Exam 3: Operating Decisions and the Accounting System

Which of the following journal entries is correct when a company has incurred an expense for work performed but has not yet paid for theses wages to employees?

Describe the transaction that created the following journal entries (amounts omitted).

Expenses are the result of decreases in assets or increases in liabilities incurred in order to generate revenues.

Which of the following is not a proper application of the revenue recognition principle?

Which of the following best describes the expense recognition principle?

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

Zeppelin Company received cash during January for services to be provided in February.Which of the following statements does not accurately describe the impact on the financial statements when Zeppelin provides the services during February?

Toy Shop Inc.has provided the following income statements: (1)Compute net profit margin for each year. (2)Discuss some of the events that could have caused the changes to the net profit margin based on the income statement information above.

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. - What is the amount of Lantz's income before income taxes?

What is the operating cycle? Describe a business entity with an operating cycle of less than six months and a business with an operating cycle of more than one year.

Which of the following best describes the operating cycle?

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

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

Which of the following transactions would be reported as cash flow from operating activities on a cash flow statement?

Which of the following accounts normally have a credit balance?

Which of the following statements is false?

A company purchased $20,000 of inventory during February and will pay for it during March.Which of the following statements is false,assuming the inventory was sold during March?

A retail store would likely have a shorter operating cycle than an automobile manufacturer.

Daring Dolls,Inc.received an order to provide SuperDolls for a big department store.The store paid Daring Dolls in advance for the order of SuperDolls.Which of the following describes what will occur when Daring Dolls recognizes revenue?

The expense recognition principle requires expenses to be recorded on the income statement in the same period they are incurred in generating revenues.