Question 1

Which of the following is the journal entry to record activity #4?

Accepted Answer

A)   Option A
B)   Option B
C)   Option C
D)   Option DE) B) and C)
F) A) and D)

Question 2

What is the amount of Net Income for the year ended December 31, 2010?

Accepted Answer

A)   $9,022
B)   $16,318
C)   $4,397
D)   $9,622E) A) and B)
F) A) and C)

Question 3

Which of the following is not true about the Income Statement?

Accepted Answer

A)   Amounts received from customers for services performed in the current month would be revenues on the income statement.
B)   Costs incurred in the current month but not paid as of the end of the month would be expenses on the income statement for the current month.
C)   Amounts received from customers in payment of their accounts arising from service in the prior period would be revenues in the income statement for the current period.
D)   Amounts received from customer as deposits for services to be rendered next month will not be recorded asE) All of the above
F) C) and D)

Question 4

Net Income would be understated by a failure to record collection of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 5

Which account is least likely to be credited when an expense is recorded?

Accepted Answer

A)   Cash.
B)   Accounts Payable.
C)   Prepaid Expenses.
D)   Accounts Receivable.E) A) and D)
F) None of the above

Question 6

During March, the Long Life Consulting Company provides $23,000 in consulting services of which $12,000 is immediately paid for and $11,000 is on account.

Accepted Answer

A)   Cash increases $12,000, revenue increases $11,000, and contributed capital increases $23,000.
B)   Cash increases $12,000, Accounts Receivable increases $11,000, and revenues increase $23,000.
C)   Accounts Receivable increases $11,000, liabilities decrease $12,000, and stockholders' equity decreases $1,000.
D)   Revenues increase $12,000, liabilities decrease $12,000, and stockholders' equity is unchanged.E) A) and B)
F) C) and D)

Question 7

Sparkling Pools provides $1,000 of pool maintenance services during July and collects payment in August. The company performs $1,600 of pool maintenance services during July that were paid for in June. The company accepts an order to perform $500 of pool maintenance services in August and will be paid in the same month. Revenue should be credited for:

Accepted Answer

A)   $1,600 in June, $1,000 in July, and $500 in August.
B)   $1,600 in June, $0 in July, and $1,500 in August.
C)   $0 in June, $1,600 in July, and $1,500 in August.
D)   $0 in June, $2,600 in July, and $500 in August.E) None of the above
F) All of the above

Question 8

The period of time from buying goods and services to collecting cash from customers is called the operating cycle.

Accepted Answer

A) True 
 B)False

Question 9

GAAP does not allow cash basis accounting to be used in external financial reports.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following represents a subtotal rather than an account?

Accepted Answer

A)   Advertising Expense.
B)   Service Revenue.
C)   Supplies Expense.
D)   Total Revenues.E) None of the above
F) B) and C)

Question 11

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

Accepted Answer

A)   A liability is recorded in October; in November the liability is reduced and revenue is recorded.
B)   Revenue is recorded in October and expenses are recorded in November.
C)   An asset is recorded in October; in November, the asset is reduced and revenue is recorded.
D)   Revenue and expenses are recorded in October.E) B) and C)
F) B) and D)

Question 12

How many of the following statements regarding the trial balance are true?
A trial balance is included in the full set of external financial statements, just like an income statement.
If debits equal credits in the unadjusted trial balance, you have made no errors in preparing and posting journal entries.
The balances for each account reported on an unadjusted trial balance are determined by adding the amounts on the "+" side and subtracting the amounts on the "-" side of each ledger or T-account.

Accepted Answer

A)   None
B)   One
C)   Two
D)   ThreeE) A) and B)
F) A) and C)

Question 13

If revenues are not growing faster than expenses, then Net Income will decrease.

Accepted Answer

A) True 
 B)False

Question 14

How many of the following statements regarding the accrual and cash basis of accounting are true?
Using the accrual basis of accounting, if payment is received before delivery of a good or service, a liability is recorded at the time the payment is received.
Using the accrual basis of accounting, if payment is received after delivery of a good or service, an asset is recorded at the time the good or service was delivered.
Generally accepted accounting principles require the accrual basis of accounting to be used for external financial reporting purposes.

Accepted Answer

A)   None
B)   One
C)   Two
D)   ThreeE) A) and B)
F) All of the above

Question 15

Revenues

Accepted Answer

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

Question 16

Company A receives $10,000 in advance this month for work to be performed next mo nth. This month, the company should:

Accepted Answer

A)   Debit Cash $10,000 and credit Service Revenue $10,000.
B)   Debit Cash $10,000 and credit Unearned Revenue $10,000.
C)   Debit Cash $10,000 and credit Accounts Payable $10,000.
D)   Debit Accounts Payable $10,000 and credit Cash $10,000.E) All of the above
F) A) and B)

Question 17

On October 10, a company paid $12,000 to its suppliers, of which $2,000 was for supplies received on October 10 and $10,000 was for supplies received and recorded during September. The $12,000 payment would be recorded as a:

Accepted Answer

A)   $10,000 debit to Supplies, a $2,000 debit to Accounts Payable, and a $12,000 credit to Cash.
B)   $12,000 debit to Supplies and a $12,000 credit to Cash.
C)   $12,000 debit to Supplies Expense and a $12,000 credit to Cash.
D)   $2,000 debit to Supplies, a $10,000 debit to Accounts Payable, and a $12,000 credit to Cash.E) A) and D)
F) All of the above

Exam 3: Reporting Operating Results on the Income Statement

GAAP does not allow cash basis accounting to be used in external financial reports.

Correct Answer
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If revenues are not growing faster than expenses, then Net Income will decrease.

Correct Answer
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Correct Answer
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Which account is least likely to be credited when an expense is recorded?

Correct Answer
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During March, the Long Life Consulting Company provides $23,000 in consulting services of which $12,000 is immediately paid for and $11,000 is on account.

Correct Answer
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Correct Answer
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On October 10, a company paid $12,000 to its suppliers, of which $2,000 was for supplies received on October 10 and $10,000 was for supplies received and recorded during September. The $12,000 payment would be recorded as a:

Correct Answer
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Which of the following is the journal entry to record activity #4?

Correct Answer
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Company A receives $10,000 in advance this month for work to be performed next mo nth. This month, the company should:

Correct Answer
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Correct Answer
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Net Income would be understated by a failure to record collection of accounts receivable.

Correct Answer
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What is the amount of Net Income for the year ended December 31, 2010?

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

Correct Answer
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Which of the following represents a subtotal rather than an account?

Correct Answer
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Revenues

Correct Answer
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The period of time from buying goods and services to collecting cash from customers is called the operating cycle.

Correct Answer
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Which of the following is not true about the Income Statement?

Correct Answer
verified

Exam 3: Reporting Operating Results on the Income Statement

GAAP does not allow cash basis accounting to be used in external financial reports.

Correct AnswerverifiedShow Answer

If revenues are not growing faster than expenses, then Net Income will decrease.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which account is least likely to be credited when an expense is recorded?

Correct AnswerverifiedShow Answer

During March, the Long Life Consulting Company provides $23,000 in consulting services of which $12,000 is immediately paid for and $11,000 is on account.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

On October 10, a company paid $12,000 to its suppliers, of which $2,000 was for supplies received on October 10 and $10,000 was for supplies received and recorded during September. The $12,000 payment would be recorded as a:

Correct AnswerverifiedShow Answer

Which of the following is the journal entry to record activity #4?

Correct AnswerverifiedShow Answer

Company A receives $10,000 in advance this month for work to be performed next mo nth. This month, the company should:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Net Income would be understated by a failure to record collection of accounts receivable.

Correct AnswerverifiedShow Answer

What is the amount of Net Income for the year ended December 31, 2010?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following represents a subtotal rather than an account?

Correct AnswerverifiedShow Answer

Revenues

Correct AnswerverifiedShow Answer

The period of time from buying goods and services to collecting cash from customers is called the operating cycle.

Correct AnswerverifiedShow Answer

Which of the following is not true about the Income Statement?

Correct AnswerverifiedShow Answer

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