Reference no: EM13356173

Multiple choice questions based on Fundamentals in Accounting

1.On January 1, a machine with a useful life of five years and a residual value of $2,000 was purchased for $10,000. What is the depreciation expense for year 2 under straight-line depreciation?
a.$2,000.
b.$6,000.
c.$1,600.
d.$4,800.

2. Net income results when
a.Assets > Liabilities
b.Revenues > Expenses
c.Revenues = Expenses
d.Revenues < Expenses

3.Retained earnings at the end of the period is equal to
a.retained earnings at the beginning of the period plus net income minus liabilities.
b.net income.
c.assets plus liabilities.
d.retained earnings at the beginning of the period plus net income minus dividends.

4.The respective normal account balances of Purchases, Freight-In and Purchases Discount are
a.credit, credit, credit.
b.credit, debit, debit.
c.debit, credit, debit.
d.debit, debit, credit.

5.The Allowance for Doubtful Accounts is necessary because
a.when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay.
b.uncollectible accounts that are written off must be accumulated in a separate account.
c.a liability results when a credit sale is made.
d.management needs to accumulate all the credit losses over the years.

6.Debts and obligations of a business are referred to as
a.Assets
b.Equities
c.Expenses
d.Liabilities

7. On a classified balance sheet, companies usually list current assets
a.with the largest dollar amounts first.
b.in alphabetical order.
c.in the order of acquisition.
d.in the order of liquidity, that is the order in which they are expected to be converted into cash.

8. A furniture factory's employees work overtime to finish an order that is sold on January 31. The office sends a statement to the customer in early February and payment is received by mid-February. The overtime wages should be expensed in
a.January.
b.February.
c.the period when the workers receive their checks.
d.either January or February depending on when the pay period ends.