Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer's interest income was tax free. this would shift
a. supply of loanable funds to the right, causing interest rates to fall.
b. supply of loanable funds to the left, causing interest rates to rise.
c. demand for loanable funds to the right, causing interest rates to rise.
d. demand for loanable funds to the left, causing interest rates to fall.

The correct answer is option a.

Explanation:

Suppose the government used to tax incomes.  

But a change in law will exempt tax for the first $5,000 of interest income.  

This means that the income from providing loans will increase and the cost of supplying funds will decline. This will cause an increase in the supply of loanable funds. As a result, the supply for loanable funds curve will shift to the right. This rightward shift will cause the interest rate to fall.

The estimated Bad Debt Expense for the period is $13,600

Explanation:

Quill Industries estimates of uncollectible receivables resulting from the aging analysis equals $20,000. The company uses the aging of accounts receivable method and the Allowance for Doubtful Accounts has credit balance of $6,400 before adjusting.

Bad debt Expense = $20,000 - $6,400 = $13,600

The entry:

Debit Bad debts expense $13,600

Credit Allowance for doubtful accounts $13,600