C examine the features of your present credit card if

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(c) Examine the features of your present credit card. (If you do not have a credit card, select a likely one online for this exercise.) Given your analysis above, what are the three major disadvantages of your present credit card? Answers to Insight and Accounting Across the Organization Questions p. 406 When Investors Ignore Warning Signs Q: When would it be appropriate for a company to lower its allowance for doubtful accounts as a percentage of its receivables? A: It could do so if the company’s collection experience had improved, or was expected to im- prove, and therefore the company expected lower defaults as a percentage of receivables. p. 408 How Does a Credit Card Work? Q: Assume that Nordstrom prepares a bank reconciliation at the end of each month. If some credit card sales have not been processed by the bank, how should Nordstrom treat these transactions on its bank reconciliation? A: Nordstrom would treat the credit card receipts as deposits in transit. It has already recorded the receipts as cash. Its bank will increase Nordstrom’s cash account when it receives the receipts. Authors’ Comments on All About You: Should You Be Carrying Plastic? (p. 416) We aren’t going to tell you to cut up your credit card(s).Well, we aren’t going to tell all of you to do so. Credit cards, when used properly, can serve a very useful purpose.They provide great con- venience, are widely accepted, and can be a source of security in an emergency. But too many 434 Chapter 9 Accounting for Receivables PDF Watermark Remover DEMO : Purchase from to remove the watermark
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Americans use credit cards inappropriately. When businesses purchase short-term items such as inventory and supplies, they use short-term credit, which they expect to pay back very quickly. The same should be true of your credit card. When you make purchases of everyday items, you should completely pay off those items within a month or two. If you don’t, you are living beyond your means, and you will soon dig yourself a deep financial pit. Longer-term items should not be purchased with credit cards, since the interest rate is too high. If you currently have a large balance on your credit card(s), we encourage you to cut up your card(s) until you have paid off your balance(s). Answers to Self-Study Questions 1. d 2. c 3. a 4. b 5. d 6. b 7. b 8. d 9. c 10. c 11. a 12. b 13. d 14. a 15. c Broadening Your Perspective 435 Remember to go back to the Navigator box on the chapter-opening page and check off your completed work. a19 PDF Watermark Remover DEMO : Purchase from to remove the watermark
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