Question

True or False:

1. The allowance method is required by GAAP for financial reporting purposes

2. The allowance method requires managers to estimate future uncollectible accounts and to record that estimate in the current year.

3. Collecting cash on an account previously written off increases total assets but has no effect on net income.

4. Writing off actual bad debts and reestablishing those previous write-offs when it appears that customers will pay has no effect on net accounts receivable.

5. The percentage-of-receivables method is sometimes referred to as the balance sheet method, because we base the estimate of bad debts on an amount found in the balance sheet.

6. A debit balance in the Allowance for Uncollectible Accounts before year-end adjustment indicates that the company wrote off more bad debts in the current year than it had estimated

7.

Answer 1