Martin MFG company uses balance sheet approach to calculate

Martin MFG company uses balance sheet approach to calculate allowance for doubtful accounts and bad debt expense. Current policy is to reserve 20% gross accounts receivable as an allowance for uncollectible accounts.

Martin MFG company issued 10% stated rate bonds in 2020. Effective market rate of interest for these bonds is 8%.

Select all statements that are true regarding the information above. Ignore taxes and any cost of goods sold.

Reducing the percentage of gross accounts receivable reserved in the allowance for uncollectible accounts will increase net income

Increasing the percentage of gross accounts receivable reserved in the allowance for uncollectible accounts will increase net income

Reducing the amount of accounts receivable written off by $1,000 will increase net income

Increasing the amount of accounts receivable written off by $1,000 will increase net income

If given option to deliver inventory in either 2020 or 2021 waiting to deliver inventory to customers until 2021 will increase revenue in 2020

If given option to deliver inventory in either 2020 or 2021 delivering inventory to customers in 2020 will increase revenue in 2020

Using income statement approach to calculate bad debt expense will always result in lower bad debt expense versus the balance sheet approach

Using direct write off method to calculate bad debt expense will always result in lower bad debt expense versus the balance sheet approach

Increasing the stated rate of the bonds would have increased the price of the bonds at issuance

Increasing the market rate used to price the bonds would have increased the price of bonds at issuance

The present value of bonds issued is higher than face value

The present value of bonds issued is lower than face value

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