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Indicate Whether Each of the Following Statements Is True or False

Question 72

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Indicate whether each of the following statements is true or false assuming use of the allowance method.

Premises:

Responses:

The write-off of an uncollectible account does not affect the amount of stockholders' equity.

True

The Allowance for Doubtful Accounts is a contra asset account.

False

The net realizable value of receivables is the difference between the ending balance of accounts receivable and the ending balance in the allowance for doubtful accounts.

The recognition of uncollectible accounts expense at the end of an accounting period does not affect the net realizable value of accounts receivable.

The write-off of an uncollectible account reduces the net realizable value of accounts receivable.

Premises:

The write-off of an uncollectible account does not affect the amount of stockholders' equity.

The Allowance for Doubtful Accounts is a contra asset account.

The net realizable value of receivables is the difference between the ending balance of accounts receivable and the ending balance in the allowance for doubtful accounts.

The recognition of uncollectible accounts expense at the end of an accounting period does not affect the net realizable value of accounts receivable.

The write-off of an uncollectible account reduces the net realizable value of accounts receivable.

Responses:

True

False

Correct Answer:

Premises:

Responses:

The write-off of an uncollectible account does not affect the amount of stockholders' equity.

The Allowance for Doubtful Accounts is a contra asset account.

The net realizable value of receivables is the difference between the ending balance of accounts receivable and the ending balance in the allowance for doubtful accounts.

The recognition of uncollectible accounts expense at the end of an accounting period does not affect the net realizable value of accounts receivable.

The write-off of an uncollectible account reduces the net realizable value of accounts receivable.

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