Assuming That the Ideal Measure of Short-Term Receivables in the Balance

question 12

Multiple Choice

Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of the cash to be received in the future, failure to follow this practice usually does not make the balance sheet misleading because

• A) Most short-term receivables are not interest bearing
• B) The allowance for uncollectible accounts includes a discount element
• C) The amount of the discount is not material
• D) Most receivables can be sold to a bank or factor

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Definitions:

Surplus

A situation where the quantity supplied of a good exceeds the quantity demanded at a given price.

Price Ceiling

A legal maximum price that can be charged for a good or service, typically set by government regulation.

Shortage

A situation where the demand for a good or service exceeds the supply available at a specific price.

Rent Controls

Government-imposed limits on the amount landlords can charge tenants for leasing property.