Question

1 . Allowance for Doubtful Accounts

Group of answer choices

is offset against current liabilities

increases the cash realizable value of accounts receivable

appears on the balance sheet

is offset against accumulated depreciation

2. Under the allowance method, the entry to write-off an uncollectible accounts receivable results in:

Group of answer choices

a debit to Provision for Doubtful Accounts and a credit to Accounts Receivable

a debit to Provision for Doubtful Accounts and a credit to Allowance for Doubtful Accounts

a debit to Allowance for Doubtful Accounts and a credit to Provision for Doubtful Accounts

a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable

3. Which of the following expressions is incorrect?

Group of answer choices

Gross profit – operating expenses = net income

Sales – cost of goods sold – operating expenses = net income

Net income + operating expenses = gross profit

Operating expenses – cost of goods sold = gross profit

4. Farley Foods had beginning inventory of $15,000 at March 1. During the month, the company made purchases of $40,000. The inventory at the end of the month is $17,300. How much is the cost of goods sold for the month of March?

Group of answer choices

$37,700

$40,000

$55,000

$57,300

5.

Followings are balances of accounts.

Accounts	Balance
Accounts Payable	$ 25,000
Accounts Receivable	10,000
Accumulated Depreciation	20,000
Allowance for Doubtful Accounts	5,000
Building	50,000
Cash	50,000
Common Stock	140,000
Equipment	40,000
Notes Payable	5,000
Prepaid Insurance	50,000
Provision for Doubtful Accounts	10,000
Retained Earnings	5,000

Based on provided information, calculate the value of Total Assets.

Group of answer choices

$175,000

$200,000

$220,000

$225,000

6.

Followings are balances of accounts.

Accounts	Balance
Accounts Payable	$ 25,000
Accounts Receivable	10,000
Accumulated Depreciation	20,000
Allowance for Doubtful Accounts	5,000
Building	50,000
Cash	50,000
Common Stock	140,000
Equipment	40,000
Notes Payable	5,000
Prepaid Insurance	50,000
Provision for Doubtful Accounts	10,000
Retained Earnings	5,000

Based on provided information, calculate the value of total Non-current assets.

Group of answer choices

$70,000

$75,000

$90,000

$110,000

7.

Match the items below with the appropriate example.

Group of answer choices

Salvage velue

      [ Choose ]            Depreciation rate is the highest for the first year, and the smallest for the last year            Equal amount of depreciation is recorded each year            Depreciation is calculated based on its usage            Expected cash value of the asset at the end of its useful life            Cost minus (less) accumulated depreciation      

Straight line method

      [ Choose ]            Depreciation rate is the highest for the first year, and the smallest for the last year            Equal amount of depreciation is recorded each year            Depreciation is calculated based on its usage            Expected cash value of the asset at the end of its useful life            Cost minus (less) accumulated depreciation      

Sum-of-year digits' method

      [ Choose ]            Depreciation rate is the highest for the first year, and the smallest for the last year            Equal amount of depreciation is recorded each year            Depreciation is calculated based on its usage            Expected cash value of the asset at the end of its useful life            Cost minus (less) accumulated depreciation      

Book value

      [ Choose ]            Depreciation rate is the highest for the first year, and the smallest for the last year            Equal amount of depreciation is recorded each year            Depreciation is calculated based on its usage            Expected cash value of the asset at the end of its useful life            Cost minus (less) accumulated depreciation      

Units-of-activity method

Answer 1

1 . Allowance for Doubtful Accounts

appears on the balance sheet

(It deducts from Accounts receivable balance in the Balance sheet)

2. Under the allowance method, the entry to write-off an un-collectible accounts receivable results in:

debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable

(Allowance for Doubtful Accounts Dr

To Accounts Receivable A/c)

3. Which of the following expressions is incorrect?

Operating expenses – cost of goods sold = gross profit

(This expression is absolutely wrong because both are expenditure in nature)

4.

$         37,700

Computation:

Cost of goods sold for the month of March
Beginning inventory	$         15,000
Purchases during the month	$         40,000
Inventory at the end	$       -17,300
Cost of goods sold	$         37,700

5.

Total Assets

$     1,75,000

Computation:

Asset Items Are:
Cash	$         50,000
Prepaid Insurance	$         50,000
Accounts Receivable	$         10,000
Allowance for Doubtful Accounts	$          -5,000
	$           5,000
Fixed Assets
Building	$         50,000
Equipment	$         40,000
Accumulated Depreciation	$       -20,000
Net Fixed Assets	$         70,000
Total Assets	$     1,75,000

6.

$70000

Computation:

Total Non-current assets
Building	$                        50,000
Equipment	$                        40,000
Accumulated Depreciation	$                      -20,000
Total	$                        70,000

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7.

Salvage value: Expected cash value of the asset at the end of its useful life

(Also referred as realizable value of the Asset)

Straight line method: Equal amount of depreciation is recorded each year

(Under SLM method depreciation is calculated equally over the useful life of the asset)

Sum-of-year digits' method: Depreciation rate is the highest for the first year, and the smallest for the last year

(Under SYD method Depreciation would be highest in the first years compared to last years)

Book value: Cost minus (less) accumulated depreciation

(Book value of an asset can be calculated by Deducting Accumulated depreciation from its original cos)

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