true or false statements

1 Notes receivable do not require a subsidiary ledger.

2 Quality of receivables refers to the likelihood of collection without loss.

3 The days' sales uncollected ratio measures a company's ability to manage its debt.

4 A dishonoured note receivable is reclassified as an account receivable.

5 TechCom had net sales of $480,000 and average accounts receivable of $64,000. Its accounts receivable turnover was 7.5.

6 Receivables can be converted to cash by either selling them or using them as security for a loan.

7 The person that borrows money and signs a promissory note is called the payee.

8 A maker who dishonours a note does not pay it at maturity.

9 The maturity date of a note is the day the note is signed.

10 The direct write-off method is used because it is simpler than the allowance method.

11 The matching principle requires use of the direct write-off method.

12 TechCom received a $1,000, 90-day, 10% note receivable from Danny Outlaw. The journal entry to record the note includes a debit to notes receivable.

13 The matching principle requires that accrued interest on outstanding accounts receivable be recorded at the end of an accounting period.

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 Credit sales are recorded by crediting an account receivable for a specific customer.

16 A high accounts receivable turnover rate in comparison with that of competitors' suggests that the firm should tighten its credit policy.

17 The aging of accounts receivable examines each account receivable to estimate the amount that is uncollectible.

18 Accounts receivable turnover is calculated by dividing net sales by average accounts receivable.

19 A company can raise cash by borrowing money, and then factoring its accounts receivable as security for the loan.

20 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.

21 The materiality principle is justification for using the direct-write-off method.

22 The allowance method complies with the generally accepted accounting principle of matching.

23 The formula for computing interest on a note receivable is principal multiplied by interest rate multiplied by time.

24 The practice of placing dishonoured notes receivable into Accounts Receivable keeps only current notes receivable in the Notes Receivable account.