Explain the Computation of the Length of the Operating Cycle

question 149

Essay

Explain the computation of the length of the operating cycle. assuming use of the allowance method.
a)The Allowance for Doubtful Accounts is a contra asset account.b)The net realizable value of receivables is the difference between the ending balance of accounts receivable and the ending balance in the allowance for doubtful accounts.c)The recognition of uncollectible accounts expense at the end of an accounting period does not affect the net realizable value of accounts receivable.d)The write-off of an uncollectible account reduces the net realizable value of accounts receivable.e)The write-off of an uncollectible account does not affect the amount of stockholders' equity.

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Definitions:

Capital Gains

Capital gains are the profit earned from the sale of an asset, such as stock or real estate, which has increased in value over the holding period.

Rate of Return

The increase or decrease in the value of an investment during a predetermined period, represented as a percentage of the investment's starting cost.

Net Asset Value

The total value of a fund's assets minus its liabilities, often used in the context of mutual funds to determine per share price.

Dividend Income Distributions

The payment of earnings declared by a company to its shareholders, typically in the form of cash or additional shares.