Question 1

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.When Yelena provides the service revenue is recognized and the unearned revenue account is reduced.Assets are not affected.E) All of the above
F) A) and B)

Question 2

Which of the following accounts normally have a debit balance?

Accepted Answer

A)  Prepaid expenses, Wages payable, Dividends.
B)  Cash, Utilities expense, Accounts receivable.
C)  Retained earnings, Cost of goods sold, Wages expense.
D)  Utilities expense, Prepaid expenses, Wages payable.E) C) and D)
F) A) and B)

Question 3

Which of the following does not correctly describe the cash basis of accounting?

Accepted Answer

A)  It is not accepted for external reporting purposes.
B)  Revenues are recognized when cash is collected from customers.
C)  Expenses are recognized when they are paid for.
D)  Cash payments for long-term assets are recognized as an expense at the time of payment.E) A) and D)
F) A) and C)

Question 4

A landlord collected $5,000 cash from a tenant for December 2016'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 using generally accepted accounting principles?

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.
D)  $5,000 would appear on the balance sheet as prepaid rent.E) B) and D)
F) A) and C)

Question 5

Why might managers be tempted to violate the revenue recognition principle and the expense recognition principle when preparing an income statement?

Accepted Answer

Managers want their companies to appear successful when financial statements are issued. When revenues are as high as possible and expenses as low as possible, net income will be maximized. Managers might be tempted to report revenues even though the revenue recognition process is not complete. Also, if some expenses can be put off until a later time, net income will appear larger. Many times manager bonuses are calculated based on net income. In addition, earnings expectations in the marketplace create tremendous pressures for those expectations to be met. Lower net income could cause an adverse reaction in the market place regarding stock prices.

Question 6

Which of the following describes the transaction resulting in a journal entry with a debit to Wages Payable and a credit to Cash?

Accepted Answer

A)  Wages expense has been incurred but is unpaid.
B)  Cash was used to pay for wages that were previously recorded as an expense.
C)  Cash was used to pay for wages that were not previously recorded as an expense.
D)  Cash was used to prepay employee wages.E) A) and C)
F) A) and B)

Question 7

Which of the following liability accounts is likely to be satisfied without a future cash payment?

Accepted Answer

A)  Wages payable.
B)  Unearned subscriptions revenue.
C)  Accounts payable.
D)  Taxes payable.E) B) and D)
F) B) and C)

Question 8

The time period assumption implies that the life of a business entity can be reported in time periods such as quarters and years.

Accepted Answer

A) True 
 B)False

Question 9

When the board of directors declares a cash dividend, the retained earnings account is debited.

Accepted Answer

A) True 
 B)False

Question 10

McNeil Company owed its employees for services performed and recorded a liability for the wages owed the employees. Which of the following correctly describes the impact on the financial statements when the employee wages are subsequently paid?

Accepted Answer

A)  Operating expenses are increased.
B)  Retained earnings decreases.
C)  Operating income does not change.
D)  Total assets remain the same.E) A) and B)
F) All of the above C

Question 11

June's Printing Shop had the following information for office supplies: • Ordered $1,200 of supplies March 3
• Received half the order of supplies on March 16
• Used one-third of the supplies during March
What is the total amount that should be reported as supplies expense for the month of March?

Accepted Answer

A)  $100.
B)  $200.
C)  $400.
D)  $600.E) B) and C)
F) A) and B)

Question 12

Which of the following journal entries is correct assuming that Mama June Pizza Company received cash for interest earned on investments?

Accepted Answer

A)  Cash xxxInvestment incomeXxx
B)  Investment income xxxCashXxx
C)  Cash xxxSales revenueXxx
D)  Sales revenueE) B) and D)
F) None of the above

Question 13

Describe the difference(s) with respect to the cash basis of accounting and the accrual basis of accounting.

Accepted Answer

The cash basis of accounting recognizes ...

Question 14

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

Accepted Answer

A)  Prepaid expenses.
B)  Insurance expense.
C)  Unearned revenue.
D)  Investments.E) A) and B)
F) C) and D)

Question 15

Reporting revenues on the income statement that were previously reported as unearned revenues on the balance sheet results in a decrease in liabilities and an increase in net income, retained earnings, and stockholders' equity.

Accepted Answer

A) True 
 B)False  True

Question 16

Which of the following statements regarding the net profit margin ratio is false?

Accepted Answer

A)  The numerator is net income.
B)  The denominator is net sales or operating revenues.
C)  It measures how much of every sales dollar is gross profit.
D)  Financial analysts expect well-run businesses to maintain or improve their profit margin over time.E) A) and B)
F) A) and C)

Question 17

Colby Corporation has provided the following information: • Operating revenues from customers were $199,700.
• Operating expenses for the store were $111,000.
• Interest expense was $9,200.
• Gain from sale of plant and equipment was $3,300.
• Dividend payments to Colby's stockholders were $7,700.
• Income tax expense was $36,000.
• Prepaid rent expense was $5,000.
What is the amount of Colby's operating revenues?

Accepted Answer

A)  $88,000.
B)  $91,300.
C)  $199,700.
D)  $203,000.E) A) and B)
F) A) and C)

Question 18

Describe the difference between operating revenues and gains from the sale of plant and equipment while providing examples of each.

Accepted Answer

Operating revenues result from ongoing o...

Question 19

Using cash to purchase office supplies, which will be consumed later, results in an increase in expenses and a decrease in assets at the time of purchase.

Accepted Answer

A) True 
 B)False

Question 20

The core revenue recognition principle has two requirements for recognizing revenue. Which of the following is one of these requirements?

Accepted Answer

A)  The customer has paid for the goods or services.
B)  Delivery of goods or performance of service has occurred or is scheduled to occur.
C)  The amount the company expects to receive is determinable.
D)  The customer has signed a contract.E) B) and D)
F) A) and B)

Exam 3: Operating Decisions and the Accounting System

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?

Correct Answer
verified

Which of the following accounts normally have a debit balance?

Correct Answer
verified

Which of the following does not correctly describe the cash basis of accounting?

Correct Answer
verified

A landlord collected $5,000 cash from a tenant for December 2016'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 using generally accepted accounting principles?

Correct Answer
verified

Why might managers be tempted to violate the revenue recognition principle and the expense recognition principle when preparing an income statement?

Which of the following describes the transaction resulting in a journal entry with a debit to Wages Payable and a credit to Cash?

Correct Answer
verified

Which of the following liability accounts is likely to be satisfied without a future cash payment?

Correct Answer
verified

The time period assumption implies that the life of a business entity can be reported in time periods such as quarters and years.

Correct Answer
verified

When the board of directors declares a cash dividend, the retained earnings account is debited.

Correct Answer
verified

McNeil Company owed its employees for services performed and recorded a liability for the wages owed the employees. Which of the following correctly describes the impact on the financial statements when the employee wages are subsequently paid?

Correct Answer
verified
C

Correct Answer
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Which of the following journal entries is correct assuming that Mama June Pizza Company received cash for interest earned on investments?

Correct Answer
verified

Describe the difference(s) with respect to the cash basis of accounting and the accrual basis of accounting.

Correct Answer
verified
The cash basis of accounting recognizes ...
View Answer

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

Correct Answer
verified

Reporting revenues on the income statement that were previously reported as unearned revenues on the balance sheet results in a decrease in liabilities and an increase in net income, retained earnings, and stockholders' equity.

Correct Answer
verified
True

Which of the following statements regarding the net profit margin ratio is false?

Correct Answer
verified

Correct Answer
verified

Describe the difference between operating revenues and gains from the sale of plant and equipment while providing examples of each.

Correct Answer
verified
Operating revenues result from ongoing o...
View Answer

Using cash to purchase office supplies, which will be consumed later, results in an increase in expenses and a decrease in assets at the time of purchase.

Correct Answer
verified

The core revenue recognition principle has two requirements for recognizing revenue. Which of the following is one of these requirements?

Correct Answer
verified

Exam 3: Operating Decisions and the Accounting System

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?

Correct AnswerverifiedShow Answer

Which of the following accounts normally have a debit balance?

Correct AnswerverifiedShow Answer

Which of the following does not correctly describe the cash basis of accounting?

Correct AnswerverifiedShow Answer

A landlord collected $5,000 cash from a tenant for December 2016'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 using generally accepted accounting principles?

Correct AnswerverifiedShow Answer

Why might managers be tempted to violate the revenue recognition principle and the expense recognition principle when preparing an income statement?

Which of the following describes the transaction resulting in a journal entry with a debit to Wages Payable and a credit to Cash?

Correct AnswerverifiedShow Answer

Which of the following liability accounts is likely to be satisfied without a future cash payment?

Correct AnswerverifiedShow Answer

The time period assumption implies that the life of a business entity can be reported in time periods such as quarters and years.

Correct AnswerverifiedShow Answer

When the board of directors declares a cash dividend, the retained earnings account is debited.

Correct AnswerverifiedShow Answer

McNeil Company owed its employees for services performed and recorded a liability for the wages owed the employees. Which of the following correctly describes the impact on the financial statements when the employee wages are subsequently paid?

Correct AnswerverifiedC

Correct AnswerverifiedShow Answer

Which of the following journal entries is correct assuming that Mama June Pizza Company received cash for interest earned on investments?

Correct AnswerverifiedShow Answer

Describe the difference(s) with respect to the cash basis of accounting and the accrual basis of accounting.

Correct AnswerverifiedThe cash basis of accounting recognizes ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Reporting revenues on the income statement that were previously reported as unearned revenues on the balance sheet results in a decrease in liabilities and an increase in net income, retained earnings, and stockholders' equity.

Correct AnswerverifiedTrue

Which of the following statements regarding the net profit margin ratio is false?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Describe the difference between operating revenues and gains from the sale of plant and equipment while providing examples of each.

Correct AnswerverifiedOperating revenues result from ongoing o...View AnswerShow Answer

Using cash to purchase office supplies, which will be consumed later, results in an increase in expenses and a decrease in assets at the time of purchase.

Correct AnswerverifiedShow Answer

The core revenue recognition principle has two requirements for recognizing revenue. Which of the following is one of these requirements?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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The cash basis of accounting recognizes ...
View Answer

Correct Answer
verified

Correct Answer
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True

Correct Answer
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Correct Answer
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Correct Answer
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Operating revenues result from ongoing o...
View Answer

Correct Answer
verified

Correct Answer
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