Indicate TRUE OR FALSE at the end of each statement.
1. Accounts receivable arise from credit sales to customers by both retailers and wholesalers.
2. Credit sales are recorded by crediting an account receivable for a specific customer.
3. As long as a company accurately records credit sales information, it is not necessary to have accounts for specific customers.
4. If a customer owes interest on a bill, Accounts Receivable is debited and Interest Expense is credited.
5. TechCom customer RDA Electronics paid off an $8,300 balance on its account receivable. TechCom should record the transaction as a debit to Accounts Receivable-RDA Electronics and a credit to Cash.
6. Quality of receivables refers to the likelihood of collection without loss.
7. The use of an allowance for bad debts is required under the materiality principle.
8. The advantage of the allowance method of accounting for bad debts is that it identifies the customers who won't pay their bills.
9. If the allowance method is used, the journal entry to record the reinstatement of an account previously written off in the current period includes a debit to Accounts Receivable and a credit to Bad Debt Expense.
10. The aging of accounts receivable examines each account receivable to estimate the amount that is uncollectible.
11. Installment accounts receivable is another name for aging accounts receivable.
12. The percentage of sales approach for estimating bad debts is based on the idea that a percent of a company's credit sales for the period are uncollectible.
13. The accounts receivable approach uses income statement relationships to estimate bad debts.
14. TechCom has $40,000 in outstanding accounts receivable. Past experience suggests that 5% of outstanding receivables are uncollectible. The current balance in the allowance for doubtful accounts is $2,500 debit. The required adjusting journal entry includes a debit to bad debt expense for $4,500.
15. TechCom has sales of $350,000 and estimates that 0.5% of its sales are uncollectible. The
