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Which of the following statements are NOT true? Choose more than one.

  1. The allowance for bad debts account is sometimes referred to as Allowance for Doubtful Accounts. True
  2. There are three methods of accounting for uncollectible accounts?the direct write-off method, the allowance method, and the reserve method.
  3. One method for estimating the amount of uncollectible involves taking a percentage of sales on account. False
  4. The balance of the allowance for bad debts account after adjustment, using the percentage of sales method, must be equal to the percent of uncollectible accounts multiplied by the number of credit sales.
  5. The percentage of sales method emphasizes proper estimating and reporting of bad debt expense on the income statement and the matching of expenses with revenues.
  6. Under the direct write-off method, the bad debt expense is recognized before it has been determined that an account is uncollectible.
  7. The allowance for bad debts account may have a credit balance prior to adjustment.
  8. Under the allowance method, the expense associated with an uncollectible account is recognized when it has been determined that a customer will not pay the amount owed.
  9. When it is possible to make a reasonable estimate of the amount of uncollectible accounts, the allowance method is preferred for financial reporting purposes.
  10. The credit portion of an adjusting entry to enter the estimate for uncollectible accounts can be made directly to a specific receivable account.
  11. When a large balance accumulates in the allowance for bad debts account, the percentage of sales used to estimate uncollectible should be modified.
  12. Most people tend to buy more if they can “charge it” rather than pay cash.
  13. The percentage of receivables method is often referred to as aging the receivables.
  14. Once an account has been written off using the direct write-off method, it will not be collected.


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