Question : 121.The Allowance for Doubtful Accounts will appear the: A.Income statement. B.Balance sheet. : 1237642

 

 

121.The Allowance for Doubtful Accounts will appear on the:   

A.Income statement.

 

B.Balance sheet.

 

C.Cash flow statement.

 

D.Owners’ equity statement.

 

 

 

 

122.Under the allowance method, when a receivable that had been previously written off is collected:   

A.Net income is increased.

 

B.Net assets are increased.

 

C.Net income and net assets are not affected.

 

D.Net assets and net income are both increased.

 

 

 

 

123.When the account Allowance for Doubtful Accounts is used, writing off of an uncollectible accounts receivable will:   

A.Reduce income.

 

B.Reduce an expense.

 

C.Not change income or total assets.

 

D.Increase total assets.

 

 

 

 

124.Accounts receivable are classified as current assets:   

A.Only if convertible into cash within 60 days or sooner.

 

B.Only if the allowance method is used to estimate the uncollectible accounts.

 

C.Only if convertible into cash within one year.

 

D.Whenever the accounts receivable arise from “normal” sales of merchandise to customers, regardless of the credit terms.

 

 

 

 

125.Uncollectible accounts expense:   

A.Should not occur if the credit department properly investigates prospective customers who wish to purchase merchandise on credit.

 

B.Is the amount of cash a business must pay each time a credit customer fails to pay his or her account.

 

C.Is the amount a business must pay to a collection agency to recover amounts on overdue accounts receivable.

 

D.Represents the loss in value of accounts receivable that are estimated to be uncollectible.

 

 

 

 

126.The Allowance for Doubtful Accounts represents:   

A.Cash set aside to make up for bad debt losses.

 

B.The amount of uncollectible accounts written off to date.

 

C.The difference between total credit sales and collections on credit sales.

 

D.The difference between the face value of accounts receivable and the net realizable value of accounts receivable.

 

 

 

 

127.When determining the uncollectible accounts expense in computing taxable income, income tax regulations:   

A.Require the allowance method.

 

B.Require the direct write-off method.

 

C.Require the income statement approach.

 

D.Allow any method.

 

 

 

 

128.The aging of the accounts receivable approach to estimating uncollectible accounts does not:   

A.Take into consideration the existing balance in the Allowance for Doubtful Accounts.

 

B.Utilize a percentage of probable uncollectible accounts for each age group of accounts receivable.

 

C.Stress the relationship between uncollectible accounts expense and net sales.

 

D.Tend to give a reliable estimate of uncollectible accounts because of the consideration given to the collectability of specific accounts receivable.

 

 

 

 

129.If a company uses a percentage of net sales in computing the amount of uncollectible accounts expense:   

A.No valuation allowance will be required.

 

B.The relationship between revenue and expenses is being stressed more than the valuation of receivables at the balance sheet date.

 

C.The existing balance in the Allowance for Doubtful Accounts will be increased sufficiently to equal the probable loss indicated by the percentage of net sales computation.

 

D.Any past-due accounts will be listed as a separate item in the balance sheet.

 

 

 

 

130.Randall, Inc. uses the allowance method supported by an aging of its accounts receivable to recognize uncollectible accounts expense in its financial statements. What method of recognizing this expense does Randall use in its income tax return?   

A.It must use the same method.

 

B.The direct write-off method.

 

C.Either the balance sheet or income statement approach is acceptable.

 

D.None, since uncollectible accounts expense is not deductible for income tax purposes.