Exam 3: Operating Decisions and the Accounting System

Which of the following statements is true?

For each item below, indicate whether the account will be debited or credited: 1. Decrease in Accounts Payable 2. Increase in Dividends 3. Increase in Common Shares 4. Increase in Unearned Revenue 5. Decrease in Interest Payable 6. Increase in Prepaid Insurance 7. Decrease in Wages Expense 8. Decrease in Supplies 9. Increase in Revenues 10. Decrease in Accounts Receivable

Revenue recognition most commonly occurs at the point of delivery of goods or services to the customer.

A high total asset turnover signifies efficient management of assets; a low asset turnover ratio signifies less efficient management.

Revenues are decreases in assets or settlements of liabilities from ongoing operations.

Expenses incurred, but not yet paid, create a receivable (i.e., an asset) until payment occurs.

Operating cash inflows and outflows are primarily connected to which of the following?

The division of business activities into a series of equal periods for accounting purposes is known as the periodicity assumption.

A company receives a $25,000 cash deposit from a customer on March 15 but will not deliver the goods until April 20. Which of the following statements is false?

Which one of the following represents the expanded basic accounting equation?

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

Income tax expense will appear on the statement of financial position.

Revenue is always recognized when which of the following occurs?

What would be the effect on December's statement of earnings of a utility bill received on December 27, 2013 but which will not be paid until January 10, 2014?

The following data is from Gauthier Machine Shop: Compute Gauthier Machine Shop's asset turnover ratio for the two most recent years (a) 20C __________ (b) 20B __________

Profit differs from cash flow from operations because the revenue recognition and matching principle result in the recognition of revenues and related expenses that are independent of the timing of cash receipts and payments.

Collection of a customer's account has an impact on total assets.

In applying the revenue principle to a given transaction, the most important moment or period in time is when which of the following happens?

Calculate the effective tax rate for a company that reports an income tax expense of $3.0 million, profit of $7.5 million, and income before taxes of $10.5 million.

The double-entry system of accounting refers to the placement of a double line at the end of a column of figures.