Answered: When a company routinely sells on…

When a company routinely sells on credit, it is inevitable that some of its customers will not pay the amount owed. Group starts True or False

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter5: Sales And Receivables

Section: Chapter Questions

Problem 13DQ

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7. What does an increasing collection period for trade receivable suggest about a firm’s credit policy? A. The business is making profits. B. The credit policy is too restrictive. C. The credit policy may be too lenient. D. The business is probably losing qualified customers. E. The collection period has no relationship to a business’s credit policy.
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Case 8 Decide whether each situation is or is not a symptom of revenue fraud. Then explain (1) why the situation isor is not a symptom and (2) if it is a symptom, how itwould be found using computer queries or traditionalmethods. YIN Sales discounts appear too high. YIN Accounts receivable increases as a percentage of revenues. YIN Bad debt allowance increasesby the same percentageas accounts receivable. YIN Increase in sales returns. YIN Large percent of revenues recorded in thefourth quarter. YIN Unexplained reconciling items on the bankstatement.
What does an increasing collection period for accounts receivable suggest about a firm's credit policy? Select one: O A. The collection period has no relationship to a firm's credit policy O B. The firm is probably losing qualified customers. C. The credit policy may be too lenient. O D. The credit policy is too restrictive.
MATCH WITH BEST ANSWER Accounts Receivable Insurance Having a client that does not pay can leave you in a difficult situation. You have to pay your employees and suppliers, and are essentially stuck covering the costs of goods sold, without the corresponding revenue. Accounts receivable insurance, also known as credit insurance, can help protect you from this risk. 1. ____ A customer’s bankruptcy or default on payment. A. Your customer made an order, but now the shipment is sitting at the dock unclaimed. This could result not only in losing the money owed, but also in storage expenses or getting the shipment resold or returned. 2. ____ A customer’s refusal to accept the goods as contracted B. Trying to get a reluctant or insolvent customer to pay can be a time-consuming and expensive experience. 3. ____ Contract cancellation. C. You have work in progress to fulfill a contract for a customer, but the customer cancels the contract, leaving you with…
31 - Which of the following is not among the consequences of a loose credit policy ? a) Sales increase B) Collection expenses increase NS) Funds tied to receivables increase. D) The amount of doubtful receivables decreases. TO) Transaction costs increase as they analyze new customers.
30. Why smaller companies choose direct method to write off uncollectible accounts? a. Uncollectible amount will be material b. Uncollectible amount will be immaterial c. There will not be any uncollectible accounts d. None of the options
H5. Retail time deposits and certificates of deposit have high withdrawal risk to issuers. Select one: True OR False Explain with details and also explain wrong option
Which of the following is a valid alternative action for an organization to take to minimize credit losses? Multiple Choice Force collections with expensive penalties for late payments. Review accounts receivables on a regular basis. None of the other alternatives are correct Never sell on credit. Implement a system of formal naming and shaming for customers making late payments.
Bad Debt Expense When a company has a policy of making sales for which credit is extended, it is reasonable to expect a portion of those sales to be uncollectible. As a result, a company must recognize bad debt expense. The two methods of recognizing bad debt expense are the (1) direct write-off method and (2) allowance method. Required: 1. Describe fully both the direct write-off method and the allowance method of recognizing bad debt expense. 2. Explain the reasons why one of these methods is preferable to the other and the reasons why the other method is not usually in accordance with generally accepted accounting principles.
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