Question

Question 25 2.5 pts

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible?

Bad Debts Recovered

Bad Debts Expense

Interest Expense

Accounts Receivable

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Question 26 2.5 pts

What would be the basis for the following entry on a firm's records?

Bad Debt Expense 150

Allowance for Doubtful Accounts 150

The firm is using the direct write-off method.

The firm is writing off an uncollectible account.

The firm is using the allowance method for estimating bad debt.

All of these answers are correct.

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Question 27 2.5 pts

A written promise to pay a certain sum of money to another person or company is a:

Promissory Note Payable.

Promissory Note Receivable.

Promissory Accounts Payable.

Promissory Accounts Receivable.

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Question 28 2.5 pts

Sonny's Service Bureau is able to collect an amount previously written off last year under the direct write-off method. The journal entry will:

increase Bad Debts Recovered.

decrease Cash.

decrease Accounts Receivable.

decrease Bad Debts Expense.

Answer 1

Solution 25:

If the direct write-off method of accounting for uncollectible receivables is used, "BAD DEBT EXPENSE" account is debited to write off a customer's account as uncollectible. As under direct method, expense is recognized when an account is actually written off.

Hence, second option is corect.

Solution 26:

The basis for the entry on a firm's records would be that "The firm is using the allowance method for estimating bad debt". As bad debt is recognized under allowance method as per estimation.

Hence, third option is correct.

Solution 27:

A written promise to pay a certain sum of money to another person or company is a "Promissory Note Payable".

Hence first option is correct.

Solution 28:

Sonny's Service Bureau is able to collect an amount previously written off last year under the direct write-off method. The journal entry will "increase bad debt recovered". As entry will be debited to Cash and credited to bad debt recovered.

Hence, first option is correct.