Multiple Choice Accounting Questions (Simple)

Please answer the multiple choice questions below

Question 4

Which of the following is NOT correct regarding factoring of receivables?

Question 4 options:

a) factoring usually involves a sale to only one company.

b) the fees are relatively high.

c) the quality of receivables may be lower.

d) the seller usually continues to service the receivables.

Question 5

In 2018, beginning inventory was overstated by $10,000.What is the impact to the December 31, 2018 financial statements?

Question 5 options:

a) no impact

b) net income is overstated by $10,000

c) net income is understated by $10,000

d) accounts payable is understated by $10,000

Question 6

Crest Textiles factors $600,000 of accounts receivable with Commercial Factors on a without recourse basis.The receivable records are transferred to Commercial which takes over responsibility for the collections.Commercial assesses a finance charge of 3% of the amount of accounts receivable and withholds an initial amount equal to 6% of the accounts receivable for returns and allowances.How much cash will Crest Textiles receive with regards to this transaction?

Question 6 options:

a) $546,000

b) $564,000

c) $582,000

d) $600,000

Question 7

When a public company holds between 20% and 50% of the outstanding common shares of an investee, which of the following statements applies?

Question 7 options:

a)The investor should always use the equity method to account for its investment.

b)The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise significant influence over the investee.

c)The investor must use the cost method unless it can clearly demonstrate the ability to exercise significant influence over the investee.

d)The investor should always use the cost method to account for its investment.

Question 8

"Allowance for Doubtful Accounts" is a(n)

Question 8 options:

a) expense account.

b) contributed surplus account

c) liability account.

d) current asset