37. The Allowance for Doubtial Accounts A. is a contra-revenue account B. has a

Question

37. The Allowance for Doubtial Accounts A. is a contra-revenue account B. has a normal debit balance. C. is used for the direct write-off method D is reported on the Income Statement as a reduction to Bad Debt Expense. E. is reflected in the asset section of the balance sheet 38. The direct A. sales method. B. cost principle. C expense recognition ("matching") principle. D. revenue recognition principle 39. Under the direct write-eff method, what jounal entry is made at the time an account has been deemed uncollectible? A. Debit Allowance for Doubtful Accounts, credit Accounts Receivable B. Debit Accounts Receivable, credit Bad Debt Expense C. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts D. Debit Bad Debt Expense, credit Accounts Receivable 40, on the maturity date of a S9000, 6-month, 12% note, the borrower sends a check that includes the principal and ali of the interest due on the note. What is the amount of the borrower's check? A. $10,080 B. $9,540 C. $9,000 D. $15,480 On October 1, a company lends $40,000 to an employee who signs a 9%, 6-month promissory note. The company is preparing its year-end financial statements on December 31. No adjusting entries have been recorded in connection with this note. What adjusting entry should be recorded before the financial statements are prepared? 41. Debit Interest Revenue and credit Interest Receivable for $1,800 Debit Interest Revenue and credit Interest Receivable for $900 Debit Interest Receivable and credit Interest Revenue for $900 Debit Interest Receivable and credit Interest Revenue for $1,800 A. B. C. D. 12

Explanation / Answer

37. A, is a contra revenue account as the same is recorded as an expense in the income statement,

38.C, the matching principle requires a business to record revenues and their matching expenses in the same accounting period.

39. D, bad debt being an expense would be debited and under direct write off method we donot maintain allowance for doubtful debt,hence directly reduce the accounts receivables balance

40. B, 9000 + (9000*6/12*12%) = $9540

41. C, its an income so interest revenue account would be credited and interest = 40000*9%*6/12*3/6

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