Question 1

Cash basis accounting may not work well for businesses for which of the following reasons?

Accepted Answer

A)  Purchasing supplies for cash may be too small in amount to record. 
B)  Businesses have too many cash transactions. 
C)  Businesses have too few cash transactions. 
D)  When credit is used for most transactions. 
A)  Purchasing supplies for cash may be too small in amount to record. 
B)  Businesses have too many cash transactions. 
C)  Businesses have too few cash transactions. 
D)  When credit is used for most transactions.

Question 2

Which of the following statements about the unadjusted trial balance is not correct?

Accepted Answer

A)  trial balance is an internal report used to determine whether total debits equal total credits. 
B)  A trial balance lists every account name in one column, usually in the order of assets, liabilities, stockholders' equity, revenues and expenses. 
C)  A trial balance shows the ending balances obtained from the ledger listed in either the debit or credit column. 
D)  You can assume that no errors were made in the recording of transactions if total debits equal total credits on the unadjusted trial balance. 
A)  trial balance is an internal report used to determine whether total debits equal total credits. 
B)  A trial balance lists every account name in one column, usually in the order of assets, liabilities, stockholders' equity, revenues and expenses. 
C)  A trial balance shows the ending balances obtained from the ledger listed in either the debit or credit column. 
D)  You can assume that no errors were made in the recording of transactions if total debits equal total credits on the unadjusted trial balance.

Question 3

Bank 'n' Roll,Inc.pays its employees once a month and records the expense at the time of payment.On May 31,Bank 'n' Roll,Inc.paid its employees $10,000 for work performed in May.The entry to record the payment includes a:

Accepted Answer

A)  credit to Salaries and Wages Expense for $10,000. 
B)  credit to Cash for $10,000. 
C)  debit to Cash for $10,000. 
D)  credit to Salaries and Wages Payable for $10,000. 
A)  credit to Salaries and Wages Expense for $10,000. 
B)  credit to Cash for $10,000. 
C)  debit to Cash for $10,000. 
D)  credit to Salaries and Wages Payable for $10,000.

Question 4

In its first year of business,Wok 'n' Roll,Inc.earned $100,000 of revenues of which $80,000 was collected.It also incurred $90,000 in expenses for which $80,000 was paid.Which of the following statements are correct?

Accepted Answer

A)  Wok 'n' Roll should use cash basis accounting for external reporting purposes as required under GAAP and IFRS. 
B)  Wok 'n' Roll should report net income of $10,000 for external reporting purposes. 
C)  Wok 'n' Roll should report $0 net income for external reporting purposes. 
D)  Wok 'n' Roll should report net income of $20,000 for external reporting purposes. 
A)  Wok 'n' Roll should use cash basis accounting for external reporting purposes as required under GAAP and IFRS. 
B)  Wok 'n' Roll should report net income of $10,000 for external reporting purposes. 
C)  Wok 'n' Roll should report $0 net income for external reporting purposes. 
D)  Wok 'n' Roll should report net income of $20,000 for external reporting purposes.

Question 5

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 6

West Corporation issued a $100 gift card.What journal entry will West Corporation record?

Accepted Answer

A)  Debit Cash and credit Sales Revenue for $100. 
B)  Debit Cash and credit Unearned Revenue for $100. 
C)  Debit Unearned Revenue and credit Cash for $100. 
D)  Debit Accounts Receivable and credit Cash for $100. 
A)  Debit Cash and credit Sales Revenue for $100. 
B)  Debit Cash and credit Unearned Revenue for $100. 
C)  Debit Unearned Revenue and credit Cash for $100. 
D)  Debit Accounts Receivable and credit Cash for $100.

Question 7

On September 30,ABC Co.received a bill for $1,000 for running a newspaper ad in September.The bill will be paid in October.Which of the following statements is correct for September?

Accepted Answer

A)  Liabilities are decreased by $1,000. 
B)  Assets are increased by $1,000. 
C)  Expenses are increased by $1,000. 
D)  Revenues are decreased by $1,000. 
A)  Liabilities are decreased by $1,000. 
B)  Assets are increased by $1,000. 
C)  Expenses are increased by $1,000. 
D)  Revenues are decreased by $1,000.

Question 8

On October 31,your company prepays rent of $7,000 for November and December.Which of the following describes the effects of this transaction on your company's accounting equation?

Accepted Answer

A)  Assets decrease $7,000 and liabilities decrease $7,000. 
B)  Assets increase $7,000 and stockholders' equity increases $7,000. 
C)  There is no change to total assets, liabilities or stockholders' equity. 
D)  Liabilities decrease $7,000 and stockholders' equity increases $7,000. 
A)  Assets decrease $7,000 and liabilities decrease $7,000. 
B)  Assets increase $7,000 and stockholders' equity increases $7,000. 
C)  There is no change to total assets, liabilities or stockholders' equity. 
D)  Liabilities decrease $7,000 and stockholders' equity increases $7,000.

Question 9

The financial statement that reports revenues and expenses is the:

Accepted Answer

A)  statement of retained earnings. 
B)  income statement. 
C)  balance sheet. 
D)  statement of cash flows. 
A)  statement of retained earnings. 
B)  income statement. 
C)  balance sheet. 
D)  statement of cash flows.

Question 10

Which of the following statements about the income statement and income statement accounts is correct?

Accepted Answer

A)  The income statement reports the financial position of a company at a point in time. 
B)  The balance sheet reports financial activities only for the current accounting period. 
C)  Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts. 
D)  The income statement reports the cash received and paid during the period. 
A)  The income statement reports the financial position of a company at a point in time. 
B)  The balance sheet reports financial activities only for the current accounting period. 
C)  Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts. 
D)  The income statement reports the cash received and paid during the period.

Question 11

Unearned Revenue is a(n):

Accepted Answer

A)  expense. 
B)  asset. 
C)  revenue. 
D)  liability. 
A)  expense. 
B)  asset. 
C)  revenue. 
D)  liability.

Question 12

Which of the following statements about cash basis accounting and accrual basis accounting is correct?

Accepted Answer

A)  Net income is generally larger under accrual basis accounting than cash basis accounting. 
B)  GAAP does not require the use of accrual basis accounting for external reporting. 
C)  Accrual basis accounting and cash basis accounting will always produce the same amount of net income. 
D)  Accrual basis accounting provides a better measure of operating performance than cash basis accounting. 
A)  Net income is generally larger under accrual basis accounting than cash basis accounting. 
B)  GAAP does not require the use of accrual basis accounting for external reporting. 
C)  Accrual basis accounting and cash basis accounting will always produce the same amount of net income. 
D)  Accrual basis accounting provides a better measure of operating performance than cash basis accounting.

Question 13

A company's revenue recognition policy:

Accepted Answer

A)  affects the income statement but not the balance sheet. 
B)  defines when its revenue should be collected. 
C)  is usually described in the notes to a company's financial statements. 
D)  states that revenues should not be recorded until payments are received from customers. 
A)  affects the income statement but not the balance sheet. 
B)  defines when its revenue should be collected. 
C)  is usually described in the notes to a company's financial statements. 
D)  states that revenues should not be recorded until payments are received from customers.

Question 14

Censing Company collected $5,000 from a customer on account.What journal entry will be prepared by Censing to record this transaction?

Accepted Answer

A)  Debit Cash and credit Accounts Receivable. 
B)  Debit Cash and credit Service Revenue. 
C)  Debit Accounts Receivable and credit Service Revenue. 
D)  Debit Accounts Receivable and credit Cash. 
A)  Debit Cash and credit Accounts Receivable. 
B)  Debit Cash and credit Service Revenue. 
C)  Debit Accounts Receivable and credit Service Revenue. 
D)  Debit Accounts Receivable and credit Cash.

Question 15

When cash is received in advance of being earned,a(n)______ called _________ is recorded.

Accepted Answer

A)  liability; Unearned Revenue 
B)  asset; Unearned Revenue 
C)  liability; Accounts Receivable 
D)  asset; Accounts Receivable 
A)  liability; Unearned Revenue 
B)  asset; Unearned Revenue 
C)  liability; Accounts Receivable 
D)  asset; Accounts Receivable

Question 16

During June,the Grass is Greener Company mows 100 lawns a week and is paid in July by those customers.The company uses the accrual basis of accounting.Which financial statement is impacted by these transactions?

Accepted Answer

A)  The income statement shows the effects of the transactions in June. 
B)  The income statement shows the effects of the transactions in July. 
C)  The balance sheet shows no effect from the transactions in June. 
D)  The transactions have no effect on the balance sheet. 
A)  The income statement shows the effects of the transactions in June. 
B)  The income statement shows the effects of the transactions in July. 
C)  The balance sheet shows no effect from the transactions in June. 
D)  The transactions have no effect on the balance sheet.

Question 17

Which of the following situations results in unearned revenue?

Accepted Answer

A)  Collected $100 from a customer who purchased goods a month ago 
B)  Received an order from a customer who will purchase and pay for goods in two weeks 
C)  Sold goods for $100 today with payment due from the customer in 30 days 
D)  Received $100 cash from a customer for an order of goods to be shipped next month 
A)  Collected $100 from a customer who purchased goods a month ago 
B)  Received an order from a customer who will purchase and pay for goods in two weeks 
C)  Sold goods for $100 today with payment due from the customer in 30 days 
D)  Received $100 cash from a customer for an order of goods to be shipped next month

Question 18

Sprinkler Blowout Company entered into the activities listed in the table below.The company's chart of accounts appears below the list of activities.
For each activity,decide whether a transaction has occurred,and,if so,indicate the account(s)that should be debited and the account(s)that should be credited in the related journal entry by entering the appropriate account number(s)in the "Debit" and "Credit" columns in the table.If the activity is not a transaction,enter the word "None" in the "Debit" column for that activity.
The account numbers to be used in the journal entry prepared for the first transaction are provided as an example.

Accepted Answer

A: 5,12
B: 14,1
C: 4

Question 19

Consider the following information from a company's unadjusted trial balance at December 31,2015.All accounts have normal balances.
 
What is the total of the debit side of the unadjusted trial balance?

Accepted Answer

A)  $22,000. 
B)  $17,350. 
C)  $16,500. 
D)  $13,500. 
A)  $22,000. 
B)  $17,350. 
C)  $16,500. 
D)  $13,500.

Question 20

Accruix,Inc.uses accrual basis accounting.Its balance sheets reported Accounts Receivable of $10,000 at the end of its first year and $15,000 at the end of its second year.Its income statement reported Sales Revenue of $100,000 in its second year.What would Accruix's revenues have been if it had used cash basis accounting?

Accepted Answer

A)  $100,000 
B)  $95,000 
C)  $105,000 
D)  $10,000 
A)  $100,000 
B)  $95,000 
C)  $105,000 
D)  $10,000

Cash basis accounting may not work well for businesses for which of the following reasons?

Which of the following statements about the unadjusted trial balance is not correct?

Bank 'n' Roll,Inc.pays its employees once a month and records the expense at the time of payment.On May 31,Bank 'n' Roll,Inc.paid its employees $10,000 for work performed in May.The entry to record the payment includes a:

In its first year of business,Wok 'n' Roll,Inc.earned $100,000 of revenues of which $80,000 was collected.It also incurred $90,000 in expenses for which $80,000 was paid.Which of the following statements are correct?

Revenues:

West Corporation issued a $100 gift card.What journal entry will West Corporation record?

On September 30,ABC Co.received a bill for $1,000 for running a newspaper ad in September.The bill will be paid in October.Which of the following statements is correct for September?

On October 31,your company prepays rent of $7,000 for November and December.Which of the following describes the effects of this transaction on your company's accounting equation?

The financial statement that reports revenues and expenses is the:

Which of the following statements about the income statement and income statement accounts is correct?

Unearned Revenue is a(n):

Which of the following statements about cash basis accounting and accrual basis accounting is correct?

A company's revenue recognition policy:

Censing Company collected $5,000 from a customer on account.What journal entry will be prepared by Censing to record this transaction?

When cash is received in advance of being earned,a(n) called ___ is recorded.

During June,the Grass is Greener Company mows 100 lawns a week and is paid in July by those customers.The company uses the accrual basis of accounting.Which financial statement is impacted by these transactions?

Which of the following situations results in unearned revenue?

Consider the following information from a company's unadjusted trial balance at December 31,2015.All accounts have normal balances. What is the total of the debit side of the unadjusted trial balance?

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Adjustments,financial Statements,and Financial Results

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

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

Cash basis accounting may not work well for businesses for which of the following reasons?

Which of the following statements about the unadjusted trial balance is not correct?

Bank 'n' Roll,Inc.pays its employees once a month and records the expense at the time of payment.On May 31,Bank 'n' Roll,Inc.paid its employees $10,000 for work performed in May.The entry to record the payment includes a:

In its first year of business,Wok 'n' Roll,Inc.earned $100,000 of revenues of which $80,000 was collected.It also incurred $90,000 in expenses for which $80,000 was paid.Which of the following statements are correct?

Revenues:

West Corporation issued a $100 gift card.What journal entry will West Corporation record?

On September 30,ABC Co.received a bill for $1,000 for running a newspaper ad in September.The bill will be paid in October.Which of the following statements is correct for September?

On October 31,your company prepays rent of $7,000 for November and December.Which of the following describes the effects of this transaction on your company's accounting equation?

The financial statement that reports revenues and expenses is the:

Which of the following statements about the income statement and income statement accounts is correct?

Unearned Revenue is a(n):

Which of the following statements about cash basis accounting and accrual basis accounting is correct?

A company's revenue recognition policy:

Censing Company collected $5,000 from a customer on account.What journal entry will be prepared by Censing to record this transaction?

When cash is received in advance of being earned,a(n)______ called _________ is recorded.

During June,the Grass is Greener Company mows 100 lawns a week and is paid in July by those customers.The company uses the accrual basis of accounting.Which financial statement is impacted by these transactions?

Which of the following situations results in unearned revenue?

Consider the following information from a company's unadjusted trial balance at December 31,2015.All accounts have normal balances. What is the total of the debit side of the unadjusted trial balance?

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Adjustments,financial Statements,and Financial Results

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

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

When cash is received in advance of being earned,a(n) called ___ is recorded.