When assessing credit losses on estimated uncollectible notes receivable, the discounted cash flow technique is often used, discounting at the current interest rate in effect when the credit loss is estimated or re-estimated. True or False
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When assessing credit losses on estimated uncollectible notes receivable, the discounted cash flow technique is often used, discounting at the current interest rate in effect when the credit loss is estimated or re-estimated. True or False True False
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- Identify the term/s being asked in the following statements: What account to credit if the customer’s notes receivable become delinquent and was not previously discounted. The interest on a non-interest-bearing note is equal to its discount amount. When accounts receivable is factored, the accounts payable shall be credited. True or False? The practice of realizing cash from accounts receivable before its maturity date is widespread. Defalcation is one of them. True or False? This is the criterion to determine whether the transfer is accounted for as borrowing. What account to debit if the company pays a delinquent notes receivable that was previously discounted. On January 1, an entity received a one-year note receivable bearing interest at the market rate. The face value of the note receivable and the entire interest are due in one year. When the note receivable was recorded on January 1, the Interest receivable is debited. True or False? A 120-day, 10% interest-bearing note…Which of the following statements concerning receivables is correct? Notes receivable are often listed after short-term investments. Both the gross amount of receivables and the allowance for doubtful accounts should be reported. O Interest revenue and gain on sale of notes receivable are shown under other revenues and gains. O All of these answer choices are correct.Which of the following is false about the discount on short-term notes payable? The Discount on Notes Payable account has a debit balance. The Discount on Notes Payable account should be reported as an asset on the balance sheet. If there is a discount on notes payable, the effective interest rate is higher than the stated discount rate. All of these are true
- Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of cash to be received in the future, failure to follow this practice usually does not make the balance sheet misleading because a. The amount of the discount is not material. B. Most receivables can be sold to a bank or factor. C. Most short-term receivables are noninterest bearing. D. The allowance for uncollectible accounts includes a discount element.The concept that supports the discounting of notes to their present value is: time value of money matching form over substance amortizationWhich of the following statements is correct? If the note is issued at a discount, the interest income to be recognized every period is a. Either higher or lower than the amount of cash received for interest depending on the amount of the discount b. Equal to the amount of cash received for interest c. Lower than the amount of cash received for interest d.
- Discounts on notes receivable are recognized as interest earned over the term of the related note. True or False True FalseAll of the following are problems associated with the valuation of accounts receivable except A) uncollectible accounts B) returns C) Cash discounts under the net method D) allowances grantedWhich of the following is true? Short-term notes payable should be discounted at its present value, more so, if it constitutes a financing transaction and the imputed interest can be measured without undue cost or effort. Transaction costs of issuing financial liabilities are expensed outright. The present value of a serial note's principal is computed by using the PV of 1 as the present value factor. Notes payable are obligations supported by creditor's promissory notes.
- Which of the following estimation methods considers the amount of time past due when computing bad debt? A. balance sheet method B. direct write-off method C. income statement method D. balance sheet aging of receivables methodThe dollar difference between Accounts Receivable and Allowance for Doubtful Accounts is called (a) book value. (b) interest value. (c) carrying value. (d) net realizable value.Which of the following best describes the objective of estimating bad debt expense with the percentage of credit sales method? a.To estimate the amount of bad debt expense based on an aging of accounts receivable. b.To estimate bad debt expense based on a percentage of credit sales made during the period. c.To determine the amount of uncollectible accounts during a given period. d.To facilitate the use of the direct write-off method.
