5. The aging of accounts receivable approach is the most ret of the three approaches to estimate bad debt by applying a. a lower percentage to accounts that have been ou b. a higher percentage write-off to account balances wid c. a higher percentage to accounts that have been ou KNOWLEDGE CHECK-UP 1. Recognition of accounts receivable is directly linked to the accounting standard for which of the following: a. Cash and cash equivalents standing the longest b. Accounting for property, plant, and equipment c. Revenue recognition higher sales for the period. d. Expense recognition 2. The allowance method to account for uncollectible standing the longest. accounts receivable is based on which accounting d. None of the above. principle: a. Matching principle 6. The percentage of sales approach to estimate bad debt in volves an income statement approach that emphasizes: b. Revenue recognition principle c. Business entity principle a. matching the dollar value of credit sales for the period to the dollar value of the bad debt expense. d. None of the above. b. matching the dollar value of outstanding receivables 3. The estimated bad debt expense is recorded with the fol for credit sales to the dollar value of bad debt expense. lowing adjusting entry at the end of the accounting c. recording a higher bad debt expense for accounts that period: have been outstanding for a longer period of time. a. Dr. Bad Debt Expense Cr. Allowance for Doubtful Accounts d. recording the dollar value of sales for the period to the dollar value of the allowance for doubtful accounts. b. Dr. Allowance for Doubtful Accounts, Cr. Bad Debt Expense 7. The direct write-off method is permitted: c. Dr. Bad Debt Expense Cr. Accounts a. When the percentage of uncollectible accounts is de- Receivable termined to be unrelated to sales volume. d. Dr. Accounts Receivable Cr. Cash b. Only in circumstances where the total reported ac counts receivable balance is insignificant to the finan 4. Recovery of a bad debt indicates which of the following: cial statements as a whole. a. A customer refuses to pay for the outstanding balance c. If the CFO determines that the aging schedule does b. The customer pays off all of the outstanding balance not impact expected future collections of outstanding A/R balances. e. Bad debt expense is reversed d. None of the above. d. Under no circumstances under generally accepted we counting principles 572