Introduction to Managerial Accounting - Connect Access
8th Edition
ISBN: 9781260519020
Author: BREWER
Publisher: MCG
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Chapter 14, Problem 9Q
To determine
A current ratio is comparison between the current assets and current liabilities of a company to determine its ability to payback its short term liabilities from the current assets.
Why a 2 to 1 current ratio is not adequate for a company get a line of credit at a bank?
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Students have asked these similar questions
A company seeking a line of credit at a bank was turned down. Among other things, the bank stated that the company’s 2 to 1 current ratio was not adequate. Give reasons why a 2 to 1 current ratio might not be adequate.
A company seeking a line of credit at a bank was turned down. Among other things, the bank started that the company's 2 to 1 current ratio was not adequate. Give reasons why a 2 to 1 current ratio migth not be adequate.
Which of the following statements is FALSE?
An entry to write off an uncollectible account does not change the net realizable value of AR.
Recording bad debt expense will affect total assets.
The maturity value of a note is it’s principal plus interest.
A credit memo will reduce a company's cash balance.
If a company's accounts receivable are a material amount, the company must use the allowance
method.
A.
В.
С.
D.
Е.
Chapter 14 Solutions
Introduction to Managerial Accounting - Connect Access
Ch. 14 - Prob. 1QCh. 14 - What is the basic purpose for examining trends in...Ch. 14 - Prob. 3QCh. 14 - Prob. 4QCh. 14 - What is meant by the dividend yield on a common...Ch. 14 - What is meant by the term financial leverage?Ch. 14 - Prob. 7QCh. 14 - Prob. 8QCh. 14 - Prob. 9QCh. 14 - Markus Company’s common stock sold for $2.75 per...
Ch. 14 - Markus Company’s common stock sold for $2.75 per...Ch. 14 - Markus Company’s common stock sold for $2.75 per...Ch. 14 - Markus Company’s common stock sold for $2.75 per...Ch. 14 - Markus Company’s common stock sold for $2.75 per...Ch. 14 - Markus Company’s common stock sold for $2.75 per...Ch. 14 - Markus Company’s common stock sold for $2.75 per...Ch. 14 - Markus Company’s common stock sold for $2.75 per...Ch. 14 - Markus Company’s common stock sold for $2.75 per...Ch. 14 - Markus Company’s common stock sold for $2.75 per...Ch. 14 - Prob. 11F15Ch. 14 - Prob. 12F15Ch. 14 - Prob. 13F15Ch. 14 - Prob. 14F15Ch. 14 - Prob. 15F15Ch. 14 - Common-Size Income Statement A comparative income...Ch. 14 - Prob. 2ECh. 14 - Prob. 3ECh. 14 - Financial Ratios for Debt Management Refer to the...Ch. 14 - Prob. 5ECh. 14 - Prob. 6ECh. 14 - Prob. 7ECh. 14 - Prob. 8ECh. 14 - Financial Ratios for Assessing Profitability and...Ch. 14 - Prob. 10ECh. 14 - Prob. 11ECh. 14 - Selected Financial Measures for Assessing...Ch. 14 - Effects of Transactions on Various Financial...Ch. 14 - Effects of Transactions on Various Ratios Denna...Ch. 14 - Prob. 15PCh. 14 - Common-Size Financial StatementsRefer to the...Ch. 14 - Interpretation of Financial Ratios Pecunious...Ch. 14 - Common-Size Statements and Financial Ratios for a...Ch. 14 - Financial Ratios for Assessing Profitability and...
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- When a large account receivable balance is due from one client it is logical to use the direct write-off method to adjust the bad debt expense and accounts receivable balance. Under different circumstances, another method is used called the allowance method. Discuss the best reason(s) for using the allowance method and give some examples of companies that are likely to use that method. Also explain why it would ever be appropriate to use the direct write-off method, especially since it is not GAAarrow_forwardQuestion 1: Why do we need to estimate doubtful accounts?Question 2: Which is better to have? Accounts receivable or notes receivable? And why?Question 3: What happens if companies use the direct write-off method in accounting for bad debts? What will be the effect in the financial statements? Question 4: What is the relationship of the promissory note between the maker and the payee?arrow_forwardWhich statement is false? a. The amount of Accounts Receivable pledged should be excluded from Accounts Receivable in the balance sheet. b. When Accounts Receivable are assigned on a notification basis, the company reduces liability and Accounts Receivable account for the net amount of collections of Accounts Rceivable. c. In factoring Accounts Receivable as a continuing agreement, the buyer of Accounts Receivable protects himself from risks arising from discounts, returns and allowances thru by withholding a portion of the amount of accounts receivable. e. none of the above Please explain.arrow_forward
- Choose the one correct answer. You are the auditor of a company and you came upon the inspection of a transaction concerning its receivables. The company did not transfer all the significant risks and rewards of its certain accounts receivable to a bank and the bank agreed to give a cash advance to the company less any finance charges and not yet releasing an amount for a contingency on sales return transactions. Which of the following receivable financing most likely occurred? A. Factoring with recourseB. Discounting with recourseC. Assignment with notificationD. Discounting without recourseE. Factoring without recoursearrow_forwardWhat If the Facts Were Different? Suppose that West Bank’s Deposit Account Agreement had not included “an obligation to Depositor to exercise good faith and ordinary care in connection with each account.” How might the result have been different?arrow_forwardWhich of the following is a valid alternative action for an organization to take to minimize credit losses? Multiple Choice Force collections with expensive penalties for late payments. Review accounts receivables on a regular basis. None of the other alternatives are correct Never sell on credit. Implement a system of formal naming and shaming for customers making late payments.arrow_forward
- Write the word "True" if the statement is correct and "False" if it is incorrect. 1. Debit memos are items added by the bank but have not been added by the book as of the cut-off date. 2. Credit memos are items that have been deducted by the bank but have not been deducted per book. 3. Debit memos are collections from receivables by the bank on behalf of the company and proceeds from loans directly added by the bank to the account of the depositor. 4. One of the internal control features in every company is a monthly bank reconciliation in which it is created to report that there is no discrepancy between the cash balance per book records and the cash balance per bank records. 5. After all, adjustments have been made. Reciprocal accounts should have the same balance. 6. Bank reconciliation statement is prepared to reconcile the difference between cash book and bank balance. 7. When a company has two bank account, only one bank reconciliation is prepared for all the accounts. 8. The…arrow_forward2. Substantial amount of credit losses is due to poor loan monitoring. In view of this, suggest how might one safeguard a bank's interest when providing loans.arrow_forwardWhat necessary steps should be taken by the bank if they classify an account as unsatisfactory?arrow_forward
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