Reference no: EM132345467

Question

True/False

1) A company uses the direct write-off method to account for uncollectible receivables. Uncollectible account expense will be estimated as a percentage of sales.

2) The direct write-off method is used primarily by large, publicly owned companies. 

3) Interest revenue must be reported for a note receivable that is outstanding at the end of the accounting period.

4) The maturity value of a note is the sum of the principal plus interest due at maturity.

5) A note is dishonored when the maker of the note fails to pay the note at maturity

6) The acid-test ratio appears in the current assets section of the balance sheet.

7) Accounts receivable amounts are generally shown on the balance sheet net of the allowance.

8) The acid-test ratio is computed as current assets divided by current liabilities.

9) When a business discounts a note receivable to a bank or financial broker, the business will generally receive either more or less than the maturity value of the note.

10) When a business is holding a note receivable and wishes to collect cash prior to the maturity date of the note, the business may sell the note to a bank or a financial broker. This process is called discounting a note.