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Financial Accounting MCQs

Compared to its 2004 cash-basis net income, Potoma Co.'s 2004 accrual-basis net income increased when it:

Sold used equipment for cash at a gain in 2004.

Had lower accrued expenses on December 31, 2004, than on January 1, 2004.

Declared a cash dividend in 2003 that it paid in 2004.

Wrote off more accounts receivable balances than it reported as uncollectible accounts expense in 2004.

Answer

Correct Answer: Had lower accrued expenses on December 31, 2004, than on January 1, 2004.

Explanation:

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