Which of the following statements is true regarding aging accounts receivable? Multiple Choice All of the statements are true. An aging schedule is used to improve the estimate used in the percent of revenue method f determining the uncollectible accounts expense. The aging of accounts receivable involves applying lower uncollectible percentage estimates to older receivables. The aging method of estimating uncollectible accounts based on the assumption that the longer an account receivable remains outstanding, the less likely it is to be collected.

Which of the following statements is true regarding aging accounts receivable? Multiple Choice All of the statements are true. An aging schedule is used to improve the estimate used in the percent of revenue method f determining the uncollectible accounts expense. The aging of accounts receivable involves applying lower uncollectible percentage estimates to older receivables. The aging method of estimating uncollectible accounts based on the assumption that the longer an account receivable remains outstanding, the less likely it is to be collected.

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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Which of the following estimation methods considers the amount of time past due when computing bad debt? A. balance sheet method B. direct write-off method C. income statement method D. balance sheet aging of receivables method
Which method delays recognition of bad debt until the specific customer accounts receivable is identified? A. income statement method B. balance sheet method C. direct write-off method D. allowance method
Estimating allowance for doubtful accounts Evers Industries has a past history of uncollectible accounts, as follows. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule you completed in Exercise 8-8.
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?
Kirchhoff Industries has a past history of uncollectible accounts, as follows. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule you completed in Exercise 9-8.
Which account type is used to record bad debt estimation and is a contra account to Accounts Receivable?
Which of the following best describes the concept of the aging method of receivables? a.An accurate estimate of bad debt expense may be arrived at by multiplying historical bad debt rates by the amount of credit sales made during a period. b.Accounts receivable should be directly written off when the due date arrives and the customers have not paid the bill. c.Estimating the appropriate balance for the allowance for doubtful accounts results in the appropriate value for net accounts receivable on the statement of financial position. d.The precise amount of bad debt expense may be arrived at by multiplying historical bad debt rates by the amount of credit sales made during a period.
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 most likely to be used in determining a proper amount to be included in the allowance for doubtful accounts? Cash Sales divided by Accounts receivable. Accounts receivable divided by Cost of goods sold. Aging of accounts receivable. Year 2 accounts receivable compared to year one accounts receivable.
Indicate how the percentage-of-receivables method, based on an aging schedule, accomplishes the objectives of the allowance method of accounting for bad debts. What other methods, besides an aging analysis, can be used for estimating uncollectible accounts?
Which of the following best describes the objective of estimating bad debt expense with the percentage of credit sales method? a.To estimate the amount of bad debt expense based on an aging of accounts receivable. b.To estimate bad debt expense based on a percentage of credit sales made during the period. c.To determine the amount of uncollectible accounts during a given period. d.To facilitate the use of the direct write-off method.