Chapter 14 True/False

true

The expense of an uncollectible account should be recorded in the accounting period that the revenue is earned.

true

the adjusting entry of uncollectible accounts does not affect the balance of the Accounts Receivable account.

true

the book value of accounts receivable must be a reasonable and unbiased estimate of the money the business expects to collect in the future.

false

a business having a $300 credit balance in Allowance of Uncollectible Accounts and estimating its uncollectible accounts to be $4000 would record a $4300 credit to Allowance for Uncollectible Accounts.

false

a note provides the business with legal evidence of the debt should it be necessary to go to court to collect.

true

interest income is classified as an Other Revenue account.

true

interest income should be recorded on a dishonored note receivable.

true

interest rates are stated as a percentage of the principal.

true

the account, Allowance for Uncollectible Accounts, has a normal credit balance.

true

the account, Allowance for Uncollectible Accounts, is reported on the balance sheet.

true

the accounting concept, Neutrality, is applied when the process of making accounting estimates is free from bias.

true

the direct write-off method of accounting for uncollectible accounts does not comply with GAAP.

true

the method for calculating interest is the same for notes payable and notes receivable.

true

when a customer account is written off under the allowance method, book value of accounts remains the same.

true

when a previously written-off account is collected, Accounts Receivable is both debited and credited for the amount collected.

false

when an account is written off as uncollectible, the business sends the customer a credit memo.

false

A business usually knows at the end of the fiscal year which customer accounts will become uncollectible.

true

the percent of each age group of an accounts receivable aging that is expected to become uncollectible is determined by past cash receipts data.

true

the percent of sales method of estimating uncollectible accounts expense assumes that a percent of credit sales will become uncollectible.

false

total assets are reduced when a business accepts a note receivable from a customer needing an extension of time to pay an account receivable.