11. The write-off of specific customers’ accounts using the allowance method has no effect on the income statement.
12. The write-off of specific customers’ accounts has no effect on Accounts Receivable, Net, because the write-off amount decreases Accounts Receivable, Gross, and its contra account, the Allowance for Uncollectibles, by exactly the same amount.
13. A debit balance in the Allowance for Uncollectibles appears on the balance sheet.
14. U.S. GAAP and IFRS require that firms disclose sufficient information to allow the reader of financial statements to calculate Accounts Receivable, Gross, Allowance for Uncollectibles, and Accounts Receivable, Net.
15. The U.S. Internal Revenue Service requires that firms recognize bad debt expense only when they conclude an account is
not
collectible.
16. U.S. GAAP permits firms to use the installment method or the cost recovery method only when receivables is/are collectible over an extended period and the seller has no reasonable basis for estimating the amount of cash that it will collect.
17. The cost recovery method matches the costs of generating revenue with cash receipts until the seller recovers all its costs.
18. The percentage-of-completion method provides information about the seller’s performance during the contract period; in contrast, the completed contract method reports all profit only when seller completes the contract.
19. Firms that reduce the price charged to a customerafter the firm has delivered the goods and the customer has found them to be unsatisfactory or damaged issue a sales allowance.
20. Both U.S. GAAP and IFRS do
not
require the allowance method for uncollectible accounts, which involves estimating the amount of uncollectible accounts receivable associated with each accounting period’s credit sales.