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Indicate Whether Each of the Following Statements Is True or False

Question 60

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Indicate whether each of the following statements is true or false.

Premises:
The practice of reporting the net realizable value of receivables is the result of using the allowance method.
Most companies expect to receive the full amount of their receivables.
The estimated amount of uncollectible accounts is called the net realizable value.
The materiality principle requires the computation of net realizable value for a company's liabilities.
The direct write-off method does not require the computation of the net realizable value of accounts receivable.
Responses:
True
False

Correct Answer:

The practice of reporting the net realizable value of receivables is the result of using the allowance method.
Most companies expect to receive the full amount of their receivables.
The estimated amount of uncollectible accounts is called the net realizable value.
The materiality principle requires the computation of net realizable value for a company's liabilities.
The direct write-off method does not require the computation of the net realizable value of accounts receivable.
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