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- One possible cost of extending credit is called ______________. A. cash B. accounts receivable C. bad debt expense D. allowance for bad debtA6 What are the advantages and disadvantages of using the following Allowance for Expected Credit Losses (AECL) estimates? 1) AECL based of 3rd party credit ratings and Aging of accounts receivab 2) AECL based on Customer Response Score (CR 3) AECL based on write-off history and regionS)leSuppose a company’s current credit terms are 1/10,net 30, but management is considering changingits terms to 2/10, net 40, relaxing its credit standards, and putting less pressure on slow-payingcustomers. How would you expect these changesto affect (a) sales, (b) the percentage of customerswho take discounts, (c) the percentage of customers who pay late, and (d) the percentage of customers who end up as bad debts?
- what is defaulting? building a credit history getting a low credit score opening too many credit accounts failing to pay debts4.-Which of the following changes in credit standards and terms would cause a decrease in profit? A) Decrease in customers taking advantage of the discount. B) Increase in average collection period days. C) Increase in units sold. D) Decrease in the % of uncollectible accounts.Firm A had no credit losses last year, but 1% of Firm B’s accounts receivableproved to be uncollectible and resulted in losses. Can you determine whichfirms credit manager is performing better? Why or why not?
- The __________ method is based on the relationship of credit sales and matches current bad debt expense against current credit sales. a.direct write-off b.percent of outstanding accounts receivable c.percentage of credit sales d.aging of accounts receivableWhich of the following best represents a positive product of a lower number of days sales in receivables ratio? A. collection of receivables is quick, and cash can be used for other business expenditures B. collection of receivables is slow, keeping cash secured to receivables C. credit extension is lenient D. the lender only lends to the top 10% of potential creditorsFirm A had no credit losses last year, but 1% of Firm Bs accounts receivable proved to be uncollectible and resulted in losses. Can you determine which firms credit manager is performing better? Why or why not?
- Which one of the following statements concerning bad debt expenses is correct? Select one: a. When you write off an accounts receivable, you debit bad debt expense and credit accounts receivable. b. You record bad debt expense when individual accounts receivable becomes uncollectible. c. Under the percentage of receivables method, bad debt expense is the year-end receivables multiplied by the % of uncollectible accounts. d. When the allowance method is used, bad debt expense is recorded before the accounts are written off.33-Accounts receivable that cannot be collected due to bankruptcy or another reason are referred to as a. Uncollectible accounts b. Doubtful accounts c. Collectible accounts d. Bad customersWhat are some possible negative signals when the product of the accounts receivable turnover ratio is lower (i.e., fewer times)?
