111. The longer an account receivable has been outstanding, the less likely it is to be collected.
112. If a company uses the percent of receivables method to estimate uncollectible accounts, the company will first determine the required ending balance in Allowance for Doubtful Accounts, and Uncollectible Accounts Expense will be the difference between that amount and the current balance in the allowance.
113. A company that uses the direct write-off method of accounting for uncollectible accounts must still prepare a year-end adjusting entry to estimate its uncollectibles.
114. The direct write-off method of accounting for uncollectible accounts overstates assets on the balance sheet.
115. With the direct write-off method, writing off an account receivable is an asset use transaction.
116. The year-end adjusting entry to accrue interest on a note receivable is an asset source transaction.
117. On June 1, 2016, Carolina Company collected a $24,000 note receivable that had been issued on June 1, 2015. The note carried a 6% interest rate. The interest revenue recognized on the maturity date is $1,440.
118. Making a loan to another party is considered an investing activity on the statement of cash flows.
119. Accepting credit cards is usually more costly to a business than offering credit directly to customers.
120. When a company accepts a credit card payment for a sale, the amount of sales revenue to be recorded is reduced by the amount of the credit card company's fee.
121. Collection of a credit card receivable is an asset source transaction.
122. Chadwick Company's sales for 2016 were $8,700,000. Its accounts receivable were $801,000 at the end of the year. During 2016, Chadwick collected $8,400,000 on its accounts receivable. The accounts receivable turnover ratio for the year was 10.5.
123. The longer it takes to collect accounts receivable, the greater the opportunity cost incurred.
124. The operating cycle is the length of time that a company spends acquiring inventory to sell.
125. Other things being equal, the longer a company's operating cycle, the higher the company’s operating costs are likely to be.