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Exam 3: Operating Decisions and the Income Statement

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Question 31

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Describe the debit and credit logic pertaining to items reported on the income statement.

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Question 32

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The primary difference between revenues and gains is

A) gains are increases in net assets from peripheral activities while revenues are increases from ongoing activities.
B) revenues increase operating income and gains have no impact on net income.
C) revenues cause increases in net assets as a result of peripheral activities and gains cause increases through ongoing activities.
D) gains result in an increase in operating income whereas revenues do not impact operating income.

E) None of the above
F) All of the above

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Question 33

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Revenue is recognized at the time that cash is collected from a customer for services to be provided in the future.

Top Company's 2011 sales revenue was $200,000 and 2010 sales revenue was $180,000.Top's total assets as of December 31,2011 were $150,000 and total assets as of January 1,2011 were $130,000.What is Top's total asset turnover ratio?

Which of the following accounts doesn't have a credit balance?

Which of the following journal entries is correct when a company has incurred interest expense but has not yet paid the interest?

Which of the following transactions will result in an increase in operating income as of the date of the transaction?

Describe the operating activities section of the cash flow statement and provide three examples of operating activities cash flows.

Which of the following correctly describes the impact of collecting cash from customers for services to be provided in the future?

The following data is from Gauthier Machine Shop: $\begin{array} { l c c c } & 2011 & 2010 & 2009 \\\text { Total Assets } & \$ 500,000 & \$ 475,000 & \$ 450,000 \\\text { Total Liabilities } & \$ 200,000 & \$ 190,000 & \$ 170,000 \\\text { Total Stockholders' Equity } & \$ 300,000 & \$ 285,000 & \$ 280,000 \\\text { Sales } & \$ 1,000,000 & \$ 900,000 & \$ 820,000 \\\text { Net income } & \$ 140,000 & \$ 120,000 & \$ 110,000\end{array}$ Compute Gauthier Machine Shop's total asset turnover ratio for 2011 and 2010.

A retail store would likely have a shorter operating cycle than an automotive manufacturer.

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?

Which of the following costs is most likely to be the largest expense reported on the income statement of a merchandiser such as Wal-Mart?

The revenue principle recognizes revenue from the sale of goods when ownership passes from the seller to the buyer regardless of the timing of the cash collection from customers.

The operating cycle is the time that elapses between a company's cash payment to suppliers for inventory purchases and the collection of cash from sale of inventory to customers.

Which of the following transactions would be reported as cash flow from operations on a cash flow statement?

A landlord collected $5,000 cash from a tenant for December 2011'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?

Which of the following statements is false?

Which of the following businesses would most likely not report cost of goods sold on their income statement?

Application of generally accepted accounting principles requires that the accrual basis of accounting be used for reporting revenues and expenses on the income statement.