Reference no: EM131771569
True or False
1. A "receivable" is a debt owed by the creditor.
2. The Accounts Receivable is located in the subsidiary accounts.
3. Subsidiary accounts are also known as "customer accounts."
4. Notes receivable due by this November 30th are considered "current assets."
5. Bad debt expense is also known as a doubtful account expense.
6. The "allowance method" of bad debt accounting is the least often used as it is not favored by G.A.A.P.
7. The "direct write off" method is primarily used by larger public companies.
8. A bad debt account expense would be included on our Income Statement.
9. As the number of days overdue gets longer, the estimated percentage of uncollectables gets higher in the balance sheet method.
10. One of the problems with the direct write off method is it does not follow the matching principle.
11. Credit card companies charge a fee to the buyer but only to the seller after 30 days.
12. The "maturity value" of a note receivable is the date final payment to the creditor is due.
13. The lower the acid test ratio number, the better.
14. With an A/R turnover ratio, a higher ratio means faster cash collections.
15. The lower of cost or market basis is an example of the accounting concept of conservatism.
16. Land improvements are generally charged to the Land account.
17. In calculating depreciation, both plant asset cost and useful life are based on estimates.
18. Using the units-of-activity method of depreciating factory equipment will generally result in more depreciation expense being recorded over the life of the asset than if the straight-line method had been used.
19. Under the double-declining-balance method, the depreciation rate used each year remains constant.
20. The IRS does not require the taxpayer to use the same depreciation method on the tax return that is used in preparing financial statements.
21. If the proceeds from the sale of a plant asset exceed its book value, a gain on disposal occurs.
22. The book value of a plant asset is the amount originally paid for the asset less anticipated salvage value.
23. A plant asset must be fully depreciated before it can be removed from the books.
24. If similar assets are exchanged, any gain on disposal should be deferred but any loss on disposal should be recognized.
25. A loss on the exchange of plant assets occurs when the fair market value of the old asset is less than its book value.