Question

TRUE OR FALSE?

1. Allowance for Doubtful Accounts is a contra asset account.

2. A factor purchases receivables from businesses for a fee and collects the directly from customers.

3. A note is dishonored when it is not fully paid at maturity.

4. All plant assets (fixed assets) must be depreciated for accounting purposes

5. Recording depreciation on plant assets affects the balance sheet and the income statement.

6. Current liabilities are typically expected to be paid within one year.

7. A note payable must always be paid before an account payable.

8. A debenture bond is an unsecured bond which is issued against the general credit of the borrower.

9. A corporation must be incorporated in each state in which it does business.

10. The number of common shares outstanding can never be greater than the number of shares issued.

11. A debit balance in the Retained Earnings account is identified as a deficit.

Answer 1

1.Allowance for Doubtful Accounts is a contra asset account.- True

It is just an estimate and it used instead of directly reducing from Accounts receivable.

.

2.A factor purchases receivables from businesses for a fee and collects the directly from customers.-True

A factor purchases receivables from business entities for a fee and collects directly from customers

.

3.A note is dishonored when it is not fully paid at maturity-True

A note is honored only it is fully paid at maturity.

.

4.All plant assets (fixed assets) must be depreciated for accounting purposes-False

Because Land does not depreciable.

.

5.Recording depreciation on plant assets affects the balance sheet and the income statement-True

Depreciation will affect both income statement and Balance Sheet.

.

6.Current liabilities are typically expected to be paid within one year.-True

Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer.

.

7.A note payable must always be paid before an account payable-False

It must not always be paid before an account payable

.

8.A debenture bond is an unsecured bond which is issued against the general credit of the borrower-True

A debenture bond is an unsecured bond which is issued against the general credit of the borrower

.

9.A corporation must be incorporated in each state in which it does business-False

A corporation must not be incorporated in each state in which it does business

.

10.The number of common shares outstanding can never be greater than the number of shares issued-True

The number of common shares outstanding less than or equal to the number of shares issued

.

11.A debit balance in the Retained Earnings account is identified as a deficit-True

A debit balance shows deficit and A credit balance shows Surplus