Current Assets
1. Define “accounts receivable.”
2. How is the “net realizable value” of accounts receivable determined?
3. Name three factors a company might consider when trying to determine the amount of accounts receivable that will be ultimately collected.
4. What does the account “allowance for doubtful accounts” represent?
5. Define “contra account.”
6. When is bad debt expense recorded?
7. Why do companies set up the allowance for doubtful accounts instead of just decreasing accounts receivable for any expected uncollectible balances?
8. What entry does a company make to write off a specific account that has proven to be uncollectible?
9. Give two reasons why accountants do not restate prior year statements when estimations are not exact.
10. Name the two most popular approaches to estimating uncollectible accounts and briefly explain each.
11. What is the purpose of a company having an accounts receivable subsidiary ledger?
12. Why does reporting balances in foreign currencies create accounting challenges?
13. At what exchange rate are monetary asset and liabilities reported?
14. Define “current assets.”
15. Define “current liabilities.”
16. How is the current ratio calculated and what does it indicate about a company’s financial health?
17. Why do financial statement users calculate a company’s age of receivables?