Financial Accounting Ch 8 – Flashcards
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The collection of an account that's been previously written off under the allowance method of accounting for uncollectibles, affects income how?
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it does not affect income in the period it is collected
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What does the percentage of sales basis of estimating uncollectibles emphasize?
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the matching of expenses with revenues
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under the direct write-off method for accounting for uncollectible accounts, bad Deb expense is debited when?
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When an account is determined uncollectible
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What are the two methods for accounting for uncollectible accounts?
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direct write-off method and the allowance method
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When is the allowance method required?
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When bad debts are significant in amount
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Bad debt expense is reported on the income statement as
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an operating expense
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When the allowance method for accounting for uncollectible accounts is used, Bad Debt Expense is recorded when
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in the sam year as the credit sale
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To record estimated uncollectible accounts using the allowance method, the adjacent entry would be
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Bad Debt Expense Allowance for Doubtful
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under the direct write-off method for accounting for uncollectibles what is done?
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A specific account receivable is decreased for the amount of the bad debt
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Accounts receivable, which are also referred to as _____ receivables, are amounts owed by customers on account.
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trade
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The three primary accounting problems associated with accounts receivable are
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recognizing, valuing, and disposing
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when credit sales are made, ______ expense is considered a normal and necessary risk of doing business on a credit basis.
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bad debt
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When the allowance method is used to account for uncollectible accounts, the _________ is credited when an account is deterred to be uncollectible
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Accounts receivable
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the _______ basis of estimating uncollectibles provides a better _____ of bad debt expense with sales revenue and therefore emphasizes income statement relationships.
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percentage-of-sales, matching
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the ______ basis of estimating uncollectibles normally results in the best approximation of ________ value and therefore emphasizes balance sheet relationships.
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percentage-of-receivables, cash realizable
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a finance company or bank that purchases receivables form business is known as a
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factor
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a 75 day note receivable dated June 10 would mature on
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august 24
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collection of a note receivable will result in a credit to ______ for the face value of the note and a credit to _______
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notes receivable, interest revenue
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a written promise to pay a specified amount on demands or at a definite time
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promissory note
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sales that involve the customer, the retailer, and the credit card issuer
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credit card sales
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emphasizes the matching of costs and revenue in the same period
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percentage of sales basis
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amounts owed by customers from the sales of goods and services
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trade receivables
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analysis of customer account balances by length of time they have been un[aid
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aging of receivables
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emphasizes the expected cash realizable value of accounts receivable
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percentage of receivables basis
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generally not acceptable for financial reporting purposes
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direct write-off method
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the amount of time that a receivable is outstanding
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average collection period
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sale of accounts receivable to a factor
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factoring
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