Question

1. A contra asset represents
   
   A. an account such as Allowance for Doubtful Accounts which reflects a decline in the net
        realizable value of accounts receivable.
   B. an account that is presented as a credit balance in the asset section of the balance sheet.
   C. an account such as Accumulated Depreciation.
   D. all of the above.
   
   
   
2. Under the allowance method of accounting for uncollectible accounts receivable, an actual write-off is recorded as
   
   A.  a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
   B.  a debit to Accounts Receivable and a credit to Uncollectible Accounts Expense.
   C.  a debit to Uncollectible Accounts Expense and a credit to Accounts Receivable.
   D.  a debit to Uncollectible Accounts Expense and a credit to Allowance for Doubtful
         Accounts.
   
   
3. Under the direct write-off method of accounting for uncollectible accounts receivable, an actual write-off is recorded as
   
   A.  a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
   B.  a debit to Accounts Receivable and a credit to Uncollectible Accounts Expense.
   C.  a debit to Uncollectible Accounts Expense and a credit to Accounts Receivable.
   D.  a debit to Uncollectible Accounts Expense and a credit to Allowance for Doubtful
         Accounts.
   
   
                                                              OVER
4. When compared to the straight-line method of depreciation, the double-declining balance method of depreciation will result in
   
   A.  higher depreciation expense and lower net income during the earlyyearsof an asset’s
         useful life but the same total amount of depreciation over the asset’s entire useful life.
   B.  higher depreciation expense and lower net income throughout the asset’s entire useful
         life.
   C.  lower depreciation expense and higher net income during the earlyyearsof an asset’s
         useful life but the same total amount of depreciation over the asset’s entire useful life.
   D.  lower depreciation expense and higher net income during throughout the asset’s
         useful life.
   
   
   
5. Depreciation is the process by which

A.  the decline in value of an operating asset such as a building is recorded in the income
       statement over its estimated useful life.

B.  the cost of an operating asset such as a building is allocated to the income statement over
       its estimated useful life.

Answer 1

Question 1 - Option D - All the above

Contra asset means an account having credit balance in the assets side of Balance sheet.

Allowance for Doubtful debts is shown as a reduction from debtors in balance sheet and hence satisfies the definition of contra asset.

Accumulated Depreciation is shown as a reduction from assets in balance sheet and hence satisfies the definition of contra asset.

Option B is the definition of contra asset.

Question 2 - Option A

The journal entries in case of Allowance write off:

For Allowance:

Uncollectible Accounts expense A/c Dr

To Allowance for Doubtful Accounts A/c

For Write off

Allowance for Doubtful Accounts A/c Dr

To Accounts receivable A/c

Question 3 - Option C

The journal entry for direct write off:

Uncollectible Accounts expense A/c Dr

To Accounts receivable A/c

Question 4 - Option A

In case of Straight line method, a fixed rate of depreciation is computed based on Asset value, useful life and scrap value. Depreciation will be equal throughout the useful life of the asset.

In case of Double declining method, the depreciation rate under straight line method is considered and multiplied with 2. The computed rate is multiplied on the written down value of the asset for the useful life. Hence the depreciation will be higher in the earlier years and adjusted in the later years to arrive at the scrap value.

The option satisfying the requirements is Option A - Since double declining has higher depreciation in earlier years compared to straight line method and has lower depreciation in later years.

Question 5 - Option A

Depreciation means the expense charged in income statement for the decline in value of an asset over its estimated useful life. Thus option A is correct.