Question 1

Revenues are increased with:

Accepted Answer

A)  debits because they decrease stockholder's equity. 
B)  credits because they decrease stockholder's equity. 
C)  credits because they increase stockholder's equity. 
D)  debits because they increase stockholder's equity. 
A)  debits because they decrease stockholder's equity. 
B)  credits because they decrease stockholder's equity. 
C)  credits because they increase stockholder's equity. 
D)  debits because they increase stockholder's equity.

Question 2

The Metropolitan Bakery paid $12,000 in advance for six months of rent.Which of the following records this transaction?

Accepted Answer

A)  dr Cash and cr Unearned Rent for $12,000 
B)  dr Prepaid Rent and cr Cash for $12,000 
C)  dr Cash and cr Prepaid Rent for $12,000 
D)  dr Rent Expense and cr Cash for $12,000 
A)  dr Cash and cr Unearned Rent for $12,000 
B)  dr Prepaid Rent and cr Cash for $12,000 
C)  dr Cash and cr Prepaid Rent for $12,000 
D)  dr Rent Expense and cr Cash for $12,000

Question 3

A company entered into the following transactions during April.
A.Signed a lease and made a payment of $4,500 to the landlord comprised of the current month's rent of $1,500 and the required $3,000 security deposit.
B.Purchased equipment on account for $35,000.
C.Purchased supplies for $6,500 on account.
D.Performed services and received cash of $57,000.
E.Performed services on account for $28,000.
F.Received a payment of $24,000 for services to be performed in the future.
G.Collected $14,000 from customers on account.
H.Paid employees $11,000 for work done during the month.
I.Made a $35,000 payment on account for equipment that was purchased above.
J.Made a payment of $6,500 on account for the supplies purchased above.
K.Received bills for the current month from telephone and electricity companies totaling $3,800; payments will be made next month.
Required:
Prepare journal entries for the transactions set forth above.

Accepted Answer

The answer of A company entered into the following transactions...

Question 4

The entry recorded by a law firm when it provides the service it previously recorded as Unearned Revenue includes a:

Accepted Answer

A)  credit to Service Revenue. 
B)  debit to Cash. 
C)  credit to Accounts Receivable. 
D)  credit to Unearned Revenue. 
E)  credit to Cash. 
A)  credit to Service Revenue. 
B)  debit to Cash. 
C)  credit to Accounts Receivable. 
D)  credit to Unearned Revenue. 
E)  credit to Cash.

Question 5

Match the letter and the blank in each transaction description to complete the analysis.Not all terms will be used and some terms may be used more than once.
TRANSACTION
1.A company pays wages.This is recorded as a(n)________ to Cash and a(n)________ to Salaries and Wages Expense.
2.A company is paid for a job completed last month.This is recorded as a debit to ________ and a credit to ________.
3.A restaurant buys and immediately uses ingredients.This is recorded as a(n)________ to an expense account and a(n)________ to Cash.
4.A customer pays in advance for services to be performed during the next month.This is recorded as a ________ to Cash and a ________ to ________.
5.A company receives cash for a job that was completed during the current month.This is recorded as a debit to ________ and a credit to ________.
TERM
A.debit
B.credit
C.Accounts Payable
D.Accounts Receivable
E.Cash
F.Notes Payable
G.Service Revenue
H.Supplies
I.Unearned Revenue

Accepted Answer

1.B,A
2.E,

Question 6

Quartz Instruments had Retained Earnings of $145,000 at December 31,2015.Net income for 2016 was $90,000,and dividends for 2016 were $30,000.What amount of Retained Earnings should be reported at December 31,2016?

Accepted Answer

A)  $205,000 
B)  $235,000 
C)  $140,000 
D)  $175,000 
A)  $205,000 
B)  $235,000 
C)  $140,000 
D)  $175,000

Question 7

Assume that accrual basis accounting is used.Which of the following errors would most likely lead to an overstatement of net income in the current year?

Accepted Answer

A)  Recording revenue when the cash is collected next year although it is earned in the current year. 
B)  Recording an expense when paid next year although it is incurred this year. 
C)  Failing to adjust the Unearned Revenue account for the portion of rent earned this year. 
D)  Recording revenue earned in the current year when cash is collected this year. 
A)  Recording revenue when the cash is collected next year although it is earned in the current year. 
B)  Recording an expense when paid next year although it is incurred this year. 
C)  Failing to adjust the Unearned Revenue account for the portion of rent earned this year. 
D)  Recording revenue earned in the current year when cash is collected this year.

Question 8

Which of the following September transactions would impact the September income statement?

Accepted Answer

A)  Collecting cash related to an account receivable 
B)  Providing services 
C)  Purchasing supplies 
D)  Issuing stock to new shareholders 
A)  Collecting cash related to an account receivable 
B)  Providing services 
C)  Purchasing supplies 
D)  Issuing stock to new shareholders

Question 9

The following activities took place during the month of November at a corporation that operates a clothing store.
1.Salaries and wages in the amount of $33,000 are paid to employees.
2.On the last day of November,the company acquires equipment on account of $55,000.
3.Payment of $375 made on account to a consulting firm for services received from that firm during October.
4.Payment of $12,000 made at the beginning of November for six months of rent; the period covered by the payment begins in November.
5.Utility bills in the amount of $125 arrive in the mail; the bills will not be paid until December.
Required:
For each activity,indicate the amount of expense that would be recorded in November.

Accepted Answer

1.$33,000
2.$0; no expense is incurred u

Question 10

When accrual basis accounting is used,net income equals the amount of cash generated by the business.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)  If payment is received at the same time a service is provided, it does not matter whether cash basis accounting or accrual basis accounting is used; both would record the transaction with the same journal entry. 
B)  The cash basis of accounting works best when a lengthy delay exists between the timing of cash flows and the underlying business activities to which they relate. 
C)  If a company receives a bill for rent for the period and decides to delay payment, the rent will not be recorded as an expense if accrual basis accounting is used. 
D)  If the cash basis of accounting is used, the Unearned Revenue account is increased when a company receives a deposit in advance of services to be performed by the company. 
A)  If payment is received at the same time a service is provided, it does not matter whether cash basis accounting or accrual basis accounting is used; both would record the transaction with the same journal entry. 
B)  The cash basis of accounting works best when a lengthy delay exists between the timing of cash flows and the underlying business activities to which they relate. 
C)  If a company receives a bill for rent for the period and decides to delay payment, the rent will not be recorded as an expense if accrual basis accounting is used. 
D)  If the cash basis of accounting is used, the Unearned Revenue account is increased when a company receives a deposit in advance of services to be performed by the company.

Question 12

Your company contracted for a 30-second commercial (an advertisement)that aired during the Super Bowl at a cost of $1.2 million.It is legally obligated to pay for the commercial,but has not yet done so.How is your company's balance sheet affected on the day the commercial aired?

Accepted Answer

A)  It increases both assets and liabilities by $1.2 million. 
B)  It increases assets and decreases stockholders' equity by $1.2 million each. 
C)  It does not affect the balance sheet. 
D)  It increases liabilities and decreases stockholders' equity by $1.2 million each. 
A)  It increases both assets and liabilities by $1.2 million. 
B)  It increases assets and decreases stockholders' equity by $1.2 million each. 
C)  It does not affect the balance sheet. 
D)  It increases liabilities and decreases stockholders' equity by $1.2 million each.

Question 13

Accounts Receivable had beginning balance of $4,210 and an ending balance of $3,495,and collections on account were $9,600.What was the amount of services that were performed on account?

Accepted Answer

A)  $8,885. 
B)  $17,305. 
C)  $10,315. 
D)  $1,895. 
A)  $8,885. 
B)  $17,305. 
C)  $10,315. 
D)  $1,895.

Question 14

Sparkling Pools performed $1,600 of pool maintenance services during July; the customers had paid in advance for these services in June.The company performed $1,000 of pool maintenance services during July and collected payment from those customers in August.Also,during July,the company accepted an order to perform $500 of pool maintenance services in August; the customers will pay for these services in August.The company uses accrual basis accounting.The Service Revenue account 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 15

Assume accrual basis accounting is used.Which of the following statements about income statement accounts is correct?

Accepted Answer

A)  Costs incurred to help generate revenue are only reported as expenses on the income statement if they are paid in cash in the same period as the revenue received. 
B)  Revenue accounts are shown after the amount of expense accounts on the income statement. 
C)  Revenue accounts include Cash, Accounts Receivable, and Unearned Revenue. 
D)  There is no Net Income account. 
A)  Costs incurred to help generate revenue are only reported as expenses on the income statement if they are paid in cash in the same period as the revenue received. 
B)  Revenue accounts are shown after the amount of expense accounts on the income statement. 
C)  Revenue accounts include Cash, Accounts Receivable, and Unearned Revenue. 
D)  There is no Net Income account.

Question 16

The following account balances are taken from the December 31, 2015, financial statements of ABZ Advertising Company.The company uses accrual basis accounting.
   
The following activities occurred in 2016:
1.Performed advertising services on account, $55,000.
2.Received cash payments on account, $10,400.
3.Received deposits from customers for advertising services to be performed in 2017, $2,500.
4.Made payments to suppliers on account, $5,000.
5.Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was on account and unpaid as of the end of the year.
-Use the information above to answer the following question.What is the balance of Accounts Receivable at December 31,2016?

Accepted Answer

A)  $51,896. 
B)  $55,000. 
C)  $44,600. 
D)  $54,396. 
A)  $51,896. 
B)  $55,000. 
C)  $44,600. 
D)  $54,396.

Question 17

The journal entry that records the collection of cash from a customer for payment on account for a sale that was recorded previously includes a debit to:

Accepted Answer

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

Question 18

Which of the following accounts does not have a normal credit balance?

Accepted Answer

A)  Common Stock 
B)  Accounts Payable 
C)  Service Revenue 
D)  Rent Expense 
A)  Common Stock 
B)  Accounts Payable 
C)  Service Revenue 
D)  Rent Expense

Question 19

Which of the following statements about revenue and expense accounts is correct?

Accepted Answer

A)  Revenue accounts are a subset of assets, and expense accounts are subcategories of liabilities. 
B)  Both revenue accounts and expense accounts are subcategories of assets. 
C)  Both revenue accounts and expense accounts are subcategories of Retained Earnings. 
D)  Revenue accounts are a subcategory of Cash and expense accounts are a subcategory of Accounts Payable. 
A)  Revenue accounts are a subset of assets, and expense accounts are subcategories of liabilities. 
B)  Both revenue accounts and expense accounts are subcategories of assets. 
C)  Both revenue accounts and expense accounts are subcategories of Retained Earnings. 
D)  Revenue accounts are a subcategory of Cash and expense accounts are a subcategory of Accounts Payable.

Question 20

An increase in revenue always:

Accepted Answer

A)  increases stockholders' equity. 
B)  increases assets. 
C)  decreases stockholders' equity. 
D)  decreases assets. 
A)  increases stockholders' equity. 
B)  increases assets. 
C)  decreases stockholders' equity. 
D)  decreases assets.

Revenues are increased with:

The Metropolitan Bakery paid $12,000 in advance for six months of rent.Which of the following records this transaction?

The entry recorded by a law firm when it provides the service it previously recorded as Unearned Revenue includes a:

Quartz Instruments had Retained Earnings of $145,000 at December 31,2015.Net income for 2016 was $90,000,and dividends for 2016 were $30,000.What amount of Retained Earnings should be reported at December 31,2016?

Assume that accrual basis accounting is used.Which of the following errors would most likely lead to an overstatement of net income in the current year?

Which of the following September transactions would impact the September income statement?

When accrual basis accounting is used,net income equals the amount of cash generated by the business.

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

Your company contracted for a 30-second commercial (an advertisement)that aired during the Super Bowl at a cost of $1.2 million.It is legally obligated to pay for the commercial,but has not yet done so.How is your company's balance sheet affected on the day the commercial aired?

Accounts Receivable had beginning balance of $4,210 and an ending balance of $3,495,and collections on account were $9,600.What was the amount of services that were performed on account?

Assume accrual basis accounting is used.Which of the following statements about income statement accounts is correct?

The journal entry that records the collection of cash from a customer for payment on account for a sale that was recorded previously includes a debit to:

Which of the following accounts does not have a normal credit balance?

Which of the following statements about revenue and expense accounts is correct?

An increase in revenue always:

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

Revenues are increased with:

The Metropolitan Bakery paid $12,000 in advance for six months of rent.Which of the following records this transaction?

The entry recorded by a law firm when it provides the service it previously recorded as Unearned Revenue includes a:

Quartz Instruments had Retained Earnings of $145,000 at December 31,2015.Net income for 2016 was $90,000,and dividends for 2016 were $30,000.What amount of Retained Earnings should be reported at December 31,2016?

Assume that accrual basis accounting is used.Which of the following errors would most likely lead to an overstatement of net income in the current year?

Which of the following September transactions would impact the September income statement?

When accrual basis accounting is used,net income equals the amount of cash generated by the business.

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

Your company contracted for a 30-second commercial (an advertisement)that aired during the Super Bowl at a cost of $1.2 million.It is legally obligated to pay for the commercial,but has not yet done so.How is your company's balance sheet affected on the day the commercial aired?

Accounts Receivable had beginning balance of $4,210 and an ending balance of $3,495,and collections on account were $9,600.What was the amount of services that were performed on account?

Assume accrual basis accounting is used.Which of the following statements about income statement accounts is correct?

The journal entry that records the collection of cash from a customer for payment on account for a sale that was recorded previously includes a debit to:

Which of the following accounts does not have a normal credit balance?

Which of the following statements about revenue and expense accounts is correct?

An increase in revenue always:

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