How Are Net Income and the Accounts Receivable Turnover Ratio

question 101

Multiple Choice

How are net income and the accounts receivable turnover ratio affected when a customer account balance,which is known to be uncollectible,is written off? Assuming the company is using allowance method.

• A)Net income and accounts receivable turnover ratio decrease
• B)Net income decreases; no change in accounts receivable turnover ratio
• C)No change in net income; accounts receivable turnover ratio decreases
• D)No change in net income or accounts receivable turnover ratio

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Definitions:

Corporations

Legal entities that are separate and distinct from their owners, with the rights to own property, sue or be sued, and conduct business.

States

Defined territorial areas within a country, each with its own government and regulatory powers.

Corporation

A legal entity that is separate and distinct from its owners, who are shareholders; it has rights, privileges, and liabilities independent of those of its members.

Owners

Individuals or entities that legally possess, control, and derive benefits from property or a business.