Question

True or false:

1) when bad debts exceed the amount estimated and written off in the previous accounting period, the company is required to issue amended financial statements?

T/F

2) other things being equal, a two year note receivable should yield more interest revenue than a one year note )

T/F

3) the receivable turnover ratio is calculated using the average net account receivable

T/F

4) in normal circumstances, the allowance for doubtful accounts for a company should be fairly consistent percentage of gross accounts receivable.

T/F

5) if the receivable turnover ratio rises significantly, the increase may be a signal that the company is extending credit to high risk borrowers or allowing an overly generous repayment schedule

T/F

Answer 1

1. False

As the writing off of bad debts can be made in the next year also as there is no rule that current sales debtors amount can be written off.

2. True, as the revenue of an higher period note would be higher considering other things being equal.

3. True, the receivable turnover ratio = net credit sales/ Average account receivable.

4. False, allowance for doubtful account receivable percentage varies yearly based on estimates.

5. False, an higher receivable turnover ratio is an good indication that the company is receivables in an timely manner.