Question 1

Revenue accounts have credit balances because they increase stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 2

Why might managers be tempted to violate the revenue recognition principle and the expense recognition principle when preparing an income statement?

Accepted Answer

Managers want their companies to appear

Question 3

Toby Toy Store has noticed the following items that need to be considered for its income statement for the year ended December 31,2019: • Commissions of $3,000 for salespeople who made sales in December will be paid January 3,2020.
• The phone bill of $400 for December was received and will be paid January 20,2020.
• The store rent of $2,000 for January 2020 was paid on December 28,2019.
• At the beginning of November,Toby paid $1,500 for advertising in a monthly magazine that is distributed in November and December of 2019,and January of 2020.
What is the proper amount of expenses to be included in the income statement for the year?

Accepted Answer

A) $4,400. 
B) $6,900. 
C) $6,400. 
D) $5,900. 
A) $4,400. 
B) $6,900. 
C) $6,400. 
D) $5,900.

Question 4

Which of the following is not a step pertaining to the revenue recognition principle beginning in year 2018,for more complex customer contracts,according to both U.S.GAAP and to International Financial Reporting Standards (IFRS)?

Accepted Answer

A) Determine the transaction price. 
B) Identify the performance obligations. 
C) Identify the contract between the company and its supplier of goods 
D) Allocate the transaction price to the performance obligations. 
A) Determine the transaction price. 
B) Identify the performance obligations. 
C) Identify the contract between the company and its supplier of goods 
D) Allocate the transaction price to the performance obligations.

Question 5

Under accrual basis accounting,revenues are recognized when goods or services are transferred to customers,and expenses are recognized when incurred to generate that revenue.

Accepted Answer

A) True 
 B)False

Question 6

Colby Corporation has provided the following information: • Operating revenues from customers were $199,700.
• Operating expenses for the store were $111,000.
• Interest expense was $9,200.
• Gain from sale of plant and equipment was $3,300.
• Dividend payments to Colby's stockholders were $7,700.
• Income tax expense was $36,000.
• Prepaid rent was $5,000.
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What is the amount of Colby's total operating expenses?

Accepted Answer

A) $111,000. 
B) $114,300. 
C) $116,000. 
D) $120,200. 
A) $111,000. 
B) $114,300. 
C) $116,000. 
D) $120,200.

Question 7

Revenue may be recognized:

Accepted Answer

A) Before goods are delivered 
B) After goods are delivered 
C) When goods are delivered 
D) Either before goods are delivered,after goods are delivered,or when goods are delivered. 
A) Before goods are delivered 
B) After goods are delivered 
C) When goods are delivered 
D) Either before goods are delivered,after goods are delivered,or when goods are delivered.

Question 8

Reporting revenues on the income statement that were previously reported as unearned revenues on the balance sheet results in a decrease in liabilities and an increase in net income,retained earnings,and stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following best describes the time period assumption?

Accepted Answer

A) It assumes we value a business as of the end of every month. 
B) It is the cutoff point for asset and liability recognition. 
C) It implies that financial statements are prepared at the end of a business entity's operating cycle. 
D) It assumes we divide the long life of a business into a series of shorter time periods for accounting and reporting purposes. 
A) It assumes we value a business as of the end of every month. 
B) It is the cutoff point for asset and liability recognition. 
C) It implies that financial statements are prepared at the end of a business entity's operating cycle. 
D) It assumes we divide the long life of a business into a series of shorter time periods for accounting and reporting purposes.

Question 10

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?

Accepted Answer

A) Operating expenses are increased. 
B) Retained earnings decreases. 
C) Operating income does not change. 
D) Total assets remain the same. 
A) Operating expenses are increased. 
B) Retained earnings decreases. 
C) Operating income does not change. 
D) Total assets remain the same.

Question 11

Lantz Company has provided the following information: • Cash sales totaled $255,000.
• Credit sales totaled $479,000.
• Cash collections from customers for services yet to be provided totaled $88,000.
• A $22,000 loss from the sale of property and equipment occurred.
• Interest income was $7,700.
• Interest expense was $19,900.
• Supplies expense was $336,000.
• Rent expense for the store was $36,000.
• Wages expense was $49,000.
• Other operating expenses totaled $79,000.
• Unearned revenue was $4,000.

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What is the amount of Lantz's operating revenues?

Accepted Answer

A) $734,000. 
B) $822,000. 
C) $826,000. 
D) $833,700. 
A) $734,000. 
B) $822,000. 
C) $826,000. 
D) $833,700.

Question 12

The following information has been provided by Hable Company: • Advertising expense $9,900
• Interest expense $3,700
• Rent expense for store $12,000
• Loss on sale of property and equipment $5,700
• Cost of goods sold $21,300
• Depreciation expense $7,100
• Prepaid insurance $1,000
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What is the amount included in the Other Items section of Hable's income statement?

Accepted Answer

A) $19,300. 
B) $9,400. 
C) $3,700. 
D) $13,800. 
A) $19,300. 
B) $9,400. 
C) $3,700. 
D) $13,800.

Question 13

Colby Company has provided the following selected information for the year ended December 31,2019:
Cash collected from customers was $392,000.
Cash received from stockholders in exchange for stock totaled $46,000.
Cash paid to suppliers was $183,000.
Cash paid to employees was $102,000.
Cash received from a long-term bank loan was $75,000.
Cash paid to stockholders for dividends was $17,000.
Cash received from sale of a building was $125,000.
Cash paid for rent was $19,000.
Cash received for interest and dividends was $4,000.
Cash paid for income taxes was $28,000.
Based on the selected information provided,calculate Colby's cash flow from operating activities.

Accepted Answer

Cash flow from operating activities = $6

Question 14

Which of the following is an example of revenue or expense to be recognized in the current period's income statement?

Accepted Answer

A) Cash received from a client before the service is provided. 
B) Inventory purchased for sale to customers. 
C) Wages owed to employees who worked during the period. 
D) Cash collected from an account receivable. 
A) Cash received from a client before the service is provided. 
B) Inventory purchased for sale to customers. 
C) Wages owed to employees who worked during the period. 
D) Cash collected from an account receivable.

Question 15

Which of the following costs is most likely to be the largest expense reported on the income statement of a merchandiser,such as Walmart Stores,Inc.?

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 16

Using cash to purchase office supplies,which will be consumed later,results in an increase in expenses and a decrease in assets at the time of purchase.

Accepted Answer

A) True 
 B)False

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

When the board of directors declares a cash dividend,the retained earnings account is debited.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following describes the reporting of interest expense on the income statement?

Accepted Answer

A) It is reported as an operating expense. 
B) It is a component of operating income. 
C) It is deducted from operating income. 
D) It is added to operating income. 
A) It is reported as an operating expense. 
B) It is a component of operating income. 
C) It is deducted from operating income. 
D) It is added to operating income.

Question 20

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 wages. 
D) Accruing utilities expense at year-end. 
A) Accruing interest expense at year-end. 
B) The recording of depreciation expense. 
C) Using cash to pay for previously accrued wages. 
D) Accruing utilities expense at year-end.

Revenue accounts have credit balances because they increase stockholders' equity.

Why might managers be tempted to violate the revenue recognition principle and the expense recognition principle when preparing an income statement?

Which of the following is not a step pertaining to the revenue recognition principle beginning in year 2018,for more complex customer contracts,according to both U.S.GAAP and to International Financial Reporting Standards (IFRS)?

Under accrual basis accounting,revenues are recognized when goods or services are transferred to customers,and expenses are recognized when incurred to generate that revenue.

Revenue may be recognized:

Reporting revenues on the income statement that were previously reported as unearned revenues on the balance sheet results in a decrease in liabilities and an increase in net income,retained earnings,and stockholders' equity.

Which of the following best describes the time period assumption?

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?

Which of the following is an example of revenue or expense to be recognized in the current period's 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 Walmart Stores,Inc.?

Using cash to purchase office supplies,which will be consumed later,results in an increase in expenses and a decrease in assets at the time of purchase.

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.

When the board of directors declares a cash dividend,the retained earnings account is debited.

Which of the following describes the reporting of interest expense on the income statement?

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

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

Revenue accounts have credit balances because they increase stockholders' equity.

Why might managers be tempted to violate the revenue recognition principle and the expense recognition principle when preparing an income statement?

Which of the following is not a step pertaining to the revenue recognition principle beginning in year 2018,for more complex customer contracts,according to both U.S.GAAP and to International Financial Reporting Standards (IFRS)?

Under accrual basis accounting,revenues are recognized when goods or services are transferred to customers,and expenses are recognized when incurred to generate that revenue.

Revenue may be recognized:

Reporting revenues on the income statement that were previously reported as unearned revenues on the balance sheet results in a decrease in liabilities and an increase in net income,retained earnings,and stockholders' equity.

Which of the following best describes the time period assumption?

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?

Which of the following is an example of revenue or expense to be recognized in the current period's 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 Walmart Stores,Inc.?

Using cash to purchase office supplies,which will be consumed later,results in an increase in expenses and a decrease in assets at the time of purchase.

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.

When the board of directors declares a cash dividend,the retained earnings account is debited.

Which of the following describes the reporting of interest expense on the income statement?

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

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