Which of the following statements is false regarding the different bases used for the allowance method?O A. Three bases are generally accepted, the percentage of sales, the percentage of receivables, and thedirect write-off.O B. Management can choose whichever basis it prefers.o C. If management wishes to emphasize the cash realizable value of receivables it will select thepercentage of receivables basis.O D. The company must determine its past experience with bad debt losses regardless of which basis itselects. Bueno Company's purchase and sales transactions for the month of July were as follows:PurchasesJuly 3 (beg. balance)4,000@ RM4.0oJuly 1612,000@ RM4.4July 303,000@ RM4.75The company sold 8,000 units on July 22.Assuming that the Bueno keeps perpetual inventory records, July's cost of goods sold on a FIFO basis isO A. RM33,600.O B. RM53,400.O C. RM54,200.D. RM34,400.

Which of the following statements is false regarding the different bases used for the allowance metho O A. Three bases are generally accepted, the percentage of sales, the percentage of receivables, a direct write-off. O B. Management can choose whichever basis it prefers. O C. If management wishes to emphasize the cash realizable value of receivables it will select the percentage of receivables basis.

Which of the following statements is false regarding the different bases used for the allowance metho O A. Three bases are generally accepted, the percentage of sales, the percentage of receivables, a direct write-off. O B. Management can choose whichever basis it prefers. O C. If management wishes to emphasize the cash realizable value of receivables it will select the percentage of receivables basis.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter9: Auditing The Revenue Cycle

Section: Chapter Questions

Problem 20MCQ

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Similar questions

Is it true that, when one firm sells to another on credit, the seller records the transaction as an account receivable while the buyer records it as an account payable and that, disregarding discounts, the receivable typically exceeds the payable by the amount of profit on the sale?
The dollar difference between Accounts Receivable and Allowance for Doubtful Accounts is called (a) book value. (b) interest value. (c) carrying value. (d) net realizable value.
Shimmer Products is considering which bad debt estimation method works best for its company. It is deciding between the income statement method, balance sheet method of receivables, and balance sheet aging of receivables method. If it uses the income statement method, bad debt would be estimated at 5.6% of credit sales. If it were to use the balance sheet method, it would estimate bad debt at 13.7% percent of accounts receivable. If it were to use the balance sheet aging of receivables method, it would split its receivables into three categories: 0â€“30 days past due at 5%, 31â€“90 days past due at 21%, and over 90 days past due at 30%. There is currently a zero balance, transferred from the prior years Allowance for Doubtful Accounts. The following information is available from the year-end income statement and balance sheet. There is also additional information regarding the distribution of accounts receivable by age. Prepare the year-end adjusting entry for bad debt, using A. Income statement method B. Balance sheet method of receivables C. Balance sheet aging of receivables method D. Which method should the company choose, and why?
The objectives of Receivables Management are as follows: a. All of above O b. To maintain the debtors at minimum according to the credit policy offered to customers. O C. To control the cost of receivables, cost of collection, administrative expenses, bad debts and opportunity cost of funds blocked in the receivables. O d. To obtain optimum (non maximum) value of sales;
1. Which of the following is correct when a company uses the net price method of recording receivables? a. The company records the total invoice price in both the "Accounts Receivable" and "Sales" accounts at the time of sale as if no cash discount is involved b. Sales discount taken is deducted from sales on the income statement to determine net sales c. Cash discount is reflected in the accounting records only when the discount is taken d. Cash discount is reflected in the accounting records only when the discount is not taken e. none of the above
Choose the correct and explain. The following statements pertain to presentation and valuation of receivables. Which is not in accordance with generally accepted practice? a.Credit balances in customers’ account receivable should be offset against other receivables to arrive at the net amount. b.Receivable balances should be valued at face amount minus allowance for doubtful accounts and for any anticipated adjustments, which in the normal course of events will reduce the amount of receivable to estimated realizable value. c.Long-term notes receivables which nominally bear no interest or an interest, which is unreasonably low should be stated at present value. d.Receivables denominated in foreign currency should be translated to local currency using the exchange rate on reporting period.
Which of the following is/are a sign that a company cannot quickly turn its receivables into cash (may have more than one answer)? Check All That Apply a)A low receivables turnover ratio. b)A low average collection period. c)A high receivables turnover ratio. d)A high average collection period.
Which of the following will increase the balance of accounts receivable? Group of answer choices Note discounted was dishonored by issuer at due date. Receipts of notes receivable as settlement of outstanding customer account. Sale of goods for cash. Collection of outstanding receivables.
Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of cash to be received in the future, failure to follow this practice usually does not make the balance sheet misleading because a. The amount of the discount is not material. B. Most receivables can be sold to a bank or factor. C. Most short-term receivables are noninterest bearing. D. The allowance for uncollectible accounts includes a discount element.
Which of the following is an advantage of using the net price method for recording cash discounts on credit sales? a. It eases communication with customers at balances. b. It properly reflects current per revenue. c. It simplifies recording of sales returns and allowances. d. It requires less recording keeping than the gross method.
The net realizable value of Accounts Receivable represents the company's best estimate of what it expects to collect on it's accounts receivable. It equals the total Accounts Receivable less an allowance for doubtful accounts. True False
Identify the term/s being asked in the following statements: What account to credit if the customer’s notes receivable become delinquent and was not previously discounted. The interest on a non-interest-bearing note is equal to its discount amount. When accounts receivable is factored, the accounts payable shall be credited. True or False? The practice of realizing cash from accounts receivable before its maturity date is widespread. Defalcation is one of them. True or False? This is the criterion to determine whether the transfer is accounted for as borrowing. What account to debit if the company pays a delinquent notes receivable that was previously discounted. On January 1, an entity received a one-year note receivable bearing interest at the market rate. The face value of the note receivable and the entire interest are due in one year. When the note receivable was recorded on January 1, the Interest receivable is debited. True or False? A 120-day, 10% interest-bearing note…