Question : Learning Objective 8-3 1) The allowance method violates the matching principle. 2) : 1412209

 

Learning Objective 8-3

 

1) The allowance method violates the matching principle.

 

2) A method of accounting for uncollectible receivables in which the company estimates bad debts expense instead of waiting to see which customers the company will not collect from is known as the allowance method.

 

3) Under both the allowance method and the direct-write off method of accounting for uncollectible accounts, the amount of bad debts expense is to be estimated at the end of each accounting period.

4) The Allowance for Bad Debts can be calculated as a specific percentage of credit sales and is a contra account to Accounts Receivable.

 

5) The net realizable value of Accounts Receivable is calculated by subtracting Bad Debts Expense from Accounts Receivable.

 

6) The percent-of-sales method computes bad debts expense as a percentage of net cash sales.

 

7) The percent-of-sales method to compute uncollectible accounts is also known as the balance sheet approach.

 

8) The percent-of-sales method to estimate bad debts computes bad debts expense as a percentage of net credit sales.

 

9) The aging-of-receivables method is a balance sheet approach of estimating uncollectible accounts.