True / False Questions
1.The net realizable value of accounts receivable is the amount of receivables a company expects to collect.
2.The best estimate for the amount of cash a company expects to collect from its accounts receivable is the face value of the receivables.
3.Most companies report receivables on their balance sheets at the net realizable value.
4.The face value of Accounts Receivable less the balance in the Allowance for Doubtful Accounts is equal to the net realizable value of the receivables.
5.The collection of an account receivable is an asset source transaction.
6.Using the allowance method of accounting for uncollectible receivables requires an estimate of the amount of receivables that will not be collected.
7.The direct write-off method does a better job of matching revenues and expenses than does the allowance method.
8.The percent of revenue method for estimating uncollectible accounts expense is considered superior to the percent of receivables method because it is more conservative.
9.Warner Company had $400,000 in credit sales for 2013, and it estimated that 2% of the credit sales would not be collected. The balance in Accounts Receivable at the end of the year was $76,000. Warnock had never used the allowance method to account for its receivables till 2013. The net realizable value of its accounts receivable at the end of the year was $68,000.
10.The net realizable value of accounts receivable decreases when an account receivable is written off.