Question 1

The fact that any problems a seller has in collecting amounts due from customers is accounted for separately is implied in the language of:

Accepted Answer

A) step 3 "entitled to." 
B) step 5 "when (or as)each performance obligation is satisfied." 
C) step 1 "it can be written,verbal,or merely implied." 
D) step 2 "transferring control of goods or services to a customer." 
A) step 3 "entitled to." 
B) step 5 "when (or as)each performance obligation is satisfied." 
C) step 1 "it can be written,verbal,or merely implied." 
D) step 2 "transferring control of goods or services to a customer." A

Question 2

The employees of Pinnacle,Inc.worked during July but are not paid their wages totaling $800 until August.Which of the following best indicates how to account for this transaction in July?

Accepted Answer

A) No journal entry needs to be made because payment has not yet been made. 
B) A journal entry with a debit to Salaries and Wages Expense and a credit to Deferred Expense for $800 should be recorded. 
C) A journal entry with a debit to Salaries and Wages Payable and a credit to Salaries and Wages Expense for $800 should be recorded. 
D) A journal entry with a debit to Salaries and Wages Expense and a credit to Salaries and Wages Payable for $800 should be recorded. 
A) No journal entry needs to be made because payment has not yet been made. 
B) A journal entry with a debit to Salaries and Wages Expense and a credit to Deferred Expense for $800 should be recorded. 
C) A journal entry with a debit to Salaries and Wages Payable and a credit to Salaries and Wages Expense for $800 should be recorded. 
D) A journal entry with a debit to Salaries and Wages Expense and a credit to Salaries and Wages Payable for $800 should be recorded. D

Question 3

Shaun,Inc.received payment from a customer in June for a service that was provided during July.For the month of July,how will this be reflected in 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. A

Question 4

The entry to record the payment of accounts payable:

Accepted Answer

A) decreases assets. 
B) increases expenses. 
C) increases liabilities. 
D) increases stockholder's equity. 
A) decreases assets. 
B) increases expenses. 
C) increases liabilities. 
D) increases stockholder's equity.

Question 5

If a company is paid in full for services provided this month,how will the basic accounting equation be affected?

Accepted Answer

A) Liabilities will decrease. 
B) Stockholders' equity will increase as revenue is recorded. 
C) Liabilities will increase. 
D) Assets will decrease. 
A) Liabilities will decrease. 
B) Stockholders' equity will increase as revenue is recorded. 
C) Liabilities will increase. 
D) Assets will decrease.

Question 6

The following account balances are taken from the December 31,2018,financial statements of ABZ Advertising Company.The company uses accrual basis accounting. $\begin{array}{lr}
\text { Advertising Revenue } & 46,482 \
\text { Cash } & 41,516 \
\text { Accounts Receivable } & 7,296 \
\text { Interest Expense } & 2,299 \
\text { Accounts Payable } & 5,000 \
\text { Operating Expenses } & 37,460 \
\text { Deferred Revenue } & 1,178 \
\text { Equipment } & 18,048 \
\text { Income Tax Expense } & 2,326
\end{array}$ The following activities occurred in 2019:
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 2020,$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.
What is the amount of revenue that will be reported on the income statement for the year ended December 31,2019?

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 7

During May,2018,Sugar Inc.performs consulting services.The client does not pay Sugar until June,2018.

Accepted Answer

A) Using the accrual basis of accounting,the revenue is reported in June 2018. 
B) Using the cash basis of accounting,the revenue is reported in May 2018. 
C) Using the accrual basis of accounting,the revenue is reported in May 2018. 
D) Using the accrual basis of accounting,the revenue is reported when Sugar's expenses are paid. 
A) Using the accrual basis of accounting,the revenue is reported in June 2018. 
B) Using the cash basis of accounting,the revenue is reported in May 2018. 
C) Using the accrual basis of accounting,the revenue is reported in May 2018. 
D) Using the accrual basis of accounting,the revenue is reported when Sugar's expenses are paid.

Question 8

In an expanded accounting equation,revenues and expenses are an expanded part of:

Accepted Answer

A) Retained Earnings. 
B) Common Stock. 
C) Liabilities. 
D) Assets. 
A) Retained Earnings. 
B) Common Stock. 
C) Liabilities. 
D) Assets.

Question 9

During April,Ballarat,Inc.earned $1,680,of which $1,200 was collected,and had expenses of $960,of which $840 was paid.Its net income equals:

Accepted Answer

A) $720 using accrual accounting versus $360 using cash basis. 
B) $360 using accrual accounting versus $720 using cash basis. 
C) $840 using accrual accounting versus $240 using cash basis. 
D) $240 using accrual accounting versus $840 using bash basis. 
A) $720 using accrual accounting versus $360 using cash basis. 
B) $360 using accrual accounting versus $720 using cash basis. 
C) $840 using accrual accounting versus $240 using cash basis. 
D) $240 using accrual accounting versus $840 using bash basis.

Question 10

A net loss results when:

Accepted Answer

A) assets are greater than liabilities. 
B) revenues are less than expenses. 
C) revenues are greater than expenses. 
D) cash paid is less than cash received. 
A) assets are greater than liabilities. 
B) revenues are less than expenses. 
C) revenues are greater than expenses. 
D) cash paid is less than cash received.

Question 11

Match the term and the explanation.There are more definitions than terms.
-Expense Recognition Principle

Accepted Answer

A) The concept that expenses should be reported at the same time as the related revenue. 
B) Reported when a company sells goods or services in the ordinary course of business for more than it costs to produce. 
C) A company's policy on when to report revenue in the financial statements. 
D) A ratio that indicates the percent of each revenue dollar that is left over after covering costs and expenses. 
E) Reporting expenses and revenue according to the time the underlying activities occur.
F)A liability account indicating customers have already paid for services not yet rendered.
G)The principle that changes in assets must be matched by changes in liabilities and equity.
H)An indication that a company has already paid a cost not yet incurred.
I)A list of account balances when the accounts do not yet include all revenues and expenses.
J)Also known as net assets,this is the value of assets minus liabilities.
K)Reporting expenses and revenues according to the time the money is paid or received. 
A) The concept that expenses should be reported at the same time as the related revenue. 
B) Reported when a company sells goods or services in the ordinary course of business for more than it costs to produce. 
C) A company's policy on when to report revenue in the financial statements. 
D) A ratio that indicates the percent of each revenue dollar that is left over after covering costs and expenses. 
E) Reporting expenses and revenue according to the time the underlying activities occur.
F)A liability account indicating customers have already paid for services not yet rendered.
G)The principle that changes in assets must be matched by changes in liabilities and equity.
H)An indication that a company has already paid a cost not yet incurred.
I)A list of account balances when the accounts do not yet include all revenues and expenses.
J)Also known as net assets,this is the value of assets minus liabilities.
K)Reporting expenses and revenues according to the time the money is paid or received.

Question 12

Murphy,Inc.paid $9,600 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) $9,600 
C) $1,600 ($9,600 × 1/6 for the month of June) 
D) $4,800 
A) No expense should be recognized in June. 
B) $9,600 
C) $1,600 ($9,600 × 1/6 for the month of June) 
D) $4,800

Question 13

During 2019,Ocean Consulting had the following transactions with it clients (customers): On February 1,2019,the company received cash of $10,000 from clients in payment of their account balances as of December 31,2018.
On November 1,2019,the company received $4,000 cash as payments in advance for services to be performed in 2020.
The company received a total of $26,000 in cash for services that were performed during 2019.
The company sent bills totaling $8,000 to clients for services performed during 2019;this amount was unpaid as December 31,2019.
What is the amount of Service Revenue that will be reported on the income statement for the year 2019?

Accepted Answer

A) $38,000. 
B) $44,000. 
C) $48,000. 
D) $34,000. 
A) $38,000. 
B) $44,000. 
C) $48,000. 
D) $34,000.

Question 14

On July 15,Monk,Inc.received a $820 bill for advertising run in July.The bill will be paid in August.The entry to record in July includes a $820:

Accepted Answer

A) debit to Prepaid Advertising. 
B) credit to Prepaid Advertising. 
C) credit to Accounts Payable. 
D) credit to Cash. 
A) debit to Prepaid Advertising. 
B) credit to Prepaid Advertising. 
C) credit to Accounts Payable. 
D) credit to Cash.

Question 15

The primary source of revenues and expenses comes from:

Accepted Answer

A) financing activities. 
B) investing activities. 
C) operating activities. 
D) other activities. 
A) financing activities. 
B) investing activities. 
C) operating activities. 
D) other activities.

Question 16

In general,the lower a company's net profit margin,the better the performance of the company.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

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

Question 18

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 19

Consider the following information from a company's unadjusted trial balance at December 31,2018.All accounts have normal balances. $\begin{array}{lr}
\text { Accounts Receivable } & \$ 4,500 \
\text { Accounts Payable } & 650 \
\text { Cash } & 1,700 \
\text { Service Revenue } & 5,500 \
\text { Common Stock } & 4,000 \
\text { Equipment } & 4,900 \
\text { Insurance Expense } & 400 \
\text { Land } & 3,800 \
\text { Notes Payable, Due 2021 } & 4,000 \
\text { Notes Receivable, Matures 2019 } & 1,200 \
\text { Prepaid Insurance } & 400 \
\text { Rent Expense } & 1,400 \
\text { Retained Earnings, January 1,2018 } & 7,850 \
\text { Salaries and Wages Expense } & 3,700
\end{array}$ 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

Match the term and the definition.There are more definitions than terms.
-Net Income

Accepted Answer

A) To reduce the recorded value of an asset to better reflect its true market value. 
B) Any outlay of money by a company for any purpose. 
C) Total revenue minus total expenses. 
D) The concept that revenue should be recorded when earned,not necessarily when payment is received. 
E) The increase in value of financial assets held by a company.
F)The practice of dividing the life of the business into months and years.
G)The concept that a company should record revenue during the same period as expenses.
H)The concept that revenue and expenses should be recorded at the time received or paid.
I)Payments received for goods that have not yet been delivered or services that have not yet been performed.
J)Revenues should be recorded when they are earned and expenses when they are incurred.
K)Any use or sacrifice of a company's resources to generate revenue. 
A) To reduce the recorded value of an asset to better reflect its true market value. 
B) Any outlay of money by a company for any purpose. 
C) Total revenue minus total expenses. 
D) The concept that revenue should be recorded when earned,not necessarily when payment is received. 
E) The increase in value of financial assets held by a company.
F)The practice of dividing the life of the business into months and years.
G)The concept that a company should record revenue during the same period as expenses.
H)The concept that revenue and expenses should be recorded at the time received or paid.
I)Payments received for goods that have not yet been delivered or services that have not yet been performed.
J)Revenues should be recorded when they are earned and expenses when they are incurred.
K)Any use or sacrifice of a company's resources to generate revenue.

The fact that any problems a seller has in collecting amounts due from customers is accounted for separately is implied in the language of:

The employees of Pinnacle,Inc.worked during July but are not paid their wages totaling $800 until August.Which of the following best indicates how to account for this transaction in July?

Shaun,Inc.received payment from a customer in June for a service that was provided during July.For the month of July,how will this be reflected in the basic accounting equation?

The entry to record the payment of accounts payable:

If a company is paid in full for services provided this month,how will the basic accounting equation be affected?

During May,2018,Sugar Inc.performs consulting services.The client does not pay Sugar until June,2018.

In an expanded accounting equation,revenues and expenses are an expanded part of:

During April,Ballarat,Inc.earned $1,680,of which $1,200 was collected,and had expenses of $960,of which $840 was paid.Its net income equals:

A net loss results when:

Match the term and the explanation.There are more definitions than terms. -Expense Recognition Principle

Murphy,Inc.paid $9,600 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?

On July 15,Monk,Inc.received a $820 bill for advertising run in July.The bill will be paid in August.The entry to record in July includes a $820:

The primary source of revenues and expenses comes from:

In general,the lower a company's net profit margin,the better the performance of the company.

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

The financial statement that reports revenues and expenses is the:

Match the term and the definition.There are more definitions than terms. -Net Income

Business Decisions and Financial Accounting

The Balance Sheet

Adjustments,Financial Statements,and Financial Results

Fraud,Internal Control,and Cash

Merchandising Operations and the Multistep Income Statement

Inventory and Cost of Goods Sold

Receivables,Bad Debt Expense,and Interest Revenue

Long-Lived Tangible and Intangible Assets

Liabilities

Stockholders Equity

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 3: The Income Statement

The fact that any problems a seller has in collecting amounts due from customers is accounted for separately is implied in the language of:

The employees of Pinnacle,Inc.worked during July but are not paid their wages totaling $800 until August.Which of the following best indicates how to account for this transaction in July?

Shaun,Inc.received payment from a customer in June for a service that was provided during July.For the month of July,how will this be reflected in the basic accounting equation?

The entry to record the payment of accounts payable:

If a company is paid in full for services provided this month,how will the basic accounting equation be affected?

During May,2018,Sugar Inc.performs consulting services.The client does not pay Sugar until June,2018.

In an expanded accounting equation,revenues and expenses are an expanded part of:

During April,Ballarat,Inc.earned $1,680,of which $1,200 was collected,and had expenses of $960,of which $840 was paid.Its net income equals:

A net loss results when:

Match the term and the explanation.There are more definitions than terms. -Expense Recognition Principle

Murphy,Inc.paid $9,600 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?

On July 15,Monk,Inc.received a $820 bill for advertising run in July.The bill will be paid in August.The entry to record in July includes a $820:

The primary source of revenues and expenses comes from:

In general,the lower a company's net profit margin,the better the performance of the company.

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

The financial statement that reports revenues and expenses is the:

Match the term and the definition.There are more definitions than terms. -Net Income

Business Decisions and Financial Accounting

The Balance Sheet

Adjustments,Financial Statements,and Financial Results

Fraud,Internal Control,and Cash

Merchandising Operations and the Multistep Income Statement

Inventory and Cost of Goods Sold

Receivables,Bad Debt Expense,and Interest Revenue

Long-Lived Tangible and Intangible Assets

Liabilities

Stockholders Equity

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters