IAB Financial Accounting & Reporting 5

Question 1

Which of the following is an example of an intangible asset?

Accepted Answer

Patent

Answer

A patent is an intangible asset — it lacks physical substance but provides future economic benefits through exclusive rights.

Question 2

When the allowance method is used for bad debts, writing off a specific uncollectible account affects:

Accepted Answer

Neither net income nor total assets

Answer

Under the allowance method, writing off a specific account reduces both Accounts Receivable and the Allowance for Doubtful Accounts equally, leaving net realizable value and net income unchanged.

Question 3

A company issues a $10,000, 6-month note payable at 8% annual interest. What is the total interest owed at maturity?

Accepted Answer

$400

Answer

Interest = Principal × Rate × Time = $10,000 × 8% × (6/12) = $400.

Question 4

Which of the following would cause an overstatement of net income?

Accepted Answer

Understating depreciation expense

Answer

Understating depreciation expense reduces total expenses, which artificially inflates the net income figure.

Question 5

The quick ratio (acid-test ratio) excludes which current asset from its calculation?

Accepted Answer

Inventory

Answer

The quick ratio excludes inventory because it is the least liquid current asset and may not be quickly convertible to cash.

(IAB) International Association of Bookkeepers Certification Practice Test

(IAB) International Association of Bookkeepers Certification Practice Test

IAB Financial Accounting & Reporting 5