The Percentage-Of-Credit-Sales Method for Estimating Uncollectible Accounts Is Commonly Referred

question 135

True/False

The percentage-of-credit-sales method for estimating uncollectible accounts is commonly referred to as the income statement method,because it always results in a higher amount of net income being reported in the income statement.This method is referred to as the income statement method because the estimate of bad debts is based on an income statement amount-credit sales.

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Definitions:

Mutually Exclusive

Decisions or events that cannot occur at the same time, implying that the selection of one precludes the selection of another.

Pay Back

The time period required for an investment to generate cash flow sufficient to recover its initial cost.

Cash Flows

The total amount of money being transferred into and out of a business, especially considered as affecting liquidity.

Shareholder Wealth

The total value of shares held by investors in a company, often used as a measure of company’s financial health and management performance.