Question

A company accepted a $10,000 note receivable from a customer for a term of 3 months at a rate of 6%. After accruing interest revenue for two months, in the third month the company discovered there was no hope of collection. The entry to write-off the note would include (Select all that apply). A : DR Allowance for Doubtful Accounts, $10,100. B : CR Interest Receivable, $100. C : DR Allowance for Doubtful Accounts, $11,200. D : CR Interest Receivable, $1,200. E : CR Notes Receivable $10,000. F : CR Notes Receivable $10,100.

Answer 1

Correct answer---(B)-Credit Interest Receivable $ 100-----(A) Dr Allowance for Doubtful Accounts, $10,100 and (E) Credit notes receivable $10000

Complete entry will be as follows

Accounts title and Explanation	Debit	Credit
Allowance for Doubtful accounts	$ 10,100.00
Notes Receivables		$ 10,000.00
Interest Receivables		$        100.00
(Notes receivable written off)

Interest for only 2 months was recorded so 2 months interest will be reversed.