When the Direct Write Off Method Is Used, the General

question 31

Multiple Choice

When the direct write off method is used, the general journal entry to write off bad debts is:

• A) DR Bad debts expense; CR Accounts receivable
• B) DR Accounts receivable; CR Bad debts expense
• C) DR Allowance for doubtful debts; CR Accounts receivable
• D) DR Accounts receivable; CR Allowance for doubtful debts

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Definitions:

Forward Contract

A customized contractual agreement to buy or sell an asset at a specified price on a future date, used to hedge against price movements.

Fair Value Hedge

A hedge of the exposure to changes in the fair value of an asset or liability, or an unrecognized firm commitment, that is attributable to a particular risk.

Thailand Bahts

The currency of Thailand, used as the standard monetary unit in the country.

Put Option

A financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specified time frame.