Question 1

Which of the following is not true concerning requirements of when a company should recognize revenue?

Accepted Answer

A)   When delivery has occurred or services have been provided (rendered) .
B)   When the price is fixed or determinable.
C)   When there is persuasive evidence of an arrangement for customer payment and collection is reasonably assured.
D)   When cash has been received for services rendered.E) A) and C)
F) A) and B)

Question 2

The Fastbank Motorcycle Service Company (FMSC)  wins a $10 million bid to provide the repair service for a recall on a popular brand of motorcycles. No money changes hands. The repairs are expected to take place next quarter. How will these events affect the balance sheet?

Accepted Answer

A)   Accounts Receivable will increase by $10 million this quarter and Inventories will decrease next quart er.
B)   Both Accounts Receivable and Accounts Payable will increase by $10 million this quarter.
C)   Both Accounts Receivable and Stockholders' Equity will increase by $10 million this quarter.
D)   These events will not impact the balance sheet this quarter.E) None of the above
F) B) and C)

Question 3

Based on the activities above, stockholders' equity of the Maverick Law Firm will be

Accepted Answer

A)   increased by $20,000.
B)   decreased by $5,000.
C)   increased by $17,000.
D)   decreased by $2,000.E) B) and C)
F) A) and D)

Question 4

On June 30, a company purchased 1 year of insurance coverage which started immediately, paying cash of $2,400. Choose the true statement.

Accepted Answer

A)   On June 30, cash would be debited for $2,400.
B)   On the Income Statement for the year, insurance expense will be $1,200.
C)   On the Balance Sheet at the end of the year, prepaid insurance will be $2,400.
D)   On the Balance Sheet at the end of the year, prepaid insurance will be a non-current asset.E) A) and B)
F) A) and C)

Question 5

What is the amount of cash?

Accepted Answer

A)   $57,500
B)   $13,500
C)   $16,500
D)   $9,500E) A) and B)
F) None of the above

Question 6

Unearned Revenue is reported on the Balance Sheet as a liability.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A)   Debiting Prepaid Insurance and crediting Cash.
B)   Debiting Unearned Revenue and crediting Revenue.
C)   Debiting Supplies and crediting Accounts Payable.
D)   Debiting Insurance Expense and crediting CashE) B) and C)
F) A) and D)

Question 8

Which of the following is true about accrual basis accounting and cash basis accounting?

Accepted Answer

A)   Net Income is generally larger under accrual basis accounting than cash basis accounting.
B)   GAAP does not require accrual basis accounting be used for external reports.
C)   Accrual basis accounting and cash basis accounting will always produce the same results.
D)   Accrual basis accounting provides a better measure of operating performance than does cash basis accountingE) None of the above
F) C) and D)

Question 9

Austin Insurance (AI)  earned $10,000 revenue for services provided. Which of the following is correct?

Accepted Answer

A)   AI would credit Accounts Receivable, regardless of the timing of cash receipts.
B)   AI would credit Accounts Receivable, but only if cash has not been received.
C)   AI would credit Revenue, regardless of the timing of cash receipts.
D)   AI would credit Revenue, but only if cash has been received.E) C) and D)
F) A) and B)

Question 10

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 cau se:

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) B) and D)

Question 11

In January, the Huntington Beach Resort (HBR)  accepts your reservation and receives your $2,000 payment for a week of sun and fun in California during spring break. The $2,000 would be recorded by HBR during January as a debit to:

Accepted Answer

A)   Cash and a credit to Unearned Revenue.
B)   Accounts Payable and a credit to Service Revenue.
C)   Cash and a credit to Service Revenue.
D)   Service Revenue and a credit to Cash.E) A) and B)
F) C) and D)

Question 12

A company does not need to record the receipt of a bill for utilities used during this year if they will not pay for it until next year.

Accepted Answer

A) True 
 B)False

Question 13

A customer purchased $1,500 of services on credit two months ago and has just paid the bill. The receipt of the payment from the customer is recorded as a

Accepted Answer

A)   debit to Cash and a credit to Accounts Receivable.
B)   debit to Cash and a credit to Accounts Payable.
C)   debit to Expenses and a credit to Revenue.
D)   debit to Accounts Receivable and a credit to Retained Earnings.E) A) and B)
F) A) and C)

Question 14

Which of the following is not an operating activity?

Accepted Answer

A)   Paying off a loan to the bank.
B)   Receiving cash from customers for services rendered.
C)   Paying employees for work completed.
D)   Billing customers for services rendered but not yet paid for.E) C) and D)
F) None of the above

Question 15

During November 2010, Asler Inc., performs consulting services. The client does not pay Asler until January, 2011.

Accepted Answer

A)   Using the accrual basis of accounting, the revenue is reported in January 2011.
B)   Using the cash basis of accounting, the revenue is reported in November 2010.
C)   Using the accrual basis of accounting, the revenue is reported in November 2010.
D)   Using the accrual basis of accounting, the revenue is reported when Asler's expenses are paid.E) B) and C)
F) C) and D)

Question 16

On December 31, 2010, a company paid $10,000 to rent a storage facility from July 1, 2011 to July 1, 2012. Choose the true statement.

Accepted Answer

A)   The Balance Sheet at December 31, 2010 should report prepaid rent of $10,000 as a non-current asset.
B)   The journal entry on December 31, 2010 should include a debit to cash of $10,000.
C)   The Income Statement for the year ended December 31, 2010 is unaffected by this transaction.
D)   The Balance Sheet at December 31, 2011will not report any of this rent as an asset.E) A) and D)
F) A) and B)

Question 17

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) A) and B)
F) C) and D)

Question 18

Customers paid $8,000 on their accounts. Which accounts are affected by this transaction?

Accepted Answer

A)   Revenue and Retained Earnings increase $8,000.
B)   Cash and Revenue increase $8,000. Liabilities and Expense increase $8,000.
C)   Cash increases $8,000 and Accounts Receivable decreases $8,000. Revenue and Retained Earnings are unchanged.
D)   Cash and Retained Earnings increase $8,000.E) A) and C)
F) None of the above

Question 19

The Income Statement for the year ended December 31, 2011 will show

Accepted Answer

A)   total Revenue of $57,500.
B)   total Expenses of $39,000.
C)   total Revenue of $55,000.
D)   total Expenses of $50,000.E) B) and C)
F) A) and D)

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 3: Reporting Operating Results on the Income Statement

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

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Based on the activities above, stockholders' equity of the Maverick Law Firm will be

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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 cau se:

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What is the amount of cash?

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Unearned Revenue is reported on the Balance Sheet as a liability.

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

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Which of the following is not true concerning requirements of when a company should recognize revenue?

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A company does not need to record the receipt of a bill for utilities used during this year if they will not pay for it until next year.

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On December 31, 2010, a company paid $10,000 to rent a storage facility from July 1, 2011 to July 1, 2012. Choose the true statement.

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Which of the following is not an operating activity?

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On June 30, a company purchased 1 year of insurance coverage which started immediately, paying cash of $2,400. Choose the true statement.

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In January, the Huntington Beach Resort (HBR) accepts your reservation and receives your $2,000 payment for a week of sun and fun in California during spring break. The $2,000 would be recorded by HBR during January as a debit to:

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The Income Statement for the year ended December 31, 2011 will show

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Which of the following is true about accrual basis accounting and cash basis accounting?

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Austin Insurance (AI) earned $10,000 revenue for services provided. Which of the following is correct?

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

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A customer purchased $1,500 of services on credit two months ago and has just paid the bill. The receipt of the payment from the customer is recorded as a

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During November 2010, Asler Inc., performs consulting services. The client does not pay Asler until January, 2011.

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Customers paid $8,000 on their accounts. Which accounts are affected by this transaction?

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The Fastbank Motorcycle Service Company (FMSC) wins a $10 million bid to provide the repair service for a recall on a popular brand of motorcycles. No money changes hands. The repairs are expected to take place next quarter. How will these events affect the balance sheet?

Correct AnswerverifiedShow Answer

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