Question 1

Which of the following statements about the income statement of a company that was formed 10 years ago is correct?

Accepted Answer

A)  Reports a Net Loss for the year if expenses are more than revenues. 
B)  Reports the financial effects of activities that have occurred since the company's inception. 
C)  Reports the amount of the increase in stockholders' equity this year as a result of the company's operations. 
D)  Reports Net Income which is not an account in the ledger. 
A)  Reports a Net Loss for the year if expenses are more than revenues. 
B)  Reports the financial effects of activities that have occurred since the company's inception. 
C)  Reports the amount of the increase in stockholders' equity this year as a result of the company's operations. 
D)  Reports Net Income which is not an account in the ledger.

Question 2

In accordance with the expense recognition principle,expenses are recorded in the period the:

Accepted Answer

A)  related revenues are recorded. 
B)  cash is paid. 
C)  related assets are recorded. 
A)  related revenues are recorded. 
B)  cash is paid. 
C)  related assets are recorded.

Question 3

Expenses are the costs of operating the business that are paid for in the period covered by the income statement.

Accepted Answer

A) True 
 B)False

Question 4

During March, Seconds Best Company had cash sales of $10,000 and sales on account of $60,000.In April, payments on account totaled $50,000.
-Use the information above to answer the following question.The journal entry prepared by Seconds Best Company to record customer payments on account during April would include a debit to:

Accepted Answer

A)  Cash and a credit to Unearned Sales Revenue for $50,000. 
B)  Cash and a credit to Sales Revenue for $50,000. 
C)  Cash and a credit to Accounts Receivable for $50,000. 
D)  Cash and a credit to Accounts Payable for $50,000. 
A)  Cash and a credit to Unearned Sales Revenue for $50,000. 
B)  Cash and a credit to Sales Revenue for $50,000. 
C)  Cash and a credit to Accounts Receivable for $50,000. 
D)  Cash and a credit to Accounts Payable for $50,000.

Question 5

Supplies are expensed when:

Accepted Answer

A)  purchased. 
B)  paid for. 
C)  used. 
D)  purchased on account. 
A)  purchased. 
B)  paid for. 
C)  used. 
D)  purchased on account.

Question 6

Which of the following accounts has a normal credit balance?

Accepted Answer

A)  Cash 
B)  Notes Receivable 
C)  Salaries and Wages Expense 
D)  Unearned Revenue 
A)  Cash 
B)  Notes Receivable 
C)  Salaries and Wages Expense 
D)  Unearned Revenue

Question 7

An expense:

Accepted Answer

A)  will decrease the amount of net income on the income statement. 
B)  will decrease the amount of Common Stock on the balance sheet. 
C)  will be increased with a credit to the account. 
D)  normally has a credit balance. 
A)  will decrease the amount of net income on the income statement. 
B)  will decrease the amount of Common Stock on the balance sheet. 
C)  will be increased with a credit to the account. 
D)  normally has a credit balance.

Question 8

The following information is available from the most recent financial statements of the Aztec Corporation:
 
What is the company's net profit margin?

Accepted Answer

A)  8% 
B)  12.5% 
C)  15% 
D)  17.1% 
A)  8% 
B)  12.5% 
C)  15% 
D)  17.1%

Question 9

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 amount of revenue that will be reported on the income statement for the year ended December 31,2016?

Accepted Answer

A)  $57,500. 
B)  $39,000. 
C)  $55,000. 
D)  $50,000. 
A)  $57,500. 
B)  $39,000. 
C)  $55,000. 
D)  $50,000.

Question 10

The following activities took place during the month of July at a corporation that earns service revenue as a law firm.
1.The law firm completes legal work relating to a real estate transaction and is paid $5,500 when the papers are signed.
2.Legal work in the amount of $26,000 is performed on account for customers.
3.A customer makes a payment of $2,500 on account for legal services that were performed last month.
4.A new client calls to request assistance in filing the documents for a patent; a fee of $3,000 is paid and the parties agree that the work will commence next month.
5.A client pays a retainer (deposit)of $15,000 for legal work; one-third of the work is performed in the current month and the remainder will be provided over the next two months.
6.The law firm borrows $10,000 from a local bank.
Required:
Indicate what accounts would be used to record the initial transaction arising from each activity.

Accepted Answer

1.Cash and Service Revenue
2.A

Question 11

Which of the following would appear in the credit column on the unadjusted trial balance?

Accepted Answer

A)  Advertising Expense 
B)  Cash 
C)  Unearned Revenue 
D)  Prepaid Rent 
A)  Advertising Expense 
B)  Cash 
C)  Unearned Revenue 
D)  Prepaid Rent

Question 12

The Pet Sitters,Inc.entered into the following transactions during the month of January.
A.Purchased supplies for $5,000 cash.
B.Paid $4,480 for salaries and wages for the month of January.
C.Paid $480 in advance for February rent.
D.Provided $12,000 in services on account.
E.Paid $800 on accounts payable.
F.Received $210 from customers as deposits for future pet sitting services.
G.Received a bill for $1,500 from the plumber who repaired a broken pipe in the restrooms,but will not pay the bill until February.
H.Purchased equipment for cash of $780.
Required:
Prepare journal entries to record the transactions identified among activities (A)through (H).

Accepted Answer

The answer of The Pet Sitters,Inc.entered into the following transactions...

Question 13

The prepayment of rent for the next three months (not including this month):

Accepted Answer

A)  reduces total assets. 
B)  has no effect to total assets. 
C)  increases expenses. 
D)  decreases stockholders' equity. 
A)  reduces total assets. 
B)  has no effect to total assets. 
C)  increases expenses. 
D)  decreases stockholders' equity.

Question 14

Costs that benefit future periods are reported as assets.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following financial statements does not cover a period of time but rather reports amounts at a specific point in time?

Accepted Answer

A)  Income statement 
B)  Balance sheet 
C)  Statement of cash flow 
D)  Statement of retained earnings 
A)  Income statement 
B)  Balance sheet 
C)  Statement of cash flow 
D)  Statement of retained earnings

Question 16

ABC Company's income statement shows Service Revenue of $40,000,Salaries and Wages Expense of $25,000 and net income of $1,000.The other expenses on ABC's income statement must equal:

Accepted Answer

A)  $14,000. 
B)  $15,000. 
C)  $16,000. 
D)  $66,000. 
A)  $14,000. 
B)  $15,000. 
C)  $16,000. 
D)  $66,000.

Question 17

Expenses 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 18

Which of the following statements about the accounting cycle is correct?

Accepted Answer

A)  A trial balance is included in the full set of external financial statements. 
B)  If debits equal credits in the unadjusted trial balance, you have made no errors in preparing and posting journal entries. 
C)  The balances for each account reported on an unadjusted trial balance are determined by adding the amounts on the "+" side and subtracting the amounts on the "-" side of each ledger or T-account. 
D)  GAAP allows companies to choose between cash basis and accrual basis of accounting. 
A)  A trial balance is included in the full set of external financial statements. 
B)  If debits equal credits in the unadjusted trial balance, you have made no errors in preparing and posting journal entries. 
C)  The balances for each account reported on an unadjusted trial balance are determined by adding the amounts on the "+" side and subtracting the amounts on the "-" side of each ledger or T-account. 
D)  GAAP allows companies to choose between cash basis and accrual basis of accounting.

Question 19

During 2016,a company provided services for cash of $21,000 and services on credit of $15,000.The company collected accounts receivable of $8,000 and incurred operating expenses of $22,700,$14,000 of which were paid during the year.The amount of net income (loss)for the year is:

Accepted Answer

A)  $13,300 
B)  ($1,700) 
C)  $22,700 
D)  $6,300 
A)  $13,300 
B)  ($1,700) 
C)  $22,700 
D)  $6,300

Question 20

During May,Just in Thyme,Inc.billed a customer $1,000 for services performed during May.During June,Just in Thyme collected the $1,000.Which of the following statements about this transaction is correct?

Accepted Answer

A)  $1,000 of revenue should be recorded in May. 
B)  $500 of revenue should be recorded in May and $500 in June. 
C)  $1,000 of revenue should be recorded in June. 
D)  No revenue should be recorded for these events because they relate only to the balance sheet. 
A)  $1,000 of revenue should be recorded in May. 
B)  $500 of revenue should be recorded in May and $500 in June. 
C)  $1,000 of revenue should be recorded in June. 
D)  No revenue should be recorded for these events because they relate only to the balance sheet.

Which of the following statements about the income statement of a company that was formed 10 years ago is correct?

In accordance with the expense recognition principle,expenses are recorded in the period the:

Expenses are the costs of operating the business that are paid for in the period covered by the income statement.

Supplies are expensed when:

Which of the following accounts has a normal credit balance?

An expense:

The following information is available from the most recent financial statements of the Aztec Corporation: What is the company's net profit margin?

Which of the following would appear in the credit column on the unadjusted trial balance?

The prepayment of rent for the next three months (not including this month):

Costs that benefit future periods are reported as assets.

Which of the following financial statements does not cover a period of time but rather reports amounts at a specific point in time?

ABC Company's income statement shows Service Revenue of $40,000,Salaries and Wages Expense of $25,000 and net income of $1,000.The other expenses on ABC's income statement must equal:

Expenses are increased with:

Which of the following statements about the accounting cycle is correct?

During 2016,a company provided services for cash of $21,000 and services on credit of $15,000.The company collected accounts receivable of $8,000 and incurred operating expenses of $22,700,$14,000 of which were paid during the year.The amount of net income (loss)for the year is:

During May,Just in Thyme,Inc.billed a customer $1,000 for services performed during May.During June,Just in Thyme collected the $1,000.Which of the following statements about this transaction is correct?

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

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Exam 3: Reporting Operating Results on the Income Statement

Which of the following statements about the income statement of a company that was formed 10 years ago is correct?

In accordance with the expense recognition principle,expenses are recorded in the period the:

Expenses are the costs of operating the business that are paid for in the period covered by the income statement.

Supplies are expensed when:

Which of the following accounts has a normal credit balance?

An expense:

The following information is available from the most recent financial statements of the Aztec Corporation: What is the company's net profit margin?

Which of the following would appear in the credit column on the unadjusted trial balance?

The prepayment of rent for the next three months (not including this month):

Costs that benefit future periods are reported as assets.

Which of the following financial statements does not cover a period of time but rather reports amounts at a specific point in time?

ABC Company's income statement shows Service Revenue of $40,000,Salaries and Wages Expense of $25,000 and net income of $1,000.The other expenses on ABC's income statement must equal:

Expenses are increased with:

Which of the following statements about the accounting cycle is correct?

During 2016,a company provided services for cash of $21,000 and services on credit of $15,000.The company collected accounts receivable of $8,000 and incurred operating expenses of $22,700,$14,000 of which were paid during the year.The amount of net income (loss)for the year is:

During May,Just in Thyme,Inc.billed a customer $1,000 for services performed during May.During June,Just in Thyme collected the $1,000.Which of the following statements about this transaction is correct?

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

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