Question 1

Expenses include all of the following except:

Accepted Answer

A) using supplies. 
B) making a payment on account. 
C) paying for electricity used during the current period. 
D) paying wages for production workers for work performed during the current period. 
A) using supplies. 
B) making a payment on account. 
C) paying for electricity used during the current period. 
D) paying wages for production workers for work performed during the current period.

Question 2

Your company receives advance payment in October for services that are provided during November.Which of the following statements is correct?

Accepted Answer

A) A liability is recorded in October and revenue will be recorded in November. 
B) Revenue is recorded in October and an expense will be recorded in November. 
C) An expense is recorded in October and revenue will be recorded in November. 
D) Revenue and expenses are recorded in October. 
A) A liability is recorded in October and revenue will be recorded in November. 
B) Revenue is recorded in October and an expense will be recorded in November. 
C) An expense is recorded in October and revenue will be recorded in November. 
D) Revenue and expenses are recorded in October.

Question 3

Reporting revenues when they are earned and expenses when they are incurred is called ________ basis accounting.

Accepted Answer

A) accrual 
B) cash 
C) expense recognition 
D) cost 
A) accrual 
B) cash 
C) expense recognition 
D) cost

Question 4

Revenues:

Accepted Answer

A) decrease assets. 
B) increase stockholders' equity. 
C) increase liabilities. 
D) decrease expenses. 
A) decrease assets. 
B) increase stockholders' equity. 
C) increase liabilities. 
D) decrease expenses.

Question 5

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:

Accepted Answer

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

Question 6

During February,Blake Building Co.billed a customer $4,500 for services performed during February.During March,Blake collected the $4,500.Which of the following statements about this transaction is correct?

Accepted Answer

A) $4,500 of revenue should be recorded in February. 
B) $2,250 of revenue should be recorded in February and $2,250 in March. 
C) $4,500 of revenue should be recorded in March. 
D) No revenue should be recorded for these events because they relate only to the balance sheet. 
A) $4,500 of revenue should be recorded in February. 
B) $2,250 of revenue should be recorded in February and $2,250 in March. 
C) $4,500 of revenue should be recorded in March. 
D) No revenue should be recorded for these events because they relate only to the balance sheet.

Question 7

Time Warner is a publishing and communications company,specializing in magazines,cable television operations,television program development,and other telecommunication services.Its financial statements show $37,666 in an account called Deferred Revenue,which represents amounts that customers have paid in advance of receiving magazines,cable television,and internet services.What type of account is this and on what statement is it reported?

Accepted Answer

A) Asset;Balance Sheet 
B) Liability;Balance Sheet 
C) Revenue;Balance Sheet 
D) Revenue;Income Statement 
A) Asset;Balance Sheet 
B) Liability;Balance Sheet 
C) Revenue;Balance Sheet 
D) Revenue;Income Statement

Question 8

Trudy's Café paid employees $4,680 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 Salaries and Wages Revenue for $4,680. 
B) Debit Cash and credit Salaries and Wages Payable for $4,680. 
C) Debit Salaries and Wages Revenue and credit Cash for $4,680. 
D) Debit Salaries and Wages Expense and credit Cash for $4,680. 
A) Debit Cash and credit Salaries and Wages Revenue for $4,680. 
B) Debit Cash and credit Salaries and Wages Payable for $4,680. 
C) Debit Salaries and Wages Revenue and credit Cash for $4,680. 
D) Debit Salaries and Wages Expense and credit Cash for $4,680.

Question 9

On December 31,2018,Prince Inc.paid $9,800 to rent a storage facility from July 1,2019 to July 1,2020.Which of the following statements about the effect of this transaction on Prince's financial statements is correct?

Accepted Answer

A) Prepaid Rent in the amount of $9,800 will be reported as a liability on the balance sheet at December 31,2018. 
B) Rent Expense in the amount of $9,800 should be reported on the income statement for the year ended December 31,2018. 
C) The income statement for the year ended December 31,2018 is unaffected by this transaction. 
D) The balance sheet at December 31,2019 will not report any assets relating to this transaction. 
A) Prepaid Rent in the amount of $9,800 will be reported as a liability on the balance sheet at December 31,2018. 
B) Rent Expense in the amount of $9,800 should be reported on the income statement for the year ended December 31,2018. 
C) The income statement for the year ended December 31,2018 is unaffected by this transaction. 
D) The balance sheet at December 31,2019 will not report any assets relating to this transaction.

Question 10

If a company has no Salaries and Wages Payable on its balance sheet,then one may conclude that:

Accepted Answer

A) there are salaries and wages to be paid in next period. 
B) no salaries and wages are owed for the current period. 
C) Salaries and Wages Expense was greater than the cash paid for wages during the period. 
D) the salaries and wages were paid in advance. 
A) there are salaries and wages to be paid in next period. 
B) no salaries and wages are owed for the current period. 
C) Salaries and Wages Expense was greater than the cash paid for wages during the period. 
D) the salaries and wages were paid in advance.

Question 11

The Fastbank Motorcycle Service Company wins a $10 million bid to provide the repair services for a recall on a popular brand of motorcycles.No money is exchanged.The repair services are expected to be performed early next year.Which of the steps of the five-step model for revenue recognition is not yet complete?

Accepted Answer

A) Determine the transaction price. 
B) Identify the seller's performance obligation(s). 
C) Identify the contract. 
D) Recognize revenue when (or as)each performance obligation is satisfied. 
A) Determine the transaction price. 
B) Identify the seller's performance obligation(s). 
C) Identify the contract. 
D) Recognize revenue when (or as)each performance obligation is satisfied.

Question 12

At September 30,Balance Corporation reported the following unadjusted amounts for its accounts,each of which is considered to be a normal account balance.Prepare an unadjusted trial balance.
 $\begin{array}{lr}
\text { Accounts Payable } & 12,000 \
\text { Accounts Receivable } & 1,000 \
\text { Advertising Expense } & 400 \
\text { Cash } & 85,000 \
\text { Common Stock } & 64,000 \
\text { Equipment } & 60,000 \
\text { Notes Payable } & 36,000 \
\text { Rent Revenue } & 42,000 \
\text { Retained Earnings } & 24,800 \
\text { Supplies } & 1,400 \
\text { Supplies Expense } & 600 \
\text { Utilities Expense } & 2,000 \
\text { Salaries and Wages Expense } & 28,400
\end{array}$

Accepted Answer

The answer of At September 30,Balance Corporation reported the following...

Question 13

On March 31,Blake paid for a one-year insurance policy that begins April 1.Blake's entry to record this transaction includes a:

Accepted Answer

A) debit to Prepaid Insurance. 
B) debit to Cash. 
C) debit to Insurance Expense. 
D) credit to Insurance Payable. 
A) debit to Prepaid Insurance. 
B) debit to Cash. 
C) debit to Insurance Expense. 
D) credit to Insurance Payable.

Question 14

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 the performance obligation is satisfied in the current year. 
B) Recording an expense when paid next year although it is incurred this year. 
C) Failing to adjust the Deferred 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 the performance obligation is satisfied in the current year. 
B) Recording an expense when paid next year although it is incurred this year. 
C) Failing to adjust the Deferred 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 15

Melody's Piano School operations for the month of May were limited to the following transactions: Provided $800 of piano lessons to students who paid in cash.
Provided $200 of piano lessons on account.
Collected $600 from students who took piano lessons during April.
Paid April's piano rental bill of $200.
Received May's piano rental bill of $300 and set it aside for payment in June.
Assuming that the company uses cash basis accounting,what is net income for May?

Accepted Answer

A) $1,600. 
B) $600. 
C) $750. 
D) $1,200. 
A) $1,600. 
B) $600. 
C) $750. 
D) $1,200.

Question 16

Match the term and the definition.There are more definitions than terms.
-Deferred Revenue

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.

Question 17

Which of the following journal entries would decrease stockholders' equity?

Accepted Answer

A) Debit Prepaid Insurance and credit Cash. 
B) Debit Deferred Revenue and credit Service Revenue. 
C) Debit Supplies and credit Accounts Payable. 
D) Debit Insurance Expense and credit Cash. 
A) Debit Prepaid Insurance and credit Cash. 
B) Debit Deferred Revenue and credit Service Revenue. 
C) Debit Supplies and credit Accounts Payable. 
D) Debit Insurance Expense and credit Cash.

Question 18

Match the term and the explanation.There are more definitions than terms.
-Cash Basis

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 19

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

Question 20

On June 30,a company paid a premium of $2,400 for one year of insurance coverage,which started on July 1.The company has a calendar year-end.Which of the following statements about this situation is correct?

Accepted Answer

A) On June 30,Cash would be debited for $2,400. 
B) Insurance Expense of $1,200 will be reported on the income statement for the year ending December 31. 
C) Prepaid Insurance of $200 will be reported on the balance sheet at December 31. 
D) Prepaid Insurance of $2,400 will be reported on the balance sheet at December 31. 
A) On June 30,Cash would be debited for $2,400. 
B) Insurance Expense of $1,200 will be reported on the income statement for the year ending December 31. 
C) Prepaid Insurance of $200 will be reported on the balance sheet at December 31. 
D) Prepaid Insurance of $2,400 will be reported on the balance sheet at December 31.

Expenses include all of the following except:

Your company receives advance payment in October for services that are provided during November.Which of the following statements is correct?

Reporting revenues when they are earned and expenses when they are incurred is called ________ basis accounting.

Revenues:

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:

During February,Blake Building Co.billed a customer $4,500 for services performed during February.During March,Blake collected the $4,500.Which of the following statements about this transaction is correct?

Trudy's Café paid employees $4,680 in September for work performed that month.What journal entry will Trudy's prepare to record that transaction?

On December 31,2018,Prince Inc.paid $9,800 to rent a storage facility from July 1,2019 to July 1,2020.Which of the following statements about the effect of this transaction on Prince's financial statements is correct?

If a company has no Salaries and Wages Payable on its balance sheet,then one may conclude that:

On March 31,Blake paid for a one-year insurance policy that begins April 1.Blake's entry to record this transaction includes a:

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?

Match the term and the definition.There are more definitions than terms. -Deferred Revenue

Which of the following journal entries would decrease stockholders' equity?

Match the term and the explanation.There are more definitions than terms. -Cash Basis

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

On June 30,a company paid a premium of $2,400 for one year of insurance coverage,which started on July 1.The company has a calendar year-end.Which of the following statements about this situation is correct?

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

Expenses include all of the following except:

Your company receives advance payment in October for services that are provided during November.Which of the following statements is correct?

Reporting revenues when they are earned and expenses when they are incurred is called ________ basis accounting.

Revenues:

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:

During February,Blake Building Co.billed a customer $4,500 for services performed during February.During March,Blake collected the $4,500.Which of the following statements about this transaction is correct?

Trudy's Café paid employees $4,680 in September for work performed that month.What journal entry will Trudy's prepare to record that transaction?

On December 31,2018,Prince Inc.paid $9,800 to rent a storage facility from July 1,2019 to July 1,2020.Which of the following statements about the effect of this transaction on Prince's financial statements is correct?

If a company has no Salaries and Wages Payable on its balance sheet,then one may conclude that:

On March 31,Blake paid for a one-year insurance policy that begins April 1.Blake's entry to record this transaction includes a:

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?

Match the term and the definition.There are more definitions than terms. -Deferred Revenue

Which of the following journal entries would decrease stockholders' equity?

Match the term and the explanation.There are more definitions than terms. -Cash Basis

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

On June 30,a company paid a premium of $2,400 for one year of insurance coverage,which started on July 1.The company has a calendar year-end.Which of the following statements about this situation is correct?

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