Chapter 8 - Receivables Part 1

What are receivables?

• Amounts due from individuals and companies that are expected to be collected in cash

• Amounts due from individuals and companies that are not expected to be collected in cash

• Amounts due from individuals and companies that are expected to be paid in goods

• Amounts due from individuals and companies that are not expected to be paid

How are receivables reported on the balance sheet?

• As a long-term liability

• As a current liability

• As a long-term asset

• As a current asset

What is the purpose of adjusting the valuation of receivables for credit losses?

• To increase the reported value of receivables

• To decrease the reported value of receivables

• To match expenses with revenues

• To match expenses with liabilities

What is the term used to record credit losses as an expense?

• Bad Debt Expense

• Uncollectible Accounts Expense

• Credit Loss Expense

• Sales Revenue Expense

Why do credit losses exist?

• Because sales on account raise the possibility of accounts not being collected

• Because sales on account guarantee all accounts will be collected

• Because sales on account eliminate the risk of accounts not being collected

• Because sales on account have no impact on collectibility

When is the direct write-off method acceptable?

• When bad debt losses are significant

• When bad debt losses are insignificant

• When bad debt losses are uncertain

• When bad debt losses are guaranteed

What is the purpose of the allowance method for uncollectible accounts?

• To record actual losses as bad debt expense

• To estimate uncollectible accounts at the end of each period

• To match expenses with revenues

• To match expenses with liabilities

What does the Allowance for Doubtful Accounts, account represent?

• The specific customers who will not pay

• The estimated amount of claims on customers that will be uncollectible

• The total amount of sales revenue

• The total amount of bad debt expense

Where is bad debt expense reported?

• On the balance sheet

• On the income statement

• On the statement of cash flows

• On the statement of retained earnings

What effect does the Allowance for Doubtful Accounts, account have?

• Increases the reported value of receivables

• Decreases the reported value of receivables

• Matches expenses with revenues

• Matches expenses with liabilities