Question 1

Which of the following expenses is usually listed last on the statement of earnings?

Accepted Answer

A)  Cost of sales 
B)  General administrative expenses 
C)  Income tax expense 
D)  Advertising expense 
A)  Cost of sales 
B)  General administrative expenses 
C)  Income tax expense 
D)  Advertising expense

Question 2

A company can experience difficulty even if it does not report a loss.

Accepted Answer

A) True 
 B)False

Question 3

The matching process recognizes liabilities when incurred in earning revenue.

Accepted Answer

A) True 
 B)False

Question 4

On January 1, 20B, Grover Inc., started the year with a $22,000 credit balance in its retained earnings account. During 20B, the company earned profit of $40,000 and declared and paid dividends of $10,000. Also, the company received cash of $15,000 as an additional investment by its owners. Therefore, the balance in retained earnings on December 31, 20B, would be which of the following?

Accepted Answer

A)  $67,000. 
B)  $57,000. 
C)  $52,000. 
D)  $42,000. 
A)  $67,000. 
B)  $57,000. 
C)  $52,000. 
D)  $42,000.

Question 5

An expense account is a subdivision of the retained earnings account and decreases shareholder's equity.

Accepted Answer

A) True 
 B)False

Question 6

Transactions where cash is received before being earned often result in adjusting entries at the end of the period to record profit in the proper period.

Accepted Answer

A) True 
 B)False

Question 7

The equality of debits and credits is the basis for

Accepted Answer

A)  the T account. 
B)  all accounting systems. 
C)  the single-entry accounting system. 
D)  the double-entry accounting system. 
A)  the T account. 
B)  all accounting systems. 
C)  the single-entry accounting system. 
D)  the double-entry accounting system.

Question 8

Why might managers be tempted to violate the revenue principle and the matching principle in financial reporting?

Accepted Answer

Managers want their companies to appear

Question 9

An increase in an asset is recorded by a debit.

Accepted Answer

A) True 
 B)False

Question 10

The statement of earnings reports profit or loss at a point in time.

Accepted Answer

A) True 
 B)False

Question 11

The category that is generally considered to be the best measure of a company's ability to continue as a going concern is

Accepted Answer

A)  cash flows from operating activities. 
B)  usually different from year to year. 
C)  cash flows from investing activities. 
D)  cash flows from financing activities. 
A)  cash flows from operating activities. 
B)  usually different from year to year. 
C)  cash flows from investing activities. 
D)  cash flows from financing activities.

Question 12

Which of the following costs is most likely to be the largest expense item on the statement of earnings of a merchandising chain such as Walmart?

Accepted Answer

A)  Income tax expense 
B)  Wage, salary and benefits expense 
C)  Advertising 
D)  Cost of Sales 
A)  Income tax expense 
B)  Wage, salary and benefits expense 
C)  Advertising 
D)  Cost of Sales

Question 13

Collection of a $600 accounts receivable

Accepted Answer

A)  has no effect on total assets. 
B)  decreases a liability $600; increases shareholders' equity $600. 
C)  increases an asset $600; decreases a liability $600. 
D)  decreases an asset $600; decreases a liability $600. 
A)  has no effect on total assets. 
B)  decreases a liability $600; increases shareholders' equity $600. 
C)  increases an asset $600; decreases a liability $600. 
D)  decreases an asset $600; decreases a liability $600.

Question 14

The operating cycle of a business is best defined as which of the following?

Accepted Answer

A)  one year 
B)  the length of time over which our plant and equipment assets are expected to be used by the company in generating revenues 
C)  the time it takes for a company to purchase and pay for goods or services from suppliers, sell those goods or services to customers and collect cash from the customers 
D)  the period of time for which we prepare our financial statements 
A)  one year 
B)  the length of time over which our plant and equipment assets are expected to be used by the company in generating revenues 
C)  the time it takes for a company to purchase and pay for goods or services from suppliers, sell those goods or services to customers and collect cash from the customers 
D)  the period of time for which we prepare our financial statements

Question 15

If a revenue account is credited, the revenue account is increased.

Accepted Answer

A) True 
 B)False

Question 16

Financial analysts look to the statement of earnings to determine which of the following?

Accepted Answer

A)  whether the company has generated sufficient cash to pay its bills 
B)  whether the company has generated earnings from operations 
C)  if the company is collecting its receivables on time 
D)  if the company has invested too much cash in its inventory 
A)  whether the company has generated sufficient cash to pay its bills 
B)  whether the company has generated earnings from operations 
C)  if the company is collecting its receivables on time 
D)  if the company has invested too much cash in its inventory

Question 17

Accrued expenses are

Accepted Answer

A)  paid and recorded in an asset account after they are used or consumed. 
B)  paid and recorded in an asset account before they are used or consumed. 
C)  incurred but not yet paid or recorded. 
D)  incurred and already paid or recorded. 
A)  paid and recorded in an asset account after they are used or consumed. 
B)  paid and recorded in an asset account before they are used or consumed. 
C)  incurred but not yet paid or recorded. 
D)  incurred and already paid or recorded.

Question 18

Using the accrual basis of accounting, a company recognizes expenses when they are paid.

Accepted Answer

A) True 
 B)False

Question 19

Accrual basis accounting recognizes revenues when cash is received from the customer.

Accepted Answer

A) True 
 B)False

Question 20

We record insurance as an expense when we pay for a three year policy.

Accepted Answer

A) True 
 B)False

Which of the following expenses is usually listed last on the statement of earnings?

A company can experience difficulty even if it does not report a loss.

The matching process recognizes liabilities when incurred in earning revenue.

An expense account is a subdivision of the retained earnings account and decreases shareholder's equity.

Transactions where cash is received before being earned often result in adjusting entries at the end of the period to record profit in the proper period.

The equality of debits and credits is the basis for

Why might managers be tempted to violate the revenue principle and the matching principle in financial reporting?

An increase in an asset is recorded by a debit.

The statement of earnings reports profit or loss at a point in time.

The category that is generally considered to be the best measure of a company's ability to continue as a going concern is

Which of the following costs is most likely to be the largest expense item on the statement of earnings of a merchandising chain such as Walmart?

Collection of a $600 accounts receivable

The operating cycle of a business is best defined as which of the following?

If a revenue account is credited, the revenue account is increased.

Financial analysts look to the statement of earnings to determine which of the following?

Accrued expenses are

Using the accrual basis of accounting, a company recognizes expenses when they are paid.

Accrual basis accounting recognizes revenues when cash is received from the customer.

We record insurance as an expense when we pay for a three year policy.

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 Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

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Exam 3: Operating Decisions and the Accounting System

Which of the following expenses is usually listed last on the statement of earnings?

A company can experience difficulty even if it does not report a loss.

The matching process recognizes liabilities when incurred in earning revenue.

An expense account is a subdivision of the retained earnings account and decreases shareholder's equity.

Transactions where cash is received before being earned often result in adjusting entries at the end of the period to record profit in the proper period.

The equality of debits and credits is the basis for

Why might managers be tempted to violate the revenue principle and the matching principle in financial reporting?

An increase in an asset is recorded by a debit.

The statement of earnings reports profit or loss at a point in time.

The category that is generally considered to be the best measure of a company's ability to continue as a going concern is

Which of the following costs is most likely to be the largest expense item on the statement of earnings of a merchandising chain such as Walmart?

Collection of a $600 accounts receivable

The operating cycle of a business is best defined as which of the following?

If a revenue account is credited, the revenue account is increased.

Financial analysts look to the statement of earnings to determine which of the following?

Accrued expenses are

Using the accrual basis of accounting, a company recognizes expenses when they are paid.

Accrual basis accounting recognizes revenues when cash is received from the customer.

We record insurance as an expense when we pay for a three year policy.

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 Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

Filters