The Lowery Co. uses the direct write-off method of accounting for uncollectible

Question

The Lowery Co. uses the direct write-off method of  accounting for uncollectible accounts receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be uncollectible. The entry to write off this account would be which of the following?

debit Bad Debt Expense; credit Allowance for Doubtful Accounts

debit Bad Debt Expense; credit Accounts Receivable

debit Sales Returns and Allowance; credit Accounts Receivable

debit Allowance for Doubtful Accounts; credit Accounts Receivable.

On July 8, Jones Inc. issued an $80,000, 6%, 120-day note payable to Miller Company. Assume that the fiscal year of Jones ends July 31. Using the 360-day year, what is the amount of interest expense recognized by Jones in the current fiscal year?

$700

$307

$1,400

$4,200

Anderson Co. issued a $50,000, 60-day, discounted note to National Bank. The discount rate is 6%. At maturity, assuming a 360-day year, the borrower will pay

$53,000

$50,500

$49,500

$50,000

Explanation / Answer

1)debit Allowance for Doubtful Accounts; credit Accounts Receivable.

here due to write off , there is decrease in liability and also in the asset, hence allowance for doubtful accounts is debited and accounts receivable get credited.

2)

3)

Answer: (b) At maturity, the borrower will pay $ 50000

On the date of issue he will get $ 49500 (50000-(50000*6%*60/360))

Journal Entries for reference

On the Date of Issue Account Title & Explanation Debit Credit Cash 49500 Discount: 50000*6%*60/360 500 Note Payable 50000

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