Question 1

Which of the following statements about the income statement and income statement accounts is correct?

Accepted Answer

A)  The income statement reports the financial position of a company at a point in time.
B)  Income statement accounts are permanent accounts,while balance sheet accounts are temporary accounts.
C)  Income statement accounts are temporary accounts,while balance sheet accounts are permanent accounts.
D)  The income statement reports the cash received and paid during the period.E) A) and B)
F) None of the above

Question 2

Which of the following statements regarding the expanded accounting equation is correct?

Accepted Answer

A)  Debits reduce expenses.
B)  The total credits recorded in revenue accounts must equal the total debits recorded in expense accounts.
C)  Across all revenue accounts,the total value of all debits must equal the total value of all credits.
D)  Credits increase revenues.E) A) and B)
F) None of the above

Question 3

Revenues are recognized when:

Accepted Answer

A)  a contract is identified.
B)  a seller's performance obligations are identified.
C)  a seller's performance obligations are satisfied.
D)  a transaction price has been determined and allocated.E) None of the above
F) B) and C)

Question 4

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

Accepted Answer

A)  Pay employees for work completed
B)  Purchase supplies on account
C)  Purchase equipment for cash
D)  Sell goods to customersE) None of the above
F) A) and B)

Question 5

Net income refers to the:

Accepted Answer

A)  difference between what was earned and the costs incurred during a period.
B)  difference between the cash received and the cash paid out during a period.
C)  difference between what is owned and what is owed at a point in time.
D)  change in the value of the company during a period.E) All of the above
F) None of the above

Question 6

Which of the following statements about the unadjusted trial balance is correct?

Accepted Answer

A)  A trial balance is an external report used to determine whether total assets equal total liabilities.
B)  You can assume that no errors were made in the recording of transactions if total debits equal total credits on the unadjusted trial balance.
C)  A trial balance shows the ending balances obtained from the ledger listed in either the asset or liability column.
D)  A trial balance lists every account name in one column,usually in the order of assets,liabilities,stockholders' equity,revenues and expenses.E) A) and D)
F) B) and D)

Question 7

Which of the following September transactions would impact the September income statement?

Accepted Answer

A)  Collecting cash related to an account receivable
B)  Providing services to new customers
C)  Purchasing supplies
D)  Issuing stock to new shareholdersE) A) and B)
F) A) and C)

Question 8

Which of the following statements about the unadjusted trial balance is correct?

Accepted Answer

A)  It generally includes final amounts for all expenses,but preliminary amounts for all revenues.
B)  It will not balance if there is a mistake.
C)  It includes end-of-the-accounting period adjustments.
D)  It is an internal report and not part of the financial statements issued to external decision makers.E) B) and C)
F) A) and D)

Question 9

When ProBuild Company sells three $1,000 gift cards at the beginning of the month,it should record a $3,000 debit to ________ and a $3,000 credit to ________.

Accepted Answer

A)  Cash;Deferred Revenue
B)  Cash;Sales Revenue
C)  Accounts Receivable;Sales Revenue
D)  Deferred Revenue;CashE) A) and D)
F) None of the above

Question 10

If revenues are not growing faster than expenses,then net income will decrease.

Accepted Answer

A) True 
 B)False

Question 11

The income statement measures the:

Accepted Answer

A)  amount of revenue earned during the current period.
B)  the change in value of a company.
C)  true values of revenues and expenses without using estimates.
D)  amount of cash generated by the business.E) B) and C)
F) B) and D)

Question 12

Match the term and the explanation.There are more definitions than terms.
-Deferred Revenue

Accepted Answer

A)  The concept that expenses should be reported at the same time as the related revenue.
B)  Reported when a company sells goods or services in the ordinary course of business for more than it costs to produce.
C)  A company's policy on when to report revenue in the financial statements.
D)  A ratio that indicates the percent of each revenue dollar that is left over after covering costs and expenses.
E)  Reporting expenses and revenue according to the time the underlying activities occur.F) A liability account indicating customers have already paid for services not yet rendered.G) The principle that changes in assets must be matched by changes in liabilities and equity.H) An indication that a company has already paid a cost not yet incurred.I) A list of account balances when the accounts do not yet include all revenues and expenses.J) Also known as net assets,this is the value of assets minus liabilities.K) Reporting expenses and revenues according to the time the money is paid or received.L) B) and E)
M) C) and K)

Question 13

Selected financial information presented below was obtained from the financial statements of the Napa Valley Brewery:   Current Assets 80,000 Property and Equipment, net 120,000 Current Liabilities 90,000 Noncurrent Liabilities 70,000 Stockholder’s Equity 40,000 Sales Revenue 100,000 Net Income 36,000\begin{array}{lr}	ext { Current Assets } & 80,000 \	ext { Property and Equipment, net } & 120,000 \	ext { Current Liabilities } & 90,000 \	ext { Noncurrent Liabilities } & 70,000 \	ext { Stockholder&#x27;s Equity } & 40,000 \	ext { Sales Revenue } & 100,000 \	ext { Net Income } & 36,000\end{array} Current Assets  Property and Equipment, net  Current Liabilities  Noncurrent Liabilities  Stockholder’s Equity  Sales Revenue  Net Income ​80,000120,00090,00070,00040,000100,00036,000​  What was the net profit margin?

Accepted Answer

A)  45.00%
B)  277.78%
C)  36.00%
D)  18.00% E) A) and C)
F) A) and B)

Question 14

During September,By the Book Co.collected $1,800 cash from a customer for services to be provided during November.Which of the following statements about this transaction is correct?

Accepted Answer

A)  $1,800 of revenue should be recorded in September.
B)  $900 of revenue should be recorded in September and $900 in November.
C)  $1,800 of revenue should be recorded in November.
D)  No revenue should be recorded for these events because they relate only to the balance sheet.E) None of the above
F) C) and D)

Question 15

Which activity is not part of the operating cycle?

Accepted Answer

A)  Repaying a bank loan used to purchase manufacturing equipment
B)  Purchasing goods from suppliers for resale to customers
C)  Paying employees for hours worked
D)  Collecting cash from sales on account made last monthE) A) and D)
F) A) and C)

Question 16

Which of the following statements about accrual basis accounting is correct?

Accepted Answer

A)  If a company uses accrual basis accounting,the company should not record revenue until payments are actually received.
B)  If a company uses accrual basis accounting,the company should record expenses in the same period as the revenues they generate.
C)  IFRS does not allow accrual basis accounting for external reporting of income.
D)  The items reported on the income statement continue to have an impact beyond the current period,whereas the items reported on the balance sheet impact just the current period.E) None of the above
F) B) and C)

Question 17

During 2019,Ocean Consulting had the following transactions with it clients (customers) : On February 1,2019,the company received cash of $10,000 from clients in payment of their account balances as of December 31,2018.
On November 1,2019,the company received $4,000 cash as payments in advance for services to be performed in 2020.
The company received a total of $26,000 in cash for services that were performed during 2019.
The company sent bills totaling $8,000 to clients for services performed during 2019;this amount was unpaid as December 31,2019.
Which of the following statements about the activities for Ocean Consulting for 2019 is correct?

Accepted Answer

A)  If Accounts Receivable at December 31,2018 totaled $50,000,the amount of Accounts Receivable to be reported on the Balance Sheet at December 31,2019 will be $48,000.
B)  The $4,000 received from clients for services to be performed next year will be reported as revenue on the 2019 income statement.
C)  The $8,000 owed by clients for services performed this year will be reported as Accounts Payable on the balance sheet at December 31,2019.
D)  The $10,000 received this year from clients in payment of their accounts will be reported as Services Revenue on the 2019 income statement.E) A) and C)
F) C) and D)

Question 18

Broadmor Industries collected $7,500 from a customer on account.What journal entry will be prepared by Broadmor to record this transaction?

Accepted Answer

A)  Debit Cash and credit Accounts Receivable.
B)  Debit Cash and credit Service Revenue.
C)  Debit Accounts Receivable and credit Service Revenue.
D)  Debit Accounts Receivable and credit Cash.E) B) and C)
F) A) and D)

Question 19

An expense:

Accepted Answer

A)  will decrease the amount of net income on the income statement.
B)  will decrease the amount of Common Stock on the balance sheet.
C)  will be increased with a credit to the account.
D)  normally has a credit balance.E) B) and C)
F) A) and D)

Question 20

If a company incorrectly records cash received for services to be provided in the future with a debit to Cash and credit to Sales Revenue,how will this error affect net income for the current period?

Accepted Answer

A)  Net income will be too high.
B)  Net income will be too low.
C)  Net income will not be affected by this error.
D)  Net income will be too high in the following period.E) B) and D)
F) B) and C)

Exam 3: The Income Statement

Correct Answer
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Which of the following statements about the income statement and income statement accounts is correct?

Correct Answer
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Which of the following statements about the unadjusted trial balance is correct?

Correct Answer
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Correct Answer
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If a company incorrectly records cash received for services to be provided in the future with a debit to Cash and credit to Sales Revenue,how will this error affect net income for the current period?

Correct Answer
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Which activity is not part of the operating cycle?

Correct Answer
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Net income refers to the:

Correct Answer
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Which of the following September transactions would impact the September income statement?

Correct Answer
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Which of the following statements regarding the expanded accounting equation is correct?

Correct Answer
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Match the term and the explanation.There are more definitions than terms. -Deferred Revenue

Correct Answer
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Which of the following statements about the unadjusted trial balance is correct?

Correct Answer
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Which of the following statements about accrual basis accounting is correct?

Correct Answer
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Broadmor Industries collected $7,500 from a customer on account.What journal entry will be prepared by Broadmor to record this transaction?

Correct Answer
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The income statement measures the:

Correct Answer
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An expense:

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

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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During September,By the Book Co.collected $1,800 cash from a customer for services to be provided during November.Which of the following statements about this transaction is correct?

Correct Answer
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Revenues are recognized when:

Correct Answer
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When ProBuild Company sells three $1,000 gift cards at the beginning of the month,it should record a $3,000 debit to and a $3,000 credit to .

Correct Answer
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Exam 3: The Income Statement

Correct AnswerverifiedShow Answer

Which of the following statements about the income statement and income statement accounts is correct?

Correct AnswerverifiedShow Answer

Which of the following statements about the unadjusted trial balance is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a company incorrectly records cash received for services to be provided in the future with a debit to Cash and credit to Sales Revenue,how will this error affect net income for the current period?

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Which activity is not part of the operating cycle?

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Net income refers to the:

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Which of the following September transactions would impact the September income statement?

Correct AnswerverifiedShow Answer

Which of the following statements regarding the expanded accounting equation is correct?

Correct AnswerverifiedShow Answer

Match the term and the explanation.There are more definitions than terms. -Deferred Revenue

Correct AnswerverifiedShow Answer

Which of the following statements about the unadjusted trial balance is correct?

Correct AnswerverifiedShow Answer

Which of the following statements about accrual basis accounting is correct?

Correct AnswerverifiedShow Answer

Broadmor Industries collected $7,500 from a customer on account.What journal entry will be prepared by Broadmor to record this transaction?

Correct AnswerverifiedShow Answer

The income statement measures the:

Correct AnswerverifiedShow Answer

An expense:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If revenues are not growing faster than expenses,then net income will decrease.

Correct AnswerverifiedShow Answer

During September,By the Book Co.collected $1,800 cash from a customer for services to be provided during November.Which of the following statements about this transaction is correct?

Correct AnswerverifiedShow Answer

Revenues are recognized when:

Correct AnswerverifiedShow Answer

When ProBuild Company sells three $1,000 gift cards at the beginning of the month,it should record a $3,000 debit to ________ and a $3,000 credit to ________.

Correct AnswerverifiedShow Answer

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Correct Answer
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When ProBuild Company sells three $1,000 gift cards at the beginning of the month,it should record a $3,000 debit to and a $3,000 credit to .

Correct Answer
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