1.

On December 31 of the current year, a company determined 1% of current years sales would be uncollectible. Assuming the allowance method was used to account for bad debts, what effect will this entry have on the company's net income and total assets?

No effect on net income; no effect on total assets.

Decrease in net income; no effect on total assets.

Decrease in net income; decrease in total assets.

Increase in net income; no effect on total assets.

No effect on net income; decrease in total assets.

2.

If common stock account had a $10,000 credit balance at the beginning of the period, and during the period, the stockholders invest an additional $5,000, the balance in the common stock account listed on the trial balance will be equal to a debit balance of $5,000.

True False

3.

When using the allowance method of accounting for uncollectible accounts, the entry to record the estimated bad debts expense is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

True False

4.

Which of the following purposes would financial statements serve for external users?

To fulfill regulatory requirements for companies whose stock is sold to the public.

To assess employee performance and compensation.

To determine purchasing needs.

To assist in monitoring consumer needs and price concerns.

To find information about projected costs and revenues of proposed products.

5.

The By-Way has sales of $435,000, costs of $254,000, depreciation of $35,000, interest expense of $22,000, and taxes of $43,400. What is the amount of EBITDA?

$181,000

$114,340

$157,900

$115,600

$322,100