ACC Ch 5 Quiz

The direct write off method is an application of GAAP. T/F?

False

At the beginning of the year, the allowance for uncollectible accounts had a credit balance of 10,000 during the year, the account receivable balances total 12,000 were written off for being uncollectible

the allowance for uncollectible accounts has a debit balance of 2000 which implies that last years estimate of bad debts was understated. (too low)

After a company specifically writes off a customers account receivable as being uncollectible, it may not subsequently collect the cash from the customer. T/F?

False

Which of the following are contra asset accounts?

Allowance for uncollectible accounts

Average Collection Period

Average collection period = 360 / accounts receivable turnover Accounts receivable turnover = net credit sales / average net accounts receivable

Accounts receivable balance?

Beginning accounts receivable + credit sales - collections on account - accounts receivable specifically written off =ending accounts receivable

The process of estimating bad debts and recording the estimate in the same period as the sales associated with the accounts receivables is an application of which accounting principle?

Expense Recognition Principle

All else being equal, as a company's accounts receivable turnover ratio decreases, the average collection period for its accounts receivable in terms of days ?

Increases

Which of the following are contra revenue accounts?

Sales returns and allowances Sales Discounts

Notes and accounts receivables which arise from sales transactions are often called trade receivables. T/F?

True

Total asset's balance on balance sheet?

cash + accounts receivable - allowance for uncollectible accounts + inventory + prepaid insurance + machinery - accumulated depreciation

If a company records too much accrued interest revenue, what are the effects of net income, total assets, total liabilities, and total stockholders' equity?

net income: overstated total assets: overstated total liabilities: no effect total stockholders' equity: overstated

If a company overstates its bad debt expenses for the year, what are the effects on net income, total assets, total liabilities, and total stockholders' equity?

net income: understated total assets: understated total liabilities: no effect total stockholders' equity: understated

As a customer's account receivable balance is specifically written off due to it being uncollectible, what is the effect on the company's net accounts receivable amount?

no effect