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1. True or false? The direct write-off method of accounting for uncollectibles understates assets. 2. California Bank lent $240,000 to Sacramento Company on a six-month, 8% note. Which party has interest receivable? Which party has interest payable? Interest expense? Interest revenue? How much interest will these organizations record one month after Sacramento Company signs the note? 3. When California Bank accrues interest on the Sacramento Company note, show the directional effects on the bank's assets, liabilities, and equity (increase, decrease, or no effect). 4. True or false? Credit sales increase receivables. Collections and write-offs decrease receivables. 5. Which receivables figure (the total amount that customers owe the company, or the net amount the company expects to collect) is more interesting to investors as they conside buying the company's shares? Give your reason. 6. Show how to determine net accounts receivable. 1. True or false? The direct write-off method of accounting for uncollectibles understates assets. Explanation of false answer Sacramento Company signs the note? California Bank lent $240,000 to Sacramento Company on a six-month, 8% note. has interest receivable and interest revenue. has interest payable and interest expense. These organizations will record interest of $ one month after Sacramento Company signs the note. 3. When California Bank accrues interest on the Sacramento Company note, show the directional effects on the bank's assets, liabilities, and equity (increase, decrease, or no effect). 4. True or false? Credit sales increase receivables. Collections and write-offs decrease receivables. T/F Explanation of false answer The amount of receivables is more interesting because it is of the amount the company will probably collect in cash. 6. Show how to determine net accounts receivable

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