1. What accounting concepts are violated by the direct charge-off method of recognizing uncollectible accounts? Why?
2. In what ways is Allowance for Uncollectible Accounts similar to Accumulated Depreciation? In what ways is it different?
3. Under what circumstances would an accrual of interest income on an interest- bearing note receivable not be required at the end of an accounting period?
4. Why is it advantageous for a company to finance its receivables?
5. To increase its sales, a company decides to increase its credit terms from 15 to 30 days. What effect will this change in policy have on receiv- ables turnover and days' sales uncollected?
6. How might the receivables turnover and days' sales uncollected reveal that management is consistently underestimating the amount of losses from uncollectible accounts? Is this action ethical?