Question 1

Revenues

Accepted Answer

A)  decrease assets. 
B)  increase stockholders' equity. 
C)  increase liabilities. 
D)  decrease expenses. 
A)  decrease assets. 
B)  increase stockholders' equity. 
C)  increase liabilities. 
D)  decrease expenses.

Question 2

The period of time from buying goods and services to collecting cash from customers is called the operating cycle.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not true about the Income Statement?

Accepted Answer

A)  Amounts received from customers for services performed in the current month would be revenues on the income statement. 
B)  Costs incurred in the current month but not paid as of the end of the month would be expenses on the income statement for the current month. 
C)  Amounts received from customers in payment of their accounts arising from service in the prior period would be revenues in the income statement for the current period. 
D)  Amounts received from customer as deposits for services to be rendered next month will not be recorded as 
A)  Amounts received from customers for services performed in the current month would be revenues on the income statement. 
B)  Costs incurred in the current month but not paid as of the end of the month would be expenses on the income statement for the current month. 
C)  Amounts received from customers in payment of their accounts arising from service in the prior period would be revenues in the income statement for the current period. 
D)  Amounts received from customer as deposits for services to be rendered next month will not be recorded as

Question 4

How many of the following statements regarding the accrual and cash basis of accounting are true?
Using the accrual basis of accounting, if payment is received before delivery of a good or service, a liability is recorded at the time the payment is received.
Using the accrual basis of accounting, if payment is received after delivery of a good or service, an asset is recorded at the time the good or service was delivered.
Generally accepted accounting principles require the accrual basis of accounting to be used for external financial reporting purposes.

Accepted Answer

A)  None 
B)  One 
C)  Two 
D)  Three 
A)  None 
B)  One 
C)  Two 
D)  Three

Question 5

How many of the following statements regarding the trial balance are true?
A trial balance is included in the full set of external financial statements, just like an income statement.
If debits equal credits in the unadjusted trial balance, you have made no errors in preparing and posting journal entries.
The balances for each account reported on an unadjusted trial balance are determined by adding the amounts on the "+" side and subtracting the amounts on the "-" side of each ledger or T-account.

Accepted Answer

A)  None 
B)  One 
C)  Two 
D)  Three 
A)  None 
B)  One 
C)  Two 
D)  Three

Question 6

GAAP does not allow cash basis accounting to be used in external financial reports.

Accepted Answer

A) True 
 B)False

Question 7

Sparkling Pools provides $1,000 of pool maintenance services during July and collects payment in August. The company performs $1,600 of pool maintenance services during July that were paid for in June. The company accepts an order to perform $500 of pool maintenance services in August and will be paid in the same month. Revenue should be credited for:

Accepted Answer

A)  $1,600 in June, $1,000 in July, and $500 in August. 
B)  $1,600 in June, $0 in July, and $1,500 in August. 
C)  $0 in June, $1,600 in July, and $1,500 in August. 
D)  $0 in June, $2,600 in July, and $500 in August. 
A)  $1,600 in June, $1,000 in July, and $500 in August. 
B)  $1,600 in June, $0 in July, and $1,500 in August. 
C)  $0 in June, $1,600 in July, and $1,500 in August. 
D)  $0 in June, $2,600 in July, and $500 in August.

Question 8

Which account is least likely to be credited when an expense is recorded?

Accepted Answer

A)  Cash. 
B)  Accounts Payable. 
C)  Prepaid Expenses. 
D)  Accounts Receivable. 
A)  Cash. 
B)  Accounts Payable. 
C)  Prepaid Expenses. 
D)  Accounts Receivable.

Question 9

Your company receives advance payment in October for services that are provided during November. Which of the following is true?

Accepted Answer

A)  A liability is recorded in October; in November the liability is reduced and revenue is recorded. 
B)  Revenue is recorded in October and expenses are recorded in November. 
C)  An asset is recorded in October; in November, the asset is reduced and revenue is recorded. 
D)  Revenue and expenses are recorded in October. 
A)  A liability is recorded in October; in November the liability is reduced and revenue is recorded. 
B)  Revenue is recorded in October and expenses are recorded in November. 
C)  An asset is recorded in October; in November, the asset is reduced and revenue is recorded. 
D)  Revenue and expenses are recorded in October.

Question 10

Net Income would be understated by a failure to record collection of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 11

On October 10, a company paid $12,000 to its suppliers, of which $2,000 was for supplies received on October 10 and $10,000 was for supplies received and recorded during September. The $12,000 payment would be recorded as a:

Accepted Answer

A)  $10,000 debit to Supplies, a $2,000 debit to Accounts Payable, and a $12,000 credit to Cash. 
B)  $12,000 debit to Supplies and a $12,000 credit to Cash. 
C)  $12,000 debit to Supplies Expense and a $12,000 credit to Cash. 
D)  $2,000 debit to Supplies, a $10,000 debit to Accounts Payable, and a $12,000 credit to Cash. 
A)  $10,000 debit to Supplies, a $2,000 debit to Accounts Payable, and a $12,000 credit to Cash. 
B)  $12,000 debit to Supplies and a $12,000 credit to Cash. 
C)  $12,000 debit to Supplies Expense and a $12,000 credit to Cash. 
D)  $2,000 debit to Supplies, a $10,000 debit to Accounts Payable, and a $12,000 credit to Cash.

Question 12

Which of the following represents a subtotal rather than an account?

Accepted Answer

A)  Advertising Expense. 
B)  Service Revenue. 
C)  Supplies Expense. 
D)  Total Revenues. 
A)  Advertising Expense. 
B)  Service Revenue. 
C)  Supplies Expense. 
D)  Total Revenues.

Question 13

During March, the Long Life Consulting Company provides $23,000 in consulting services of which $12,000 is immediately paid for and $11,000 is on account.

Accepted Answer

A)  Cash increases $12,000, revenue increases $11,000, and contributed capital increases $23,000. 
B)  Cash increases $12,000, Accounts Receivable increases $11,000, and revenues increase $23,000. 
C)  Accounts Receivable increases $11,000, liabilities decrease $12,000, and stockholders' equity decreases $1,000. 
D)  Revenues increase $12,000, liabilities decrease $12,000, and stockholders' equity is unchanged. 
A)  Cash increases $12,000, revenue increases $11,000, and contributed capital increases $23,000. 
B)  Cash increases $12,000, Accounts Receivable increases $11,000, and revenues increase $23,000. 
C)  Accounts Receivable increases $11,000, liabilities decrease $12,000, and stockholders' equity decreases $1,000. 
D)  Revenues increase $12,000, liabilities decrease $12,000, and stockholders' equity is unchanged.

Question 14

If revenues are not growing faster than expenses, then Net Income will decrease.

Accepted Answer

A) True 
 B)False

Question 15

Company A receives $10,000 in advance this month for work to be performed next mo nth. This month, the company should:

Accepted Answer

A)  Debit Cash $10,000 and credit Service Revenue $10,000. 
B)  Debit Cash $10,000 and credit Unearned Revenue $10,000. 
C)  Debit Cash $10,000 and credit Accounts Payable $10,000. 
D)  Debit Accounts Payable $10,000 and credit Cash $10,000. 
A)  Debit Cash $10,000 and credit Service Revenue $10,000. 
B)  Debit Cash $10,000 and credit Unearned Revenue $10,000. 
C)  Debit Cash $10,000 and credit Accounts Payable $10,000. 
D)  Debit Accounts Payable $10,000 and credit Cash $10,000.

Question 16

What is the amount of Net Income for the year ended December 31, 2010?

Accepted Answer

A)  $9,022 
B)  $16,318 
C)  $4,397 
D)  $9,622 
A)  $9,022 
B)  $16,318 
C)  $4,397 
D)  $9,622

Question 17

Which of the following is the journal entry to record activity #4?

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

Revenues

The period of time from buying goods and services to collecting cash from customers is called the operating cycle.

Which of the following is not true about the Income Statement?

GAAP does not allow cash basis accounting to be used in external financial reports.

Which account is least likely to be credited when an expense is recorded?

Your company receives advance payment in October for services that are provided during November. Which of the following is true?

Net Income would be understated by a failure to record collection of accounts receivable.

On October 10, a company paid $12,000 to its suppliers, of which $2,000 was for supplies received on October 10 and $10,000 was for supplies received and recorded during September. The $12,000 payment would be recorded as a:

Which of the following represents a subtotal rather than an account?

During March, the Long Life Consulting Company provides $23,000 in consulting services of which $12,000 is immediately paid for and $11,000 is on account.

If revenues are not growing faster than expenses, then Net Income will decrease.

Company A receives $10,000 in advance this month for work to be performed next mo nth. This month, the company should:

What is the amount of Net Income for the year ended December 31, 2010?

Which of the following is the journal entry to record activity #4?

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Adjustments, Financial Statements, and Financial Results

Financial Reporting and Analysis

Internal Control and Financial Reporting for Cash and Merchandise Sales

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables, Bad Debt Expense, and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 3: Reporting Operating Results on the Income Statement

Revenues

The period of time from buying goods and services to collecting cash from customers is called the operating cycle.

Which of the following is not true about the Income Statement?

GAAP does not allow cash basis accounting to be used in external financial reports.

Which account is least likely to be credited when an expense is recorded?

Your company receives advance payment in October for services that are provided during November. Which of the following is true?

Net Income would be understated by a failure to record collection of accounts receivable.

On October 10, a company paid $12,000 to its suppliers, of which $2,000 was for supplies received on October 10 and $10,000 was for supplies received and recorded during September. The $12,000 payment would be recorded as a:

Which of the following represents a subtotal rather than an account?

During March, the Long Life Consulting Company provides $23,000 in consulting services of which $12,000 is immediately paid for and $11,000 is on account.

If revenues are not growing faster than expenses, then Net Income will decrease.

Company A receives $10,000 in advance this month for work to be performed next mo nth. This month, the company should:

What is the amount of Net Income for the year ended December 31, 2010?

Which of the following is the journal entry to record activity #4?

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Adjustments, Financial Statements, and Financial Results

Financial Reporting and Analysis

Internal Control and Financial Reporting for Cash and Merchandise Sales

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables, Bad Debt Expense, and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters