Question 1

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 to record the March sales would include a debit to:

Accepted Answer

A)   Cash for $10,000, debit to Accounts Receivable for $60,000, and credit to Sales Revenue for $70,000.
B)   Cash for $10,000, debit to Unearned Revenue for $60,000, and credit to Sales Revenue for $70,000.
C)   Cash for $10,000, debit to Accounts Payable for $60,000, and credit to Sales Revenue for $70,000.
D)   Cash and credit to Sales Revenue for $10,000.

Question 2

This month,a company performed $517,000 of services and incurred total expenses of $438,000.The company was paid in cash for all its services and paid cash for all its expenses.These transactions would cause:

Accepted Answer

A)   revenues to increase by $517,000, expenses to increase by $438,000, and Retained Earnings to decrease by $79,000.
B)   Cash to increase by $517,000, expenses to increase by $438,000, and Common Stock to increase by $79,000.
C)   revenues to increase by $517,000, expenses to increase by $438,000, and Cash to increase by $79,000.
D)   revenues to increase by $79,000, expenses to increase by $438,000, and Cash to increase by $517,000.

Question 3

The ending balance of Accounts Receivable in the ledger is calculated by adding the:

Accepted Answer

A)   debits and subtracting the credits recorded during the period to the beginning debit balance to arrive at the ending debit balance.
B)   debits and subtracting the credits recorded during the period to the beginning credit balance to arrive at the ending credit balance.
C)   credits and subtracting the debits recorded during the period to the beginning credit balance to arrive at the ending credit balance.
D)   credits and subtracting the debits recorded during the period to the beginning debit balance to arrive at the ending debit balance.

Question 4

Dividing the long life of a company into shorter periods such as months,quarters,or years for reporting purposes is called the:

Accepted Answer

A)   time period assumption.
B)   expense recognition principle ("matching") .
C)   revenue recognition principle.
D)   Separation principle.

Question 5

Under the accrual basis of accounting,the ________ recognition ("matching") principle requires that expenses be recognized in the same period as the related revenues.

Accepted Answer

A)   expense
B)   revenue
C)   cost
D)   separate

Question 6

In accrual accounting,according to the __________ recognition principle,revenues should be recognized when they are earned,not necessarily when cash is received.

Accepted Answer

A)   revenue
B)   expense
C)   cost
D)   accrual

Question 7

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

Accepted Answer

A)   It might only include a preliminary amount for income tax expense.
B)   It might balance even if there is a mistake.
C)   It does not yet include end-of-the-accounting period adjustments.
D)   It is part of the financial statements issued to external decision makers.

Question 8

Your company orders and receives supplies in January,pays for them in February,provides services to customers that use those supplies in March,and is paid by its customers for the services in April.Using the accrual basis of accounting:

Accepted Answer

A)   expenses are recorded in February and revenues are recorded in April.
B)   expenses are recorded in February and revenues are recorded in March.
C)   expenses and revenues are recorded in March.
D)   expenses are recorded in January and revenues are recorded in April.

Question 9

During the month of September,AppGame Company wrote checks to employees totaling $8,100 for wages earned in September.Which of the following is the correct entry?

Accepted Answer

A)   Debit Salaries and Wages Expense for $8,100 and credit Salaries and Wages Payable for $8,100
B)   Debit Cash for $8,100 and credit Salaries and Wages Expense for $8,100
C)   Debit Salaries and Wages Expense for $8,100 and credit Cash for $8,100
D)   Debit Cash for $8,100 and credit Salaries and Wages Payable for $8,100

Question 10

Which activity is part of the operating cycle?

Accepted Answer

A)   Selling goods and services
B)   Buying property, plant and equipment
C)   Issuing new shares
D)   Negotiating a long-term note, payable to a bank

Question 11

A net profit margin of 15.4% means that the company used 84.6 cents of each sales dollar to cover costs and expenses.

Accepted Answer

A) True 
 B)False

Question 12

Grossing Inc.receives $10,000 in advance this month for work to be performed next month.This month,the company should record a journal entry that includes a debit to:

Accepted Answer

A)   Cash and a credit to Service Revenue for $10,000.
B)   Cash and a credit to Unearned Revenue for $10,000.
C)   Cash and a credit to Accounts Receivable for $10,000.
D)   Prepaid Services and a credit to Cash for $10,000.

Question 13

ABC Company paid $6,000 cash for insurance in June that provides coverage for six months,from July through December.How much expense should be recognized in June to be in accordance with generally accepted accounting principles?

Accepted Answer

A)   No expense should be recognized in June.
B)   $6,000
C)   $1,000 ($6,000 x 1/6 for the month of June) 
D)   $3,000

Question 14

Which of the following will result in an increase in revenue?

Accepted Answer

A)   Borrowing $10,000 from a bank
B)   Stockholders investing $10,000 in a company
C)   Selling concert tickets for $10,000 four months before the performance
D)   Selling $10,000 of groceries

Question 15

If the cash is received before the related goods or services are delivered,which of the following will be recorded?

Accepted Answer

A)   Unearned Revenue, a liability
B)   Accounts Receivable, an asset
C)   Pre-earned Revenue, which increases Retained Earnings
D)   Service Revenue, which increases Retained Earnings

Question 16

Which of the following is an example of an error that would cause the trial balance to be out of balance?

Accepted Answer

A)   A journal entry was posted as a debit to Cash for $525 and a credit to Accounts Receivable for $552.
B)   A journal entry was posted as a debit to Cash and a credit to Sales Revenue when the company received a $400 payment from a customer on account.
C)   A purchase of supplies on account for $100 was posted as a debit to Supplies for $10 and a credit to Accounts Payable for $10.
D)   A $350 transaction was not recorded at all.

Question 17

During the year,Pizza Company,Inc.had $100,000 in revenues,$40,000 in expenses,and paid $3,000 in dividends.Net income equals:

Accepted Answer

A)   $63,000.
B)   $57,000.
C)   $100,000.
D)   $60,000.

Question 18

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

Accepted Answer

A)   Salaries and Wages Expense
B)   Service Revenue
C)   Accounts Receivable
D)   Cash

Question 19

Unearned Revenue is reported on the balance sheet as a liability.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)   If a company uses accrual basis accounting, the company should not record revenue until payments is actually received.
B)   If a company uses accrual basis accounting, the company should, the company should record expenses in the same period as the revenues they generate.
C)   IFRS does not allow accrual basis accounting for external reporting of income.
D)   The items reported on the income statement continue to have an impact beyond the current period, whereas the items reported on the balance sheet impact just the current period.

Exam 3: Reporting Operating Results on the Income Statement

During the month of September,AppGame Company wrote checks to employees totaling $8,100 for wages earned in September.Which of the following is the correct entry?

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If the cash is received before the related goods or services are delivered,which of the following will be recorded?

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Which of the following is an example of an error that would cause the trial balance to be out of balance?

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Under the accrual basis of accounting,the ________ recognition ("matching") principle requires that expenses be recognized in the same period as the related revenues.

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Your company orders and receives supplies in January,pays for them in February,provides services to customers that use those supplies in March,and is paid by its customers for the services in April.Using the accrual basis of accounting:

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Which of the following will result in an increase in revenue?

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In accrual accounting,according to the __________ recognition principle,revenues should be recognized when they are earned,not necessarily when cash is received.

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

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Which activity is part of the operating cycle?

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Dividing the long life of a company into shorter periods such as months,quarters,or years for reporting purposes is called the:

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

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ABC Company paid $6,000 cash for insurance in June that provides coverage for six months,from July through December.How much expense should be recognized in June to be in accordance with generally accepted accounting principles?

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

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A net profit margin of 15.4% means that the company used 84.6 cents of each sales dollar to cover costs and expenses.

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This month,a company performed $517,000 of services and incurred total expenses of $438,000.The company was paid in cash for all its services and paid cash for all its expenses.These transactions would cause:

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During the year,Pizza Company,Inc.had $100,000 in revenues,$40,000 in expenses,and paid $3,000 in dividends.Net income equals:

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The ending balance of Accounts Receivable in the ledger is calculated by adding the:

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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 to record the March sales would include a debit to:

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Unearned Revenue is reported on the balance sheet as a liability.

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Grossing Inc.receives $10,000 in advance this month for work to be performed next month.This month,the company should record a journal entry that includes a debit to:

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