Reference no: EM133004595

Problem 1: The effect on financial statements of the write-off of an uncollectible accounts receivable ( under the allowance method ) is:

a. Decrease in profit and no effect on total assets

b. No effect on profit and no effect on total assets

c. Decrease in profit and decrease in total assets

d. Increase in profit and no effect on total assets

e. No effect on profit and decrease in total assets

Problem 2: ABC Company borrows $25,000 from XYZ Company. ABC Company signs a promissory note and pledges $30,000 of its accounts receivable as collateral for the loan. The journal entry made by XYZ Company to record this transaction would include:

a. Debit to Notes Receivable for $30,000

b. Debit to Accounts Receivable for $25,000

c. Credit to Notes Receivable for $30,000

d. Debit to Notes Receivable for $25,000

e. Credit to Notes Receivable for $25,000