6. The account Allowance for Doubtful Accounts is classified asa(n) A) liability
ID: 2444282 • Letter: 6
Question
6.
The account Allowance for Doubtful Accounts is classified asa(n)
A)
liability.
B)
contra account of Bad Debt Expense.
C)
expense.
D)
contra account to Accounts Receivable.
7.
The interest on a $4,000, 6%, 60-day note receivable is
A)
$240.
B)
$40.
C)
$80.
D)
$120.
8.
10 pnts
Assuming that the allowance method is being used, preparegeneral journal entries without explanations, record the followingtransactions.
January 1
Sold merchandise to Jane Marks for $500 on account.
February 1
Received $200 from Marks.
July 1
Wrote off Marks' account as uncollectible.
September 1
Unexpectedly received payment in full from Marks
6.
The account Allowance for Doubtful Accounts is classified asa(n)
A)
liability.
B)
contra account of Bad Debt Expense.
C)
expense.
D)
contra account to Accounts Receivable.
Explanation / Answer
6) The allowance for doubtful accounts is a contra-account toaccounts receivable as it is an offset to account for thelikelihood of certain customers not paying. Doing thisdecreases the net value of A/R thus making it a contra-account. 7) 60 day interest rate = 6% * 60 / 360 = 6% * 1/6 = 1% Interest = principal * interest rate = 4,000 * .01 = 40
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