Question 1

Which of the following statements about net profit margin is not correct?

Accepted Answer

A)  If a company's net profit margin increases from 15% to 20% this would be considered an improvement in profitability. 
B)  A company with a net profit margin of 10% is using 90% of each dollar of revenue to cover costs and expenses. 
C)  Net profit margin indicates how much net income is earned for every dollar of revenue. 
D)  A company with a net profit margin of 10% may be evaluated differently depending upon which industry it is in. 
A)  If a company's net profit margin increases from 15% to 20% this would be considered an improvement in profitability. 
B)  A company with a net profit margin of 10% is using 90% of each dollar of revenue to cover costs and expenses. 
C)  Net profit margin indicates how much net income is earned for every dollar of revenue. 
D)  A company with a net profit margin of 10% may be evaluated differently depending upon which industry it is in.

Question 2

Jim's Gymnastics Training's operations for the month of October are summarized as follows:
A.Provided $5,000 of training to students on account.
B.Received $4,000 cash from students for training provided in October.
C.Received $1,000 cash for training to be provided in November.
D.Received $3,000 cash from students on account for training provided in September.
E.Paid September's gym rental bill on account in the amount of $1,000.
F.Received October's rental bill of $1,500; set it aside.
Required:
Part a.Determine the net income for October using the cash basis of accounting.
Part b.Determine the net income for October using the accrual basis of accounting.

Accepted Answer

Part a
Net income = Cash recei

Question 3

Dividing up the continuing life of a company into shorter periods is called the time period assumption.

Accepted Answer

A) True 
 B)False

Question 4

In January,a company pays for advertising space in the local paper for ads to be run during the months of January,February,and March at $1,500 a month.The journal entry to record the payment would debit to:

Accepted Answer

A)  Cash for $4,500, credit Advertising Expense for $1,500, and credit Prepaid Advertising for $3,000. 
B)  Accounts Payable and a credit to Cash for $4,500. 
C)  Accounts Payable and a credit to Stockholders' Equity for $4,500. 
D)  Advertising Expense for $1,500, debit Prepaid Advertising for $3,000, and credit Cash for $4,500. 
A)  Cash for $4,500, credit Advertising Expense for $1,500, and credit Prepaid Advertising for $3,000. 
B)  Accounts Payable and a credit to Cash for $4,500. 
C)  Accounts Payable and a credit to Stockholders' Equity for $4,500. 
D)  Advertising Expense for $1,500, debit Prepaid Advertising for $3,000, and credit Cash for $4,500.

Question 5

A company has sales revenues of $200,000 and expenses of $50,000.What is its net profit margin?

Accepted Answer

A)  4 
B)  25% 
C)  75% 
D)  $150,000 
A)  4 
B)  25% 
C)  75% 
D)  $150,000

Question 6

A company does not need to record the receipt of a bill for utilities used during this year if the company will not pay the bill until next year.

Accepted Answer

A) True 
 B)False

Question 7

Your company received payment from a customer last month for a service that you provided this month.How will the business activity of the current month affect the basic accounting equation?

Accepted Answer

A)  Assets will not change; liabilities will decrease; and stockholders' equity will increase. 
B)  Assets will increase, liabilities will increase, and stockholders' equity will not change. 
C)  Assets will increase, liabilities will not change, and stockholders' equity will increase. 
D)  Assets will decrease, liabilities will not change, and stockholders' equity will increase. 
A)  Assets will not change; liabilities will decrease; and stockholders' equity will increase. 
B)  Assets will increase, liabilities will increase, and stockholders' equity will not change. 
C)  Assets will increase, liabilities will not change, and stockholders' equity will increase. 
D)  Assets will decrease, liabilities will not change, and stockholders' equity will increase.

Question 8

On Time Computer Repair uses accrual basis accounting.A computer was repaired on May 15.The customer picked up the computer on June 1 and mailed the payment on June 5.On Time Computer Repair received the check in the mail on June 10.The revenue should be recognized as earned on which date?

Accepted Answer

A)  May 15 
B)  August 1 
C)  June 5 
D)  June 10 
A)  May 15 
B)  August 1 
C)  June 5 
D)  June 10

Question 9

The basic accounting equation may be expanded to include the income statement effects of operating activities.Which of the statements below is correct regarding the expanded accounting equation?

Accepted Answer

A)  Expenses are increased by credits and revenues are increased by debits. 
B)  Net Income increases the Common Stock account. 
C)  Expenses are increased by debits and revenues are increased by credits. 
D)  Retained Earnings is reduced by net income. 
A)  Expenses are increased by credits and revenues are increased by debits. 
B)  Net Income increases the Common Stock account. 
C)  Expenses are increased by debits and revenues are increased by credits. 
D)  Retained Earnings is reduced by net income.

Question 10

When AppGame Company sells three $100 gift cards at the beginning of the month,it should record a $300 debit to ______ and a $300 credit to ______:

Accepted Answer

A)  Cash; Unearned Revenue 
B)  Cash; Sales Revenue 
C)  Accounts Receivable; Sales Revenue 
D)  Unearned Revenue; Cash 
A)  Cash; Unearned Revenue 
B)  Cash; Sales Revenue 
C)  Accounts Receivable; Sales Revenue 
D)  Unearned Revenue; Cash

Question 11

Trudy's Café paid employees $1,700 in September for work performed that month.What journal entry will Trudy's prepare to record that transaction?

Accepted Answer

A)  Debit Cash and credit Wages Revenue for $1,700. 
B)  Debit Cash and credit Salaries and Wages Payable for $1,700. 
C)  Debit Salaries and Wages Revenue and credit Cash for $1,700. 
D)  Debit Salaries and Wages Expense and credit Cash for $1,700. 
A)  Debit Cash and credit Wages Revenue for $1,700. 
B)  Debit Cash and credit Salaries and Wages Payable for $1,700. 
C)  Debit Salaries and Wages Revenue and credit Cash for $1,700. 
D)  Debit Salaries and Wages Expense and credit Cash for $1,700.

Question 12

A dance studio accepts $1,500 to provide a series of dance lessons to a youth group during the month of July.The studio decides to record the revenue in July.The studio incurs rent,utilities,and salaries expenses in July.The studio decides to record those expenses in August,when it pays for them.One or both of these decisions:

Accepted Answer

A)  violate the expense recognition principle. 
B)  are an example of accrual accounting. 
C)  violate the revenue recognition principle. 
D)  violate the accounting equation. 
A)  violate the expense recognition principle. 
B)  are an example of accrual accounting. 
C)  violate the revenue recognition principle. 
D)  violate the accounting equation.

Question 13

During January,services totaling $1,500 were performed on account for a customer.The company collected that $1,500 from the customer in March.The journal entry to record the receipt of cash from the customer is recorded with a debit to:

Accepted Answer

A)  Cash and a credit to Accounts Receivable. 
B)  Cash and a credit to Accounts Payable. 
C)  Cash and a credit to Revenue. 
D)  Purchases and a credit to Cash. 
A)  Cash and a credit to Accounts Receivable. 
B)  Cash and a credit to Accounts Payable. 
C)  Cash and a credit to Revenue. 
D)  Purchases and a credit to Cash.

Question 14

During April,the Grass is Greener Company buys and pays for a six-month supply of fertilizer in order to receive a bulk discount.The company uses accrual basis accounting.The cost of fertilizer recorded:

Accepted Answer

A)  immediately as an expense. 
B)  as a liability, which will later be reduced as the fertilizer used. 
C)  partially as an expense and partially as a liability. 
D)  as an asset, which will later be reduced as the fertilizer is used. 
A)  immediately as an expense. 
B)  as a liability, which will later be reduced as the fertilizer used. 
C)  partially as an expense and partially as a liability. 
D)  as an asset, which will later be reduced as the fertilizer is used.

Question 15

Which of the following items is not a specific account in a company's chart of accounts?

Accepted Answer

A)  Income Tax Expense 
B)  Sales Revenue 
C)  Unearned Revenue 
D)  Net Income 
A)  Income Tax Expense 
B)  Sales Revenue 
C)  Unearned Revenue 
D)  Net Income

Question 16

An increase in operating expenses would have which of the following effects on a company's profit margin?

Accepted Answer

A)  Net profit margin would increase. 
B)  Net profit margin would decrease. 
C)  Net profit margin would remain unchanged. 
D)  There is not enough information given to determine the effect. 
A)  Net profit margin would increase. 
B)  Net profit margin would decrease. 
C)  Net profit margin would remain unchanged. 
D)  There is not enough information given to determine the effect.

Question 17

A business purchased supplies for cash.The business will decrease its Cash account and:

Accepted Answer

A)  increase its Supplies account. 
B)  decrease its Supplies account. 
C)  increase its Supplies Payable account 
D)  decrease stockholder's equity by recording Supplies Expense for the amount of the payment. 
A)  increase its Supplies account. 
B)  decrease its Supplies account. 
C)  increase its Supplies Payable account 
D)  decrease stockholder's equity by recording Supplies Expense for the amount of the payment.

Question 18

During January 2015, the first month of operations, a consulting firm had following transactions:
1.Issued common stock to owners in exchange for $20,000 cash.
2.Purchased $5,000 of equipment, paying $1,000 cash and signing a promissory note for $4,000.
3.Received $9,000 in cash for consulting services performed in January.
4.Purchased $1,500 of supplies on account; all of the supplies were used in January.
5.Provided consulting services on account in the amount of $16,000.
6.Paid $750 on account.
7.Paid $3,000 to employees for work performed during January.
8.Received a bill for utilities for January of $3,400; the bill remains unpaid.
-Use the information above to answer the following question.What is the amount of total revenue to be reported on the income statement for the month of January?

Accepted Answer

A)  $45,000. 
B)  $9,000. 
C)  $29,000. 
D)  $25,000. 
A)  $45,000. 
B)  $9,000. 
C)  $29,000. 
D)  $25,000.

Question 19

Pandey Inc.had the following activities during the month:
A.Borrowed $7,000,000 cash,signing a promissory note.
B.Bought a building for $800,000,paying $200,000 in cash and signing a promissory note for $600,000.
C.Rented equipment at a cost of $10,000 per month and issued a check covering six months' rent.
D.Provided $104,000 of services and billed customers.
E.Purchased $30,000 of supplies on account.
F.Received a utility bill for the current period in the amount of $1,200.
G.Raised sales prices on 200 units from $400 per unit to $440 per unit.
H.Received a 50% deposit from a customer on a $20,000 order to be filled next month.
Required:
Analyze each of the activities (A)through (H)above with the goal of indicating their effects on the basic accounting equation by completing the table below.Indicate the accounts and amounts involved.Include a plus (+)or minus (-)sign before each number to show its effect on the accounting equation.If the activity should not to be recorded as a transaction,enter the word "None" in the first column for that activity.

Accepted Answer

The answer of Pandey Inc.had the following activities during the...

Question 20

Which of the following would not be reported on the income statement?

Accepted Answer

A)  Utilities expense in the amount of a bill received for utilities used during the current period but unpaid as of the end of the period. 
B)  Rent expense in the amount of rent paid during the period for use of a storage facility in the current period. 
C)  Revenue in the amount of services provided to customers who promise to pay in the next period. 
D)  Cost of land purchased with cash for future use. 
A)  Utilities expense in the amount of a bill received for utilities used during the current period but unpaid as of the end of the period. 
B)  Rent expense in the amount of rent paid during the period for use of a storage facility in the current period. 
C)  Revenue in the amount of services provided to customers who promise to pay in the next period. 
D)  Cost of land purchased with cash for future use.

Which of the following statements about net profit margin is not correct?

Dividing up the continuing life of a company into shorter periods is called the time period assumption.

In January,a company pays for advertising space in the local paper for ads to be run during the months of January,February,and March at $1,500 a month.The journal entry to record the payment would debit to:

A company has sales revenues of $200,000 and expenses of $50,000.What is its net profit margin?

A company does not need to record the receipt of a bill for utilities used during this year if the company will not pay the bill until next year.

Your company received payment from a customer last month for a service that you provided this month.How will the business activity of the current month affect the basic accounting equation?

On Time Computer Repair uses accrual basis accounting.A computer was repaired on May 15.The customer picked up the computer on June 1 and mailed the payment on June 5.On Time Computer Repair received the check in the mail on June 10.The revenue should be recognized as earned on which date?

The basic accounting equation may be expanded to include the income statement effects of operating activities.Which of the statements below is correct regarding the expanded accounting equation?

When AppGame Company sells three $100 gift cards at the beginning of the month,it should record a $300 debit to and a $300 credit to :

Trudy's Café paid employees $1,700 in September for work performed that month.What journal entry will Trudy's prepare to record that transaction?

During January,services totaling $1,500 were performed on account for a customer.The company collected that $1,500 from the customer in March.The journal entry to record the receipt of cash from the customer is recorded with a debit to:

During April,the Grass is Greener Company buys and pays for a six-month supply of fertilizer in order to receive a bulk discount.The company uses accrual basis accounting.The cost of fertilizer recorded:

Which of the following items is not a specific account in a company's chart of accounts?

An increase in operating expenses would have which of the following effects on a company's profit margin?

A business purchased supplies for cash.The business will decrease its Cash account and:

Which of the following would not be reported on the income statement?

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

Which of the following statements about net profit margin is not correct?

Dividing up the continuing life of a company into shorter periods is called the time period assumption.

In January,a company pays for advertising space in the local paper for ads to be run during the months of January,February,and March at $1,500 a month.The journal entry to record the payment would debit to:

A company has sales revenues of $200,000 and expenses of $50,000.What is its net profit margin?

A company does not need to record the receipt of a bill for utilities used during this year if the company will not pay the bill until next year.

Your company received payment from a customer last month for a service that you provided this month.How will the business activity of the current month affect the basic accounting equation?

On Time Computer Repair uses accrual basis accounting.A computer was repaired on May 15.The customer picked up the computer on June 1 and mailed the payment on June 5.On Time Computer Repair received the check in the mail on June 10.The revenue should be recognized as earned on which date?

The basic accounting equation may be expanded to include the income statement effects of operating activities.Which of the statements below is correct regarding the expanded accounting equation?

When AppGame Company sells three $100 gift cards at the beginning of the month,it should record a $300 debit to ______ and a $300 credit to ______:

Trudy's Café paid employees $1,700 in September for work performed that month.What journal entry will Trudy's prepare to record that transaction?

During January,services totaling $1,500 were performed on account for a customer.The company collected that $1,500 from the customer in March.The journal entry to record the receipt of cash from the customer is recorded with a debit to:

During April,the Grass is Greener Company buys and pays for a six-month supply of fertilizer in order to receive a bulk discount.The company uses accrual basis accounting.The cost of fertilizer recorded:

Which of the following items is not a specific account in a company's chart of accounts?

An increase in operating expenses would have which of the following effects on a company's profit margin?

A business purchased supplies for cash.The business will decrease its Cash account and:

Which of the following would not be reported on the income statement?

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 AppGame Company sells three $100 gift cards at the beginning of the month,it should record a $300 debit to and a $300 credit to :