Barry Is Both a Debtor and a Creditor of Allen

question 5

Multiple Choice

Barry is both a debtor and a creditor of Allen Ltd. At the end of the period Barry owes Allen Ltd $1400 while Allen Ltd owes him $800. Allen Ltd should record which journal entry to offset the amounts against each other?

• A) DR Accounts receivable $700; CR Accounts payable $700
• B) DR Accounts receivable $2200; CR Accounts payable $2200
• C) DR Accounts payable $800; CR Accounts receivable $800
• D) DR Accounts payable $2200; CR Accounts receivable $2200

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Definitions:

Interest Income

Earnings received from investments like savings accounts, CDs, or bonds.

Taxpayer

An individual or entity that is obligated to make payments to municipal or governmental authorities based on income earned or property owned.

Provisional Income

It's the total income a person has, including tax-exempt interest and half of their Social Security benefits, used to determine the taxability of Social Security benefits.

Social Security Benefits

Payments made to eligible individuals from the government, intended to support retirees, disabled persons, and survivors of deceased workers.