If a Company Uses a Percentage of Net Sales in Computing

question 97

Multiple Choice

If a company uses a percentage of net sales in computing the amount of uncollectible accounts expense:

• A) No valuation allowance will be required.
• B) The relationship between revenue and expenses is being stressed more than the valuation of receivables at the balance sheet date.
• C) The existing balance in the Allowance for Impairment will be increased sufficiently to equal the probable loss indicated by the percentage of net sales computation.
• D) Any past-due accounts will be listed as a separate item in the balance sheet.

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Definitions:

GL-5

A classification of gear lubricants, indicating the oil is suitable for high-pressure conditions and hypoid gears, common in automotive differentials.

TranSynd

A synthetic heavy-duty automatic transmission oil recommended by Allison, which states that it extends oil change intervals by 300 percent.

CD-50

A classification of heavy-duty gear oil, with "CD-50" indicating the oil's viscosity and performance characteristics according to specific standards.

Pinion Bearing Preload

The amount of force applied to pinion bearings, controlling how tightly they fit, influencing gear meshing and noise.