Which of the Following Statements Is NOT Correct

question 35

Multiple Choice

Which of the following statements is NOT correct?

• A)Collection policy is how a firm goes about collecting past-due accounts.
• B)A more aggressive collection policy will reduce bad debt expenses, but may also decrease sales.
• C)Collection policy usually has little impact on sales since collecting past-due accounts occurs only after the customer has already purchased.
• D)Typically, a firm will turn over an account to a collection agency only after it has tried several times on its own to collect the account.

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Definitions:

Corporation

A legal entity that is separate and distinct from its owners, capable of owning property, entering contracts, and being sued.

Income Tax Payable

The amount of income tax a company owes to the government but has not paid by the end of the period.

Prepaid Asset

An asset on the balance sheet representing goods or services paid for in advance, which are to be consumed in future accounting periods.

Pre-Tax Book Income

The income of a business before taking into account any tax liabilities, reflecting the company's financial performance without the impact of tax expenses.