1. Which of the following is not true with regard to a $3,000, 14%, 90-day note that is dishonored (360-day year)?

A. An account receivable is charged with the maturity value of the note

B. The Interest Earned account is credited

C. The Notes Receivable account is credited for the maturity value

D. A dishonored note does not relieve the maker from the obligation

E. Total current assets increase by the amount of the interest earned

2. When recording accrued interest on a note receivable at year end, what account is debited?

A. interest expense

B. interest revenue

C. interest receivable

D. note receivable

E. None of the above

3. It is Dec 31 and the company needs to record it's bad debt expense for the year. They use the Allowance Method. The balance in the Allowance for Doubtful Accounts, prior to adjustment, is $100 credit balance. Based on an aging of Accounts Receivable, they estimate that $400 of their Accounts Receivable balance will not be collected next year. Their adjusting journal entry for bad debts expense will include:

A. Credit Bad Debt Expense for $300

B. Debit Bad Debt Expense for $300

C. Credit Allowance for Doubtful Accounts for $400

D. Debit Bad Debt Expense for $400