Question 1

Which of the following accounts normally have a debit balance?

Accepted Answer

A)  Prepaid expenses, Wages payable, Dividends. 
B)  Cash, Utilities expense, Accounts receivable. 
C) Retained earnings, Cost of goods sold, Wages expense. 
D) Utilities expense, Prepaid expenses, Wages payable. 
A)  Prepaid expenses, Wages payable, Dividends. 
B)  Cash, Utilities expense, Accounts receivable. 
C) Retained earnings, Cost of goods sold, Wages expense. 
D) Utilities expense, Prepaid expenses, Wages payable.

Question 2

Which of the following correctly describes the impact of collecting cash from customers for services to be provided in the future?

Accepted Answer

A)  Assets and stockholders' equity increase. 
B)  Assets and revenues increase. 
C) Assets and liabilities increase. 
D) Assets and operating income increase. 
A)  Assets and stockholders' equity increase. 
B)  Assets and revenues increase. 
C) Assets and liabilities increase. 
D) Assets and operating income increase.

Question 3

According to the revenue realization principle, revenue is recognized at the time that cash is collected from a customer for services to be provided in the future.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is correct?

Accepted Answer

A)  Recording revenues results in an increase in assets or a decrease in liabilities. 
B)  Recording revenues results in an increase in assets or a decrease in stockholders' equity. 
C) Recording expenses results in a decrease in assets or a decrease in liabilities. 
D) Recording expenses results in an increase in assets or an increase in liabilities. 
A)  Recording revenues results in an increase in assets or a decrease in liabilities. 
B)  Recording revenues results in an increase in assets or a decrease in stockholders' equity. 
C) Recording expenses results in a decrease in assets or a decrease in liabilities. 
D) Recording expenses results in an increase in assets or an increase in liabilities.

Question 5

Which of the following transactions will not decrease the net profit margin ratio?

Accepted Answer

A)  Accruing interest expense at year-end. 
B)  The recording of depreciation expense. 
C) Using cash to pay for previously accrued salaries. 
D) Accruing utilities expense at year-enD.Net profit margin = Net income ÷ Net sales (operating revenues). Previously accrued expenses have already been recognized and factored into net income; paying for these expenses impacts the balance sheet and not the income statement. 
A)  Accruing interest expense at year-end. 
B)  The recording of depreciation expense. 
C) Using cash to pay for previously accrued salaries. 
D) Accruing utilities expense at year-enD.Net profit margin = Net income ÷ Net sales (operating revenues). Previously accrued expenses have already been recognized and factored into net income; paying for these expenses impacts the balance sheet and not the income statement.

Question 6

Which of the following is not reported as an operating expense on the income statement?

Accepted Answer

A)  Salaries expense. 
B)  Rent expense. 
C) Interest expense. 
D) Cost of goods solD.Interest expense is the result of borrowing money and not of day-to-day operations of making and/or selling products and/or services. Therefore, interest expense is not listed as an operating expense. 
A)  Salaries expense. 
B)  Rent expense. 
C) Interest expense. 
D) Cost of goods solD.Interest expense is the result of borrowing money and not of day-to-day operations of making and/or selling products and/or services. Therefore, interest expense is not listed as an operating expense.

Question 7

Which of the following costs is most likely to be the largest expense reported on the income statement of a merchandiser such as Wal-Mart stores?

Accepted Answer

A)  Utilities expense. 
B)  Cost of goods sold. 
C) Advertising expense. 
D) Income tax expense. 
A)  Utilities expense. 
B)  Cost of goods sold. 
C) Advertising expense. 
D) Income tax expense.

Question 8

Which of the following businesses would most likely not report cost of goods sold on their income statement?

Accepted Answer

A)  A law firm. 
B)  An automobile dealership. 
C) A pizza restaurant. 
D) A computer chip manufacturer. 
A)  A law firm. 
B)  An automobile dealership. 
C) A pizza restaurant. 
D) A computer chip manufacturer.

Question 9

A company purchased supplies for cash, which will be consumed during future months. Which of the following correctly describes the impact of the supplies purchase on the financial statements?

Accepted Answer

A)  Total assets will remain unchanged. 
B)  Total assets will decrease. 
C) Operating expenses will increase. 
D) Operating income will decrease. 
A)  Total assets will remain unchanged. 
B)  Total assets will decrease. 
C) Operating expenses will increase. 
D) Operating income will decrease.

Question 10

The following information has been provided by Hable Company: Advertising expense $9,900;
Interest expense $3,700;
Rent expense $12,000;
Loss on sale of property and equipment $5,700;
Cost of goods sold $21,300;
Depreciation expense $7,100;
Prepaid insurance expense $1,000.
How much were Hable's operating expenses?

Accepted Answer

A)  $50,300. 
B)  $54,000. 
C) $59,700. 
D) $43,200. 
A)  $50,300. 
B)  $54,000. 
C) $59,700. 
D) $43,200.

Question 11

Under accrual accounting, rent expense for February, 2015 would be recognized on the income statement in February, 2015 even though it had been paid for in January.

Accepted Answer

A) True 
 B)False

Question 12

Mama June Pizza Company sold land costing $39,000 for $51,000 cash. Which of the following statements concerning the land sale is correct?

Accepted Answer

A)  The land account was credited for $51,000. 
B)  The revenue account was debited for $51,000. 
C) Operating income increased $12,000. 
D) Income before income taxes increased $12,000. 
A)  The land account was credited for $51,000. 
B)  The revenue account was debited for $51,000. 
C) Operating income increased $12,000. 
D) Income before income taxes increased $12,000.

Question 13

The revenue realization principle recognizes revenue when the goods or services are provided, regardless of the timing of the cash collection from customers.

Accepted Answer

A) True 
 B)False

Question 14

An example of operating revenue would be the revenue created by the sale of an automobile by a car dealership.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is correct?

Accepted Answer

A)  Expense accounts result in decreases in net income and stockholders' equity and therefore have credit balances. 
B)  Revenue accounts result in increases in net income and stockholders' equity and therefore have debit balances. 
C) Loss accounts result in decreases in net income and stockholders' equity and therefore have debit balances. 
D) Gain accounts result in increases in net income and stockholders' equity and therefore have debit balances. 
A)  Expense accounts result in decreases in net income and stockholders' equity and therefore have credit balances. 
B)  Revenue accounts result in increases in net income and stockholders' equity and therefore have debit balances. 
C) Loss accounts result in decreases in net income and stockholders' equity and therefore have debit balances. 
D) Gain accounts result in increases in net income and stockholders' equity and therefore have debit balances.

Question 16

Which of the following accounts normally have a credit balance?

Accepted Answer

A)  Unearned revenues; Prepaid rent; Revenues. 
B)  Revenues; Expenses; Retained earnings. 
C) Revenues; Cash; Unearned revenue. 
D) Accounts payable; Retained earnings; Revenues. 
A)  Unearned revenues; Prepaid rent; Revenues. 
B)  Revenues; Expenses; Retained earnings. 
C) Revenues; Cash; Unearned revenue. 
D) Accounts payable; Retained earnings; Revenues.

Question 17

Which of the following best describes operating revenues?

Accepted Answer

A)  They are increases in assets or increases in liabilities as a result of peripheral transactions. 
B)  They are decreases in assets or decreases in liabilities as a result of ongoing operations. 
C) They are increases in assets or decreases in liabilities as a result of ongoing operations. 
D) They are decreases in assets or increases in liabilities as a result of peripheral transactions. 
A)  They are increases in assets or increases in liabilities as a result of peripheral transactions. 
B)  They are decreases in assets or decreases in liabilities as a result of ongoing operations. 
C) They are increases in assets or decreases in liabilities as a result of ongoing operations. 
D) They are decreases in assets or increases in liabilities as a result of peripheral transactions.

Question 18

Explain why the net income reported on the income statement is usually not equal to net cash flows from operating activities on the statement of cash flows.

Accepted Answer

Net income on the income statement is an

Question 19

According to the matching principle, salary expense is recognized on the income statement when the salaries are paid rather than when the employee provides the work.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following journal entries is correct assuming that Mama June Pizza Company received cash for interest earned on investments? A. Cash
$\quad$Investment income
B. Investment income
$\quad$Cash
C. Cash
$\quad$Sales revenues
D. Sales revenues
$\quad$Cash

Accepted Answer

A)  Option A 
B)  Option B 
C) Option C 
D) Option D 
A)  Option A 
B)  Option B 
C) Option C 
D) Option D

Which of the following accounts normally have a debit balance?

Which of the following correctly describes the impact of collecting cash from customers for services to be provided in the future?

According to the revenue realization principle, revenue is recognized at the time that cash is collected from a customer for services to be provided in the future.

Which of the following statements is correct?

Which of the following transactions will not decrease the net profit margin ratio?

Which of the following is not reported as an operating expense on the income statement?

Which of the following costs is most likely to be the largest expense reported on the income statement of a merchandiser such as Wal-Mart stores?

Which of the following businesses would most likely not report cost of goods sold on their income statement?

A company purchased supplies for cash, which will be consumed during future months. Which of the following correctly describes the impact of the supplies purchase on the financial statements?

Under accrual accounting, rent expense for February, 2015 would be recognized on the income statement in February, 2015 even though it had been paid for in January.

Mama June Pizza Company sold land costing $39,000 for $51,000 cash. Which of the following statements concerning the land sale is correct?

The revenue realization principle recognizes revenue when the goods or services are provided, regardless of the timing of the cash collection from customers.

An example of operating revenue would be the revenue created by the sale of an automobile by a car dealership.

Which of the following statements is correct?

Which of the following accounts normally have a credit balance?

Which of the following best describes operating revenues?

Explain why the net income reported on the income statement is usually not equal to net cash flows from operating activities on the statement of cash flows.

According to the matching principle, salary expense is recognized on the income statement when the salaries are paid rather than when the employee provides the work.

Which of the following journal entries is correct assuming that Mama June Pizza Company received cash for interest earned on investments? A. Cash $\quad$ Investment income B. Investment income $\quad$ Cash C. Cash $\quad$ Sales revenues D. Sales revenues $\quad$ Cash

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

Filters

Exam 3: Operating Decisions and the Accounting System

Which of the following accounts normally have a debit balance?

Which of the following correctly describes the impact of collecting cash from customers for services to be provided in the future?

According to the revenue realization principle, revenue is recognized at the time that cash is collected from a customer for services to be provided in the future.

Which of the following statements is correct?

Which of the following transactions will not decrease the net profit margin ratio?

Which of the following is not reported as an operating expense on the income statement?

Which of the following costs is most likely to be the largest expense reported on the income statement of a merchandiser such as Wal-Mart stores?

Which of the following businesses would most likely not report cost of goods sold on their income statement?

A company purchased supplies for cash, which will be consumed during future months. Which of the following correctly describes the impact of the supplies purchase on the financial statements?

Under accrual accounting, rent expense for February, 2015 would be recognized on the income statement in February, 2015 even though it had been paid for in January.

Mama June Pizza Company sold land costing $39,000 for $51,000 cash. Which of the following statements concerning the land sale is correct?

The revenue realization principle recognizes revenue when the goods or services are provided, regardless of the timing of the cash collection from customers.

An example of operating revenue would be the revenue created by the sale of an automobile by a car dealership.

Which of the following statements is correct?

Which of the following accounts normally have a credit balance?

Which of the following best describes operating revenues?

Explain why the net income reported on the income statement is usually not equal to net cash flows from operating activities on the statement of cash flows.

According to the matching principle, salary expense is recognized on the income statement when the salaries are paid rather than when the employee provides the work.

Which of the following journal entries is correct assuming that Mama June Pizza Company received cash for interest earned on investments? A. Cash \quad Investment income B. Investment income \quad Cash C. Cash \quad Sales revenues D. Sales revenues \quad Cash

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

Filters

Which of the following journal entries is correct assuming that Mama June Pizza Company received cash for interest earned on investments? A. Cash $\quad$ Investment income B. Investment income $\quad$ Cash C. Cash $\quad$ Sales revenues D. Sales revenues $\quad$ Cash