Question 1

A receivable occurs when a business sells goods or services to another party on account.

True

False

Question 2

A receivable is a monetary claim against a business or an individual.

True

False

Question 3

In order to keep accurate records about the collection of cash for a previously written off account, a business should re-establish the Accounts Receivable by crediting the receivable account.

True

False

Question 4

Bad debt expense is a cost to the seller of extending credit.

True

False

Question 5

Under both the allowance method and the direct-write off method of accounting for uncollectible accounts, the amount of bad debts expense is estimated at the end of each accounting period.

True

False

Question 6

The Allowance for Bad Debts is a contra account to Accounts Receivable.

True

False

Question 7

If the maker of the note fails to pay on the maturity date, the note is said to be dishonored.

True

False

Question 8

If a note receivable is outstanding at the end of an accounting period, the interest earned up to year-end is recorded as interest revenue when the cash is received.

True

False

Question 9

A company's liquidity can be evaluated by analyzing the company's current assets.

True

False

Question 10

The higher the acid-test (or quick) ratio, the less able the business is to pay its current liabilities.

True

False