Asked by Kelsey Brianne on Jun 29, 2024
Verified
The journal entry to recognize the impairment of a note receivable includes a
A) debit to Bad Debt Expense
B) credit to Notes Receivable
C) credit to Interest Expense
D) debit to Interest Revenue
Note Receivable
A financial claim against another party that is evidenced by a written promise to pay a specified sum of money on demand or at a set time.
Impairment
A decrease in the recoverable value of an asset below its carrying amount on the balance sheet, leading to an adjustment of the book value.
Bad Debt Expense
Represents the amount of receivables that a company does not expect to collect and is treated as an expense on the income statement.
- Examine the identification and valuation of impaired loans and receivables from notes.
Verified Answer
ZK
Zybrea KnightJul 05, 2024
Final Answer :
A
Explanation :
Recognizing the impairment of a note receivable means that it is unlikely that the full amount will be collected. This is considered a loss for the company, so Bad Debt Expense should be debited to reflect the decrease in asset value. The credit to Notes Receivable reflects the reduction in the value of the asset. Interest Expense and Interest Revenue are not relevant in this scenario.
Learning Objectives
- Examine the identification and valuation of impaired loans and receivables from notes.