BBD2104/BBD2104N/ Set A Page 4 of 13 4. A companys found the closing inventory was understated by RM 26, 750 post to the preparation of its financial statements for the current year, What will be the effect of this error if its not corrected? A. The current years profit will be overstated and next years profit will understated B. The current years profit will be understated but there will be no effect on next years profit C. The current years profit will be understated and next years profit will be overstated D. No effect at all. 5. A company purchased a vehicle for RM 6, 000. It will be used for 5 years and residual value is expected to be RM 1,000. What is the annual amount of depreciation using straight line method of depreciation? A. RM 1,000 B. RM 2,000 C. RM 5,000 D. RM 3,000 6. Which of the following is double entry for depreciation expenses? A. Dr. accumulated depreciation; Cr. Depreciation expenses B. Dr. depreciation expenses; Cr. Accumulated depreciation C. Dr. cash; Cr. Depreciation expenses D. Dr. depreciation expenses; Cr. Cash/bank 7. Which of the following is the effect on the net income if a business decreases its provision for bad debts? A. It will increase net income B. It will decrease net income C. No effect D. It will increase gross profit and net income

BBD2104/BBD2104N/ Set A Page 5 of 13 8. Which accounting concept dictates the inclusion of provision for doubtful debts in the financial statements? A. Accrual concept B. Matching concept C. Going concern concept D. Prudence concept 9. Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited _____________. A. when a credit sale is past due. B. at the end of each accounting period. C. whenever a pre-determined amount of credit sales have been made. D. when an account is determined to be uncollectible. 10. An aging of a company's accounts receivable indicates that RM6,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a RM2,000 debit balance, the adjustment to record bad debts for the period will require a _____________. A. debit to Bad Debt Expense for RM8,000. B. debit to Allowance for Doubtful Accounts for RM8,000. C. debit to Bad Debt Expense for RM4,000. D. credit to Allowance for Doubtful Accounts for RM4,000. 11. A debit balance in the Allowance for Doubtful Accounts _____________. A. is the normal balance for that account. B. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts. C. indicates that actual bad debt write-offs have been less than what was estimated. D. cannot occur if the percentage of receivables method of estimating bad debts is