On 31 December 2014 Mayo Resources Decided That It Needed

question 34

Multiple Choice

On 31 December 2014 Mayo Resources decided that it needed finally to write off as a bad debt a receivable of $4400 (including $400 GST) from Jayne Pty Ltd (in liquidation) . If Mayo Resources uses the allowance method, the entry to achieve the write off is which of the following?

• A) Debit bad debts expense $4400; credit GST collections $400; credit accounts receivable $4000
• B) Debit allowance for doubtful debts $4000; credit bad debts expense $4000
• C) Debit bad debts expense $4400; credit accounts receivable $4400
• D) Debit allowance for doubtful debts $4000, debit GST collections $400; credit accounts receivable $4400

---

Definitions:

Amortization

The process of spreading the cost of an intangible asset over its useful life, recognizing a portion of the expense each accounting period.

Intangible Assets

Non-physical assets owned by a business that have value, such as intellectual property, brand recognition, and goodwill.

Discarding

The act of getting rid of something that is no longer useful or desired, within a context like inventory management or manufacturing.

Fixed Assets

Permanent tangible properties engaged in business operations, which are unlikely to be used up or exchanged for cash in the span of a year.