Management Uses the Ageing Approach Method to Calculate the Allowance

question 13

Multiple Choice

Management uses the ageing approach method to calculate the allowance for doubtful debts. An analysis of the ageing of accounts receivable shows a substantial increase in the accounts receivable in the over-90-days category. Management does not adjust the allowance for doubtful debts at year-end. As a result:

• A) assets are overstated, and net income is overstated.
• B) assets are overstated, and net income is understated.
• C) assets are understated, and net income is overstated.
• D) assets are understated, and net income is understated.

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Definitions:

Independent Samples

Two or more groups of data that are collected from separate populations, where the participants in one group do not affect the members of another group.

ANOVA

Analysis of Variance (ANOVA) is a statistical method used to test differences between two or more means by analyzing variances.

Chi-square Test

A statistical test used to determine the significance of the association between categorical variables.

Unequally

In a manner that is not equal or identical in status, amount, or value.