Question :
91. The direct write-off method A. must be used for income tax reporting : 1245986
91. The direct write-off method
A. must be used for income tax reporting in the United States.
B. is the method preferred by U.S. GAAP for financial reporting.
C. prevents management of earnings by the firm.
D. does not misstate the amount of accounts receivable on the balance sheet.
E. none of the above.
92. An example of a firm’s use of a different set of accounting principles for financial reporting and for income tax reporting is
A. the allowance method for financial reporting and the direct write-off method for income tax reporting.
B. the direct write-off method for financial reporting and the allowance method for income tax reporting.
C. the direct write-off method for financial reporting and the percentage of sales method for income tax reporting.
D. the allowance method for financial reporting and the percentage of payables method for income tax reporting.
E. none of the above.
93. The allowance method does not involve
A. estimating the amount of uncollectible accounts that will occur over time in connection with the sales of each period.
B. recognizing the amount of uncollectible accounts that will occur over time in connection with the sales of each period in the period of the sale.
C. matching expenses with associated revenues.
D. the valuation method required for income tax reporting in the United States.
E. none of the above.
94. When using the allowance method
A. the write-off of specific customers’ accounts does not affect income.
B. the income effect occurs in the year of sale, when the firm provides for estimated uncollectible accounts.
C. the write-off of specific customers’ accounts does not affect (net) accounts receivable.
D. all of the above.
E. none of the above.
95. The allowance method overcomes shortcomings of the direct write-off method because it
A. recognizes the loss from uncollectible accounts in the period in which the sale occurs and the firm recognizes revenue.
B. reduces the opportunity to manage earnings each period by deciding when particular customers’ accounts become uncollectible.
C. reflects the amount a firm expects to collect in cash from the accounts receivable on the balance sheet.
D. all of the above.
E. none of the above.
96. The allowance method is used by a firm
A. to estimate for uncollectibles when it knows that at the time of sale, it will experience some reduction in future cash flows and this amount can be estimated with reasonable precision in order to reduce reported earnings in the period of sale to the amount of the expected net cash collections.
B. when the customer has the right to return the product for a refund and the firm can estimate with reasonable precision the amount of returns at the time of sale.
C. when the customer has the right to repairs or replacement under warranty if the purchased product is defective, and the firm can estimate with reasonable precision the amount of warranty costs at the time of sale.
D. all of the above.
E. none of the above.
97. The seller of merchandise often offers a reduction from the invoice price for prompt payment, this is called a
A. sales discount.
B. purchase allowance.
C. incentive discount.
D. prompt payment discount.
E. all of the above.
98. The allowance method for uncollectibles is used by a firm
A. when it knows that at the time of sale, it will experience some reduction in future cash flows.
B. when the firm can estimate with reasonable precision the amount of reduction in future cash flows at the time of sale.
C. to reduce reported earnings in the period of sale to the amount of the expected net cash collections.
D. all of the above.
E. none of the above.
99. In estimating the amount of uncollectible accounts the accountant (1) estimates the amount of outstanding accounts receivable that the firm does not expect to collect and (2) adjusts the balance in the Allowance for Uncollectible Accounts so that, after the entry to recognize estimated uncollectibles, the balance in the account will equal the amount that the firm does not expect to collect. The name of this procedure is/are:
A. the percentage-of-sales.
B. aging-of-accounts-receivable.
C. direct write-off.
D. tax accounting.
E. indirect write-off.
100. Which of the following is/are true?
A. The percentage-of-sales procedure (1) estimates the amount of uncollectible accounts that will likely occur over time in connection with sales of each period and (2) makes an entry debiting Bad Debt expense and crediting Allowance for Uncollectible Accounts.
B. The aging-of-accounts-receivable procedure (1) estimates the amount of outstanding accounts receivable that the firm does not expect to collect and (2) adjusts the balance in the Allowance for Uncollectible Accounts so that, after the entry to recognize estimated uncollectibles, the balance in the account will equal the amount that the firm does not expect to collect.
C. The percentage-of-sales and the aging-of-accounts-receivable procedures should produce a balance in the Allowance for Uncollectible Accounts that is approximately the same at the end of each period.
D. all of the above.
E. none of the above.
