Chapter 7

Question 1

T or F: Companies don’t know the exact amount of receivables that will be uncollectible, so it is estimated.

Answer 1

True

Question 2

How does the year-end estimate of uncollectible accounts receivable change the financial statements?

Answer 2

Balance sheet: decreases retained earnings and accounts receivable. Increases allowance for doubtful accounts (contra-asset account)

Income statement: decreases net income

Question 3

___ _____ ________ is the name of the expense for uncollected amounts from accounts receivable.

Answer 3

bad debt expense

Question 4

How is net accounts receivable calculated?

Answer 4

A/R - Allowance for doubtful accounts = Net A/R

Question 5

What type of asset account is allowance for doubtful accounts?

Answer 5

A contra-asset account

Question 6

____ ______ ________ tells financial statement users how much receivables that the company truly believes it will collect.

Answer 6

Net accounts receivable

Question 7

If a specific customer will not pay off their bill, the amount the customer owes will be ________ ____.

Answer 7

written off

Question 8

T or F: Write-offs change the financial statement totals.

Answer 8

False, they do not impact the totals.

Question 9

T or F: Older receivables are less likely to be collected than newer collectibles.

Answer 9

True.