True false 22 a high accounts receivable turnover in

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True False 22. A high accounts receivable turnover in comparison with competitors suggests that the firm should tighten its credit policy. True False 23. The accounts receivable turnover is calculated by dividing net sales by average accounts receivable. True False 24. A company had net sales of $500,000 and an average accounts receivable of $80,000. Its accounts receivable turnover equals 6.25. True False 25. A Company had net sales of $23,000 million, and its average account receivables were $5,860 million. Its accounts receivable turnover is 0.92. True False 26. The direct write-off method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. True False 27. The matching principle requires use of the direct write-off method of accounting for bad debts. True False 28. Companies follow both the matching principle and the materiality constraint when applying the direct write-off method. True False 29. The use of an allowance for bad debts is required under the materiality constraint. True False 30. The advantage of the allowance method of accounting for bad debts is that it identifies the specific customers who will not pay their bills. True False 31. Companies use two methods to account for uncollectible accounts, the direct write-off method and the allowance method. True False
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32. Under the allowance method of accounting for uncollectible accounts receivable, no attempt is made to estimate bad debts expense. True False 33. The materiality constraint permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in relation to a company's other financial statement items such as sales and net income. True False 34. When using the allowance method of accounting for uncollectible accounts, the entry to record the bad debts expense is a debit to Bad Debts Expense and a credit to Accounts Receivable. True False 35. After adjustment, the balance in the Allowance for Doubtful Accounts has the effect of reducing accounts receivable to its estimated realizable value. True False 36. When using the allowance method of accounting for uncollectible accounts, the entry to write off Harold's uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable - Harold. True False 37. When using the allowance method of accounting for uncollectible accounts, the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense. True False 38. The aging of accounts receivable involves classifying each account receivable by how long it is past its due date and estimating the percent of each uncollectible class. True False 39. Installment accounts receivable is another name for aging of accounts receivable.
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  • Spring '10
  • Brown
  • Doubtful Accounts

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