Exam 3: Operating Decisions and the Accounting System

A company purchased supplies for cash, which will be consumed during future months. Which of the following does not correctly describe the impact on the financial statements when the supplies are used during future months?

Which of the following statements is false?

The following accounts for Carthage Enterprises, Inc. are listed randomly. Enter the number associated with each transaction to identify the accounts that would be used in the journal entry for each transaction given below. 1. Accounts payable 9. Income taxes payable 2. Accounts receivable 10. Prepaid expenses 3. Supplies 11. Operating expenses 4. Building 12. Prepaid insurance 5. Cash 13. Retained earnings 6. Common stock 14. Service revenue 7. Dividends 15. Unearned revenue 8. Income tax expense

Cash paid to suppliers for inventory is an investing activity.

Which of the following statements does not properly describe the accrual basis of accounting?

Which of the following is correct when land costing $20,000 is sold for $29,000? The land was a component of property and equipment on the balance sheet.

An income statement with each line divided by net sales and shown as a percentage is called a common statement.

The operating cycle is the time that elapses between a company's cash payment to suppliers for inventory purchases and the collection of cash from sale of inventory to customers.

Which of the following statements is false?

Which of the following statements is false?

Which of the following statements is correct?

The following information has been provided by Flatiron Company for the year ended December 31, 2014: Net income was $71,000; Income tax expense was $47,000; Dividends declared and paid totaled $7,500; Interest expense was $8,700; Loss on sale of plant assets was $15,000; Operating expenses totaled $91,000; Cash collected from customers was $220,000. How much was Flatiron's operating income?

McNeil Company owed its employees for services performed and recorded a liability for the wages owed the employees. Which of the following correctly describes the impact on the financial statements when the employee wages are subsequently paid?

Earnings per share must be either reported on the income statement or disclosed in the notes to the financial statements.

Which of the following expenses does not affect operating income?

Which of the following best describes the operating cycle?

Describe the difference between operating revenues and gains from the sale of plant and equipment while providing examples of each.

Which of the following does not correctly describe the cash basis of accounting?

Which of the following statements is false when Mama June Pizza Company paid $47,000 cash on accounts owed to suppliers?

Due to the relationship of financial statements, the statement of retained earnings links the income statement to the balance sheet.