When a Particular Account Receivable Is Determined to Be Uncollectible

question 119

True/False

When a particular account receivable is determined to be uncollectible, the journal entry to write off the account reduces net income.

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Definitions:

Prime Cost

The combined direct costs of raw material and labor that are directly associated with the production of a product.

Discretionary Fixed Costs

Those fixed costs that arise from annual decisions by management to spend on certain fixed cost items, such as advertising and research.

Committed Fixed Costs

Expenses that a company has to pay regardless of its level of production or sales, such as leases and long-term contracts, which cannot be easily changed in the short term.

Unit Fixed Cost

The fixed cost associated with producing one unit of a product, which does not vary with the level of production output.