Installment Notes Payable That Require Payments of Accrued Interest to Date

question 141

Multiple Choice

Installment notes payable that require payments of accrued interest to date plus equal amounts of principal

• A)Result in periodic payments that gradually decrease in amount.
• B)Result in equal periodic payments
• C)Result in periodic payments that gradually increase in amount
• D)Result in increasing amounts of interest each period
• E)Are not legal

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of receivables that may not be collectible.

Contra Asset

An account on a company's balance sheet that reduces the total amount of an asset, such as accumulated depreciation.

Normal Balance

In accounting, the normal balance is the side (debit or credit) of an account that is usually increased. For example, asset accounts normally have a debit balance, while liabilities and equity accounts have a credit balance.

Direct Write-off Method

A method of accounting for bad debts that involves charging the amount of an uncollectible account directly to the expense account when it is deemed non-recoverable.