19-20 Acctg 3: Chapter 6 Review

Regardless of whether a business uses the direct write-off or allowance method, accounts receivable should be reported on the balance sheet at net realizable value.

• True

• False

Recording uncollectible accounts expense at the time the amount is actually known to be uncollectible is called the allowance method of recording losses from uncollectible accounts.

• True

• False

The larger the accounts receivable turnover ratio, the fewer the average number of days for payment.

• True

• False

Using the direct write-off method, no attempt is made to collect accounts that have been written off because the account no longer appears in the accounting records of the business.

• True

• False

Morton, Inc., estimates that 1% of its net sales will become uncollectible. The adjustment is made by debiting Uncollectible Accounts Expense and crediting Accounts Receivable.

• True

• False

For a business that offers n/30 terms, an accounts receivable turnover ratio that increases from 6.5 to 7.5 is a positive trend.

• True

• False

When customers receive notices that their accounts have been written off, they no longer owe on the account receivable.

• True

• False

If a business carefully checks credit ratings before granting credit to customers, the business will not experience any uncollectible accounts.

• True

• False

When collection is made on an account that has been written off using the allowance method, two journal entries are made. One reopens the customer’s account, and the

other records the receipt of cash.

• True

• False

Applying the Matching Expenses with Revenue concept, uncollectible accounts expense should be recorded in the same fiscal period in which the sales revenue is earned.

• True

• False