Which of the following situations is impossible? A. Book value is greater than residual value. B. Book value is less than residual value. C. Book value is equal to the residual value. D. Book value is less than the original cost. 6. 7. Neutron sold goods on account to James Company on June 15 for $300. If James Company pays the bill for full settlement on June 27, Neutron's journal entry to record the collection on account will include A. a debit to cash for $300. B. a debit to Accounts Payable for $300. C. a debit to Sales Revenue for $300. D. a credit to Accounts Receivable for $30. 8. If a capital expenditure is mistakenly recorded as a revenue expenditure, the effect is to A. understate profit, shareholders' equity, and assets. B. overstate profit and shareholders' equity, and understate assets. C. understate profit and shareholders' equity, and overstate assets. D. None of the above. 9. Failure to record accrued interest on notes payable causes a company to A. overstate interest income. B. understate interest expense. C. understate shareholders' equity. D. Both B and C are correct. 10. If beginning inventory is understated by $10,000, the effect of this error in the current period is Cost of Goods Sold Understated Profit Understated A. B. Overstated Understated Overstated Overstated C. Overstated Understated D. The custodian of an asset should A. be an accountant. B. have access to the accounting records for the asset. C. be someone from outside the company. D. not have access to the accounting records for the asset. 11. Under the allowance method, writing off an uncollectible account A. affects only statement of financial position accounts. B. affects both statement of financial position and income statement accounts. C. affects only income statement accounts. D. is not acceptable practice. 12