Question 1

Net Income on the Income Statement is equal to the amount of cash generated by the business.

Accepted Answer

A) True 
 B)False

Question 2

What is the amount of Accounts receivable at the end of 2014?

Accepted Answer

A)  $51,896
B)  $55,000
C)  $44,600
D)  $54,396E) C) and D)
F) A) and C)

Question 3

Which one of the following would not be considered an operating activity?

Accepted Answer

A)  pay employees for work completed
B)  buy supplies on account
C)  purchase equipment for cash
D)  sell goods to customersE) All of the above
F) A) and B)

Question 4

A company received a bill of $3,500 for utilities used in the current month.The journal entry to record this would include:

Accepted Answer

A)  a debit to Accounts receivable for $3,500.
B)  a credit to Accounts payable for $3,500.
C)  a credit to Utilities expense.
D)  No entry would be made until the utilities are paid.E) B) and D)
F) None of the above

Question 5

A company's revenue recognition policy:

Accepted Answer

A)  affects the income statement but not the balance sheet.
B)  defines when its revenue should be collected.
C)  is usually described in the notes to a company's financial statements.
D)  states that revenues should not be recorded until payments are received from customers.E) A) and B)
F) All of the above

Question 6

If a company provides a service and receives payment at the same time,:

Accepted Answer

A)  more than one journal entry is needed.
B)  cash will be credited.
C)  a revenue account will be increased with a debit.
D)  stockholders' equity will increase.E) A) and B)
F) A) and C)

Question 7

Which of the following is an expense of this period?

Accepted Answer

A)  Costs of items used up this period but paid for next period.
B)  Costs of items paid for in this period but used up next period.
C)  Cost of land purchased and paid for this period.
D)  Repayment of debt from a loan in a prior period.E) A) and B)
F) None of the above

Question 8

An increase in operating expenses would have which of the following effects on a company's profit margin?

Accepted Answer

A)  Net profit margin would increase.
B)  Net profit margin would decrease.
C)  Net profit margin would remain unchanged.
D)  There is not enough information given to determine the effect.E) None of the above
F) B) and D)

Question 9

Which of the following is true of income statement accounts?

Accepted Answer

A)  Costs incurred to help generate revenue are only reported as expenses on the income statement if they are paid in cash in the same period as the revenue received.
B)  Revenue accounts are shown after the amount of expense accounts on the income statement.
C)  Revenue accounts include accounts receivable,unearned revenue and cash accounts.
D)  There is no net income account.E) All of the above
F) None of the above

Question 10

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 payment would be recorded in January as a:

Accepted Answer

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

Question 11

Which of the following is not true about accrual basis accounting?

Accepted Answer

A)  The revenue principle is applied.
B)  The Expense Recognition (Matching) principle is applied.
C)  It is required for external accounting reports.
D)  It requires the timing of cash receipts be in the same period as revenues are recognized.E) A) and B)
F) B) and D)

Question 12

A company reported Sales revenue,all from credit sales,of $40,000 on the Income Statement for the current year.The balance sheet includes the following:  What is the amount of cash that was collected during the year?

Accepted Answer

A)  $11,450
B)  $51,450
C)  $43,700
D)  $38,200E) A) and C)
F) B) and C)

Question 13

A dance studio accepts $1,500 to provide a series of dance lessons to a youth group during the month of July.The studio decides to record the revenue in July.The studio also decides to record the July expenses of rent,utilities and salaries in August,when it pays for them.One or both of these decisions:

Accepted Answer

A)  violate the Expense Recognition (Matching) principle.
B)  are an example of accrual accounting.
C)  violate the revenue principle.
D)  violate the accounting equation.E) B) and D)
F) B) and C)

Question 14

This month,Grass is Greener Lawn Service pays cash for $4,000 of grass fertilizer to be used two months from now.What journal entry will Grass is Greener record this month?

Accepted Answer

A)  Debit cash for $4,000 and credit supplies expense for $4,000.
B)  Debit supplies expense for $4,000 and credit accounts payable for $4,000.
C)  Debit supplies for $4,000 and credit cash for $4,000.
D)  Debit retained earnings for $4,000 and credit accounts payable for $4,000.E) A) and C)
F) A) and B)

Question 15

Which of the following statements is not true regarding net profit margin?

Accepted Answer

A)  If a company's net profit margin increases from 15% to 20% this would be considered an improvement in profitability.
B)  A company with a net profit margin of 10% may be evaluated differently depending upon which industry it is in.
C)  A company with a net profit margin of 10% is using 90% of each dollar of revenue to cover costs and expenses.
D)  Net profit margin indicates how much revenue is earned for every dollar of net income.E) All of the above
F) None of the above

Question 16

Which of the following is an operating activity?

Accepted Answer

A)  Repaying a bank loan.
B)  Paying a dividend to owners.
C)  Purchasing a new building.
D)  Paying for inventory to be offered for sale.E) A) and C)
F) B) and C)

Question 17

During April,the Grass is Greener Company buys and pays for a six-month supply of fertilizer in order to receive a bulk discount.The cost of fertilizer is recorded:

Accepted Answer

A)  immediately as an expense.
B)  as a liability,which will later be reduced as the fertilizer used.
C)  partially as an expense and partially as a liability.
D)  as an asset,which will later be reduced as the fertilizer is used.E) C) and D)
F) B) and C)

Question 18

Which of the following statements is true about the cash basis of accounting?

Accepted Answer

A)  It can distort reported profits.
B)  It is the only acceptable method for external reporting.
C)  It reports revenues when earned and expenses when incurred.
D)  It is used when cash is paid at the same time as the cost is incurred,but is not used when cash is paid before the expense is incurred.E) None of the above
F) All of the above

Question 19

This month,a company performed $517,000 of services and incurred total expenses of $438,000.If 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 $517,000,expenses to increase $438,000,and retained earnings to decrease $79,000.
B)  cash to increase $517,000,expenses to increase $438,000,and contributed capital to increase $79,000.
C)  revenues to increase $517,000,expenses to increase $438,000,and cash to increase $79,000.
D)  revenues to increase $79,000,expenses to increase $438,000,and cash to increase $517,000.E) A) and D)
F) A) and C)

Question 20

Sparkling Pools received a bill for $1,200 for running newspaper ads during the last two weeks of July;the bill will be paid on August 1.Advertising expense should be:

Accepted Answer

A)  credited for $1,200 in July.
B)  credited for $1,200 in August.
C)  debited for $1,200 in July.
D)  debited for $1,200 in August.E) C) and D)
F) A) and D)

Exam 3: The Income Statement

Which of the following statements is not true regarding net profit margin?

Correct Answer
verified

Which of the following is true of income statement accounts?

Correct Answer
verified

What is the amount of Accounts receivable at the end of 2014?

Correct Answer
verified

A company received a bill of $3,500 for utilities used in the current month.The journal entry to record this would include:

Correct Answer
verified

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

Correct Answer
verified

Which of the following statements is true about the cash basis of accounting?

Correct Answer
verified

Which of the following is an expense of this period?

Correct Answer
verified

During April,the Grass is Greener Company buys and pays for a six-month supply of fertilizer in order to receive a bulk discount.The cost of fertilizer is recorded:

Correct Answer
verified

A company's revenue recognition policy:

Correct Answer
verified

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 payment would be recorded in January as a:

Correct Answer
verified

Which of the following is not true about accrual basis accounting?

Correct Answer
verified

An increase in operating expenses would have which of the following effects on a company's profit margin?

Correct Answer
verified

A company reported Sales revenue,all from credit sales,of $40,000 on the Income Statement for the current year.The balance sheet includes the following: What is the amount of cash that was collected during the year?

Correct Answer
verified

Which one of the following would not be considered an operating activity?

Correct Answer
verified

Correct Answer
verified

Sparkling Pools received a bill for $1,200 for running newspaper ads during the last two weeks of July;the bill will be paid on August 1.Advertising expense should be:

Correct Answer
verified

Which of the following is an operating activity?

Correct Answer
verified

This month,Grass is Greener Lawn Service pays cash for $4,000 of grass fertilizer to be used two months from now.What journal entry will Grass is Greener record this month?

Correct Answer
verified

If a company provides a service and receives payment at the same time,:

Correct Answer
verified

Net Income on the Income Statement is equal to the amount of cash generated by the business.

Correct Answer
verified

Exam 3: The Income Statement

Which of the following statements is not true regarding net profit margin?

Correct AnswerverifiedShow Answer

Which of the following is true of income statement accounts?

Correct AnswerverifiedShow Answer

What is the amount of Accounts receivable at the end of 2014?

Correct AnswerverifiedShow Answer

A company received a bill of $3,500 for utilities used in the current month.The journal entry to record this would include:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is true about the cash basis of accounting?

Correct AnswerverifiedShow Answer

Which of the following is an expense of this period?

Correct AnswerverifiedShow Answer

During April,the Grass is Greener Company buys and pays for a six-month supply of fertilizer in order to receive a bulk discount.The cost of fertilizer is recorded:

Correct AnswerverifiedShow Answer

A company's revenue recognition policy:

Correct AnswerverifiedShow Answer

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 payment would be recorded in January as a:

Correct AnswerverifiedShow Answer

Which of the following is not true about accrual basis accounting?

Correct AnswerverifiedShow Answer

An increase in operating expenses would have which of the following effects on a company's profit margin?

Correct AnswerverifiedShow Answer

A company reported Sales revenue,all from credit sales,of $40,000 on the Income Statement for the current year.The balance sheet includes the following: What is the amount of cash that was collected during the year?

Correct AnswerverifiedShow Answer

Which one of the following would not be considered an operating activity?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Sparkling Pools received a bill for $1,200 for running newspaper ads during the last two weeks of July;the bill will be paid on August 1.Advertising expense should be:

Correct AnswerverifiedShow Answer

Which of the following is an operating activity?

Correct AnswerverifiedShow Answer

This month,Grass is Greener Lawn Service pays cash for $4,000 of grass fertilizer to be used two months from now.What journal entry will Grass is Greener record this month?

Correct AnswerverifiedShow Answer

If a company provides a service and receives payment at the same time,:

Correct AnswerverifiedShow Answer

Net Income on the Income Statement is equal to the amount of cash generated by the business.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified