1. Advantage of relating company's bad debt expense to its outstanding accounts receivable is that this approach
a. Provides a reasonably correct statement of receivables in balance sheet.
b. Best relates bad debt expense to the period of sale.
c. Is the only generally accepted method for valuing accounts receivable.
d. Makes estimates of uncollectible accounts unnecessary.
2. Which of the given is capital expenditure?
a. Payment of an account payable
b. Retirement of bonds payable
c. Payment of Federal income taxes
d. None of these
3. If corporation buys a lot and building and subsequently tears down building and uses property as parking lot, proper accounting treatment of cost of building would depend on:
a. Significance of the cost allocated to the building in relation to the combined cost of the lot and building.
b. Length of time for which the building was held prior to its demolition.
c. Contemplated future use of the parking lot.
d. Intention of management for the property when the building was acquired.
4. Which of the given must not be included in present liabilities section of balance sheet?
a. Trade notes payable
b. Short-term zero-interest-bearing notes payable
c. The discount on short-term notes payable
d. All of these are included
5. Which of the given contingencies require not be disclosed in financial statements or the notes thereto?
a. Probable losses not reasonably estimable
b. Environmental liabilities that cannot be reasonably estimated
c. Guarantees of indebtedness of others
d. All of these must be disclosed.