Question 1

The primary difference between revenues and gains is

Accepted Answer

A) gains are increases in net assets from peripheral activities while revenues are increases from ongoing activities. 
B) revenues increase operating income and gains have no impact on net income. 
C) revenues cause increases in net assets as a result of peripheral activities and gains cause increases through ongoing activities. 
D) gains result in an increase in operating income whereas revenues do not impact operating income. 
A) gains are increases in net assets from peripheral activities while revenues are increases from ongoing activities. 
B) revenues increase operating income and gains have no impact on net income. 
C) revenues cause increases in net assets as a result of peripheral activities and gains cause increases through ongoing activities. 
D) gains result in an increase in operating income whereas revenues do not impact operating income.

Question 2

Which of the following journal entries is correct when a company has incurred interest expense but has not yet paid the interest?

Accepted Answer

A)  Interest expense 
$ \quad $$ \quad $Operating income 
B)  Interest expense 
$ \quad $$ \quad $Interest payable 
C)  Interest payable 
$ \quad $$ \quad $Interest expense 
D)  Retained earnings 
$ \quad $$ \quad $Interest expense 
A)  Interest expense 
$ \quad $$ \quad $Operating income 
B)  Interest expense 
$ \quad $$ \quad $Interest payable 
C)  Interest payable 
$ \quad $$ \quad $Interest expense 
D)  Retained earnings 
$ \quad $$ \quad $Interest expense

Question 3

Which of the following correctly describes the impact of collecting cash from customers for services to be provided in the future?

Accepted Answer

A) Assets and stockholders' equity increase. 
B) Assets and revenues increase. 
C) Assets and liabilities increase. 
D) Assets and operating income increase. 
A) Assets and stockholders' equity increase. 
B) Assets and revenues increase. 
C) Assets and liabilities increase. 
D) Assets and operating income increase.

Question 4

The operating cycle is the time that elapses between a company's cash payment to suppliers for inventory purchases and the collection of cash from sale of inventory to customers.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following transactions will result in an increase in operating income as of the date of the transaction?

Accepted Answer

A) The sale of plant and equipment at a gain. 
B) Collection of cash from a customer for services to be provided at a later date. 
C) Providing a service to a customer on account. 
D) The receipt of cash dividends from an investment. 
A) The sale of plant and equipment at a gain. 
B) Collection of cash from a customer for services to be provided at a later date. 
C) Providing a service to a customer on account. 
D) The receipt of cash dividends from an investment.

Question 6

The revenue principle recognizes revenue from the sale of goods when ownership passes from the seller to the buyer regardless of the timing of the cash collection from customers.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following costs is most likely to be the largest expense reported on the income statement of a merchandiser such as Wal-Mart?

Accepted Answer

A) Salaries expense 
B) Cost of goods sold 
C) Advertising expense 
D) Income tax expense 
A) Salaries expense 
B) Cost of goods sold 
C) Advertising expense 
D) Income tax expense

Question 8

Yelena Company received cash from a customer in advance of providing the service to the customer.Which of the following does not accurately describe the impact on the financial statements when Yelena later provides the service?

Accepted Answer

A) Liabilities are decreased. 
B) Operating income increases. 
C) Retained earnings increases. 
D) Assets are increased. 
A) Liabilities are decreased. 
B) Operating income increases. 
C) Retained earnings increases. 
D) Assets are increased.

Question 9

Application of generally accepted accounting principles requires that the accrual basis of accounting be used for reporting revenues and expenses on the income statement.

Accepted Answer

A) True 
 B)False

Question 10

A landlord collected $5,000 cash from a tenant for December 2011's rent but the tenant's rent for December is $8,000.Which of the following is true with respect to the landlord's financial statements?

Accepted Answer

A) $8,000 would be reported on the statement of cash flows. 
B) $8,000 would appear on the balance sheet as rent receivable. 
C) $8,000 would appear on the income statement as rent revenue earned. 
D) $5,000 would appear on the balance sheet as prepaid rent. 
A) $8,000 would be reported on the statement of cash flows. 
B) $8,000 would appear on the balance sheet as rent receivable. 
C) $8,000 would appear on the income statement as rent revenue earned. 
D) $5,000 would appear on the balance sheet as prepaid rent.

Question 11

Which of the following transactions would be reported as cash flow from operations on a cash flow statement?

Accepted Answer

A) Cash paid to purchase equipment 
B) Cash paid to acquire land 
C) Cash paid for interest 
D) Cash paid for rent 
A) Cash paid to purchase equipment 
B) Cash paid to acquire land 
C) Cash paid for interest 
D) Cash paid for rent

Question 12

Describe the operating activities section of the cash flow statement and provide three examples of operating activities cash flows.

Accepted Answer

The answer of Describe the operating activities section of the...

Question 13

Which of the following statements is false?

Accepted Answer

A) Expense accounts have a debit balance. 
B) Revenue accounts have a credit balance. 
C) Gain accounts have a credit balance. 
D) Loss accounts have a credit balance. 
A) Expense accounts have a debit balance. 
B) Revenue accounts have a credit balance. 
C) Gain accounts have a credit balance. 
D) Loss accounts have a credit balance.

Question 14

A retail store would likely have a shorter operating cycle than an automotive manufacturer.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following businesses would most likely not report cost of goods sold on their income statement?

Accepted Answer

A) A law firm 
B) An automobile dealership 
C) A pizza restaurant 
D) A computer chip manufacturer 
A) A law firm 
B) An automobile dealership 
C) A pizza restaurant 
D) A computer chip manufacturer

Question 16

Describe the debit and credit logic pertaining to items reported on the income statement.

Accepted Answer

The answer of Describe the debit and credit logic pertaining...

Question 17

Revenue is recognized at the time that cash is collected from a customer for services to be provided in the future.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following accounts doesn't have a credit balance?

Accepted Answer

A) Gain on sale of land 
B) Investment income 
C) Unearned revenues 
D) Rent expense 
A) Gain on sale of land 
B) Investment income 
C) Unearned revenues 
D) Rent expense

Question 19

Top Company's 2011 sales revenue was $200,000 and 2010 sales revenue was $180,000.Top's total assets as of December 31,2011 were $150,000 and total assets as of January 1,2011 were $130,000.What is Top's total asset turnover ratio?

Accepted Answer

A) 1.48 
B) 1.33 
C) 1.36 
D) 1.43 
A) 1.48 
B) 1.33 
C) 1.36 
D) 1.43

Question 20

The following data is from Gauthier Machine Shop:
 $$\begin{array} { l c c c } 
& 2011 & 2010 & 2009 \
\text { Total Assets } & \$ 500,000 & \$ 475,000 & \$ 450,000 \
\text { Total Liabilities } & \$ 200,000 & \$ 190,000 & \$ 170,000 \
\text { Total Stockholders' Equity } & \$ 300,000 & \$ 285,000 & \$ 280,000 \
\text { Sales } & \$ 1,000,000 & \$ 900,000 & \$ 820,000 \
\text { Net income } & \$ 140,000 & \$ 120,000 & \$ 110,000
\end{array}$$ Compute Gauthier Machine Shop's total asset turnover ratio for 2011 and 2010.

Accepted Answer

The total asset turnover ratio is a fina

The primary difference between revenues and gains is

Which of the following journal entries is correct when a company has incurred interest expense but has not yet paid the interest?

Which of the following correctly describes the impact of collecting cash from customers for services to be provided in the future?

The operating cycle is the time that elapses between a company's cash payment to suppliers for inventory purchases and the collection of cash from sale of inventory to customers.

Which of the following transactions will result in an increase in operating income as of the date of the transaction?

The revenue principle recognizes revenue from the sale of goods when ownership passes from the seller to the buyer regardless of the timing of the cash collection from customers.

Which of the following costs is most likely to be the largest expense reported on the income statement of a merchandiser such as Wal-Mart?

Yelena Company received cash from a customer in advance of providing the service to the customer.Which of the following does not accurately describe the impact on the financial statements when Yelena later provides the service?

Application of generally accepted accounting principles requires that the accrual basis of accounting be used for reporting revenues and expenses on the income statement.

A landlord collected $5,000 cash from a tenant for December 2011's rent but the tenant's rent for December is $8,000.Which of the following is true with respect to the landlord's financial statements?

Which of the following transactions would be reported as cash flow from operations on a cash flow statement?

Describe the operating activities section of the cash flow statement and provide three examples of operating activities cash flows.

Which of the following statements is false?

A retail store would likely have a shorter operating cycle than an automotive manufacturer.

Which of the following businesses would most likely not report cost of goods sold on their income statement?

Describe the debit and credit logic pertaining to items reported on the income statement.

Revenue is recognized at the time that cash is collected from a customer for services to be provided in the future.

Which of the following accounts doesn't have a credit balance?

Top Company's 2011 sales revenue was $200,000 and 2010 sales revenue was $180,000.Top's total assets as of December 31,2011 were $150,000 and total assets as of January 1,2011 were $130,000.What is Top's total asset turnover ratio?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Balance Sheet

Adjustments,Financial Statements,and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Natural Resources; and Intangibles

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Reporting and Interpreting Investments in Other Corporations

Statement of Cash Flows

Analyzing Financial Statements

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Exam 3: Operating Decisions and the Income Statement

The primary difference between revenues and gains is

Which of the following journal entries is correct when a company has incurred interest expense but has not yet paid the interest?

Which of the following correctly describes the impact of collecting cash from customers for services to be provided in the future?

The operating cycle is the time that elapses between a company's cash payment to suppliers for inventory purchases and the collection of cash from sale of inventory to customers.

Which of the following transactions will result in an increase in operating income as of the date of the transaction?

The revenue principle recognizes revenue from the sale of goods when ownership passes from the seller to the buyer regardless of the timing of the cash collection from customers.

Which of the following costs is most likely to be the largest expense reported on the income statement of a merchandiser such as Wal-Mart?

Yelena Company received cash from a customer in advance of providing the service to the customer.Which of the following does not accurately describe the impact on the financial statements when Yelena later provides the service?

Application of generally accepted accounting principles requires that the accrual basis of accounting be used for reporting revenues and expenses on the income statement.

A landlord collected $5,000 cash from a tenant for December 2011's rent but the tenant's rent for December is $8,000.Which of the following is true with respect to the landlord's financial statements?

Which of the following transactions would be reported as cash flow from operations on a cash flow statement?

Describe the operating activities section of the cash flow statement and provide three examples of operating activities cash flows.

Which of the following statements is false?

A retail store would likely have a shorter operating cycle than an automotive manufacturer.

Which of the following businesses would most likely not report cost of goods sold on their income statement?

Describe the debit and credit logic pertaining to items reported on the income statement.

Revenue is recognized at the time that cash is collected from a customer for services to be provided in the future.

Which of the following accounts doesn't have a credit balance?

Top Company's 2011 sales revenue was $200,000 and 2010 sales revenue was $180,000.Top's total assets as of December 31,2011 were $150,000 and total assets as of January 1,2011 were $130,000.What is Top's total asset turnover ratio?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Balance Sheet

Adjustments,Financial Statements,and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Natural Resources; and Intangibles

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Reporting and Interpreting Investments in Other Corporations

Statement of Cash Flows

Analyzing Financial Statements

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