There Are Two Approaches That Management Can Use to Estimate

question 112

Multiple Choice

There are two approaches that management can use to estimate the amount of credit sales that would prove to be uncollectible, they are the _____. Over time, the two methods, correctly used, will give the same cumulative income and asset totals.U.S.GAAP and IFRS do not require firms to use one or the other, and some firms use both methods.

• A)gross amount of sales procedure and the aging-of-accounts-receivable procedure.
• B)percentage-of-sales procedure and the aging-of-accounts-receivable procedure.
• C)percentage-of-cost of good sold procedure and the amount of accounts-receivable procedure.
• D)percentage-of-cost of good sold procedure and the aging-of-notes-receivable procedure.
• E)gross amount of sales procedure and the amount of accounts-receivable procedure.

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Definitions:

Outstanding Stock

Shares of a corporation that have been issued and are currently held by investors, including public shareholders and company insiders.

Authorized Stock

The maximum number of shares a corporation is legally permitted to issue, as specified in its corporate charter.

Noncumulative Nonparticipating

Noncumulative nonparticipating refers to a type of preferred stock where dividends do not accumulate if not declared and the stockholders do not participate in additional corporate earnings beyond the specified dividend rate.

Cash Dividends

Payments made by a company to its shareholders, usually in the form of cash, out of its profits or reserves.