When a Corporation Pays a Note Payable and Interest

question 43

Multiple Choice

When a corporation pays a note payable and interest,

• A)the account Notes Payable will be increased.
• B)the account Interest Expense will be decreased.
• C)they will debit Notes Payable and interest expense.
• D)they will debit Cash.

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Definitions:

Income Statement Approach

A method for estimating bad debts expense that focuses on income statement relationships, often involving a percentage of sales or accounts receivable.

Balance Sheet Approach

A method in accounting that focuses on valuing all assets and liabilities listed on the balance sheet at their current market values to provide a snapshot of a company's financial condition at a specific point in time.

Direct Write-off Approach

An accounting method for dealing with bad debts where specific accounts receivable are written off against income at the time they are determined to be uncollectible.

Normal Balance

The side of an account that is increased, which for assets, expenses, and dividends is the debit side, and for liabilities, equity, and revenue is the credit side.