1. On January 1, a machine with useful life of five years and residual value of $2,000 was bought for $10,000. Compute the depreciation expense for year 2 under straight-line depreciation?
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 starting of 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. 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. Allowance for Doubtful Accounts is essential 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 should be accumulated in separate account.
c. Liability results when a credit sale is made.
d. Management needs to accumulate all the credit losses over years.