Chapter 6, Problem 12Q

Which of the following best describes the concept of the aging method of receivables? a.An accurate estimate of bad debt expense may be arrived at by multiplying historical bad debt rates by the amount of credit sales made during a period. b.Accounts receivable should be directly written off when the due date arrives and the customers have not paid the bill. c.Estimating the appropriate balance for the allowance for doubtful accounts results in the appropriate value for net accounts receivable on the statement of financial position. d.The precise amount of bad debt expense may be arrived at by multiplying historical bad debt rates by the amount of credit sales made during a period.

Suppose customers express greater satisfaction with the accuracy of their charge account bills but the performance measures for the average age of accounts receivable and for bad debts do not improve. Explain why this might happen.

When using the allowance method for accounting for bad debts, accounts receivable is reported on the balance sheet at the expected net realizable value. When a particular receivable from a customer ultimately is determined to be uncollectible and is written off, the recording of this event will Group of answer choices A)decrease the net realizable value of the accounts receivable. B)have an effect that is not determinable from the information given. C)increase the net realizable value of the accounts receivable. D)decrease total current assets. e)None of the above

The percentage-of-receivables basis of estimating uncollectible accounts receivable emphasizes income statement relationships. ignores the existing balance in Allowance for Doubtful Accounts. produces a better estimate of cash realizable value. results in a better matching of expenses with revenues.

How do the percent-of-receivables and aging-of-receivables methods compute bad debts expense?

Indicate the most likely effect of the following changes in credit policy on the receivables turnoverratio and days to collect ( 1 for increase, 2 for decrease, and NE for no effect).a. Granted credit with shorter payment deadlines.b. Granted credit to less-creditworthy customers.c. Increased effectiveness of collection methods.

Question By restricting credit, and granting short maturities to speed up accounts receivable turnover, sales may decrease. True or false?

What is cumulative effect of changing the estimated bad debit rate

"In accounts receivable management, credit analysis is the process of determining the probability that customers will not pay."