Q1

Why is interest added back to profit before tax when calculating the rate of return on total assets? Group of answer choicesBecause it must be paid regardless of profit

To indicate to lenders that some risk is involved

To reflect the fact that the efficient use of resources should be examined independently from the method of financing

Because interest rates are variable over time

Q2

Which statement concerning the allowance for doubtful debts account is not true? Group of answer choices

Allowance for doubtful debts is used to adjust receivables for estimated bad debts because individual debtor's balances cannot be removed from the ledger unless there is indisputable evidence they are bad.

Allowance for doubtful debts is a contra-asset account designed to reduce receivables to estimated realisable value.

Allowance for doubtful debts represents cash set aside to cover losses incurred as a consequence of customers being declared bankrupt.

Allowance for doubtful debts normally has a credit balance.