Question 1

Your company orders and receives supplies in January, pays for them in February, provides services that use those goods up in March and is paid by customers in April. Using the accrual basis of accounting:

Accepted Answer

A)   expenses are recorded in February and revenues are recorded in April.
B)   expenses are recorded in February and revenues are recorded in March.
C)   expenses and revenues are recorded in March.
D)   expenses are recorded in January and revenues are recorded in April.

Question 2

Net Income refers to:

Accepted Answer

A)   The difference between what was earned and the costs incurred during a period.
B)   The difference between the cash received and the cash paid out during a period.
C)   The difference between what is owned and what is owed at a point in time.
D)   The change in the value of the company during a period.

Question 3

Your company received payment last month for a service that you provided this month. How will the business activity of the current month affect the basic accounting equation?

Accepted Answer

A)   Assets will not change; liabilities (Unearned Revenue)  will decrease; and stockholders' equity (Service Revenue)  will increase.
B)   Assets (Cash)  will increase, liabilities (Unearned Revenue)  will increase, and stockholders' equity will not change.
C)   Assets (Cash)  will increase, liabilities will not change, and stockholders' equity (Service Revenue)  will increase.
D)   Assets (Prepaid Expenses)  will decrease, liabilities will not change, and stockholders' equity (Service

Question 4

Which of the following items is not a specific account in a company's chart of accounts?

Accepted Answer

A)   Income Tax Expense.
B)   Sales Revenue.
C)   Unearned Revenue.
D)   Net Income.

Question 5

If a company is paid in full for services provided this month, how will the basic accounting equation be affected?

Accepted Answer

A)   Liabilities will decrease.
B)   Stockholders' equity will increase as revenue is recorded.
C)   Liabilities will increase.
D)   Assets will decrease.

Question 6

Dividing up the continuing life of a company into shorter periods is called the time period assumption.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements regarding revenues and expenses is true?

Accepted Answer

A)   Both revenues and expenses typically have credit balances.
B)   Revenues and expenses are considered assets and liabilities, respectively.
C)   Revenue is the same as Cash.
D)   Expenses decrease the amount of stockholders' equity.

Question 8

What is the amount of Revenue for July?

Accepted Answer

A)   $5,300
B)   $5,700
C)   $4,300
D)   $7,200

Question 9

During June, the Grass is Greener Company mows 100 lawns a week; the company was paid in advance during May by those customers. The company uses the accrual basis of accounting. How will these events affect the company's financial statements?

Accepted Answer

A)   The income statement shows the effects of the transactions in May.
B)   The income statement shows the effects of the transactions in June.
C)   The balance sheet shows no effect from the transactions in May.
D)   The transactions have no effect on the balance sheet.

Question 10

Which of the following accounts has a normal credit balance?

Accepted Answer

A)   Cash
B)   Notes receivable
C)   Wage expense
D)   Unearned revenue

Question 11

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

Accepted Answer

A)   The revenue principle is applied.
B)   The matching principle is applied.
C)   Required for external accounting reports.
D)   Requires the timing of cash receipts be in the same period as revenues recognized.

Question 12

The correct entry by Seconds Best Company to record the receipt of payment in the current month is:

Accepted Answer

A)   Option A
B)   Option B
C)   Option C
D)   Option D

Question 13

Galvan Corporation (GC)  capitalized a $20,000 automobile. Which of the following is true?

Accepted Answer

A)   GC recorded a liability for $20,000.
B)   GC recorded an asset for $20,000.
C)   GC recorded an expense for $20,000.
D)   GC recorded Contributed Capital for $20,000.

Question 14

Unearned Revenue is a liability account.

Accepted Answer

A) True 
 B)False

Question 15

What is Melody's Net Income for May using the accrual basis of accounting?

Accepted Answer

A)   $250
B)   $300
C)   $350
D)   $600

Question 16

Which of the following is not true of the Income Statement of a company that was formed 10 years ago?

Accepted Answer

A)   Reports a Net Loss for the year if expenses are more than revenues.
B)   Reports the financial effects of activities that have occurred since the company's inception.
C)   Reports the amount of the increase in stockholders' equity this year as a result of the company's operations.
D)   Reports Net Income which is not an account in the ledger.

Question 17

Revenue and Expense accounts are subcategories of Retained Earnings.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following accounts would appear on the Income Statement?

Accepted Answer

A)   Accounts receivable
B)   Unearned revenue
C)   Service revenue
D)   Accounts payable

Question 19

Time Warner is a publishing and communications company, specializing in magazines, cable television operation, television program development, and other telecommunication services. Its financial statements show $37,666 in an account called "Unearned Subscriber Revenue," which represents amounts that customers have paid in advance of receiving magazines, cable television, and internet services. What type of account is this and
On what statement is it reported?

Accepted Answer

A)   Option A
B)   Option B
C)   Option C
D)   Option D

Question 20

One of the ways companies can mislead investors is to inappropriately capitalize costs. When is it appropriate to capitalize costs?

Accepted Answer

A)   When the work has already been performed.
B)   When future economic benefits are associated with the cost.
C)   When the good or service being purchased by the company has been received and used.
D)   When the good or service purchased by the company has not yet been paid.

Exam 3: Reporting Operating Results on the Income Statement

Which of the following accounts has a normal credit balance?

Correct Answer
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Net Income refers to:

Correct Answer
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Which of the following statements regarding revenues and expenses is true?

Correct Answer
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Revenue and Expense accounts are subcategories of Retained Earnings.

Correct Answer
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During June, the Grass is Greener Company mows 100 lawns a week; the company was paid in advance during May by those customers. The company uses the accrual basis of accounting. How will these events affect the company's financial statements?

Correct Answer
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The correct entry by Seconds Best Company to record the receipt of payment in the current month is:

Correct Answer
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Which of the following items is not a specific account in a company's chart of accounts?

Correct Answer
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What is the amount of Revenue for July?

Correct Answer
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One of the ways companies can mislead investors is to inappropriately capitalize costs. When is it appropriate to capitalize costs?

Correct Answer
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If a company is paid in full for services provided this month, how will the basic accounting equation be affected?

Correct Answer
verified

Dividing up the continuing life of a company into shorter periods is called the time period assumption.

Correct Answer
verified

Your company received payment last month for a service that you provided this month. How will the business activity of the current month affect the basic accounting equation?

Correct Answer
verified

Your company orders and receives supplies in January, pays for them in February, provides services that use those goods up in March and is paid by customers in April. Using the accrual basis of accounting:

Correct Answer
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What is Melody's Net Income for May using the accrual basis of accounting?

Correct Answer
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Correct Answer
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Which of the following accounts would appear on the Income Statement?

Correct Answer
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Unearned Revenue is a liability account.

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

Correct Answer
verified

Galvan Corporation (GC) capitalized a $20,000 automobile. Which of the following is true?

Correct Answer
verified

Which of the following is not true of the Income Statement of a company that was formed 10 years ago?

Correct Answer
verified

Exam 3: Reporting Operating Results on the Income Statement

Which of the following accounts has a normal credit balance?

Correct AnswerverifiedShow Answer

Net Income refers to:

Correct AnswerverifiedShow Answer

Which of the following statements regarding revenues and expenses is true?

Correct AnswerverifiedShow Answer

Revenue and Expense accounts are subcategories of Retained Earnings.

Correct AnswerverifiedShow Answer

During June, the Grass is Greener Company mows 100 lawns a week; the company was paid in advance during May by those customers. The company uses the accrual basis of accounting. How will these events affect the company's financial statements?

Correct AnswerverifiedShow Answer

The correct entry by Seconds Best Company to record the receipt of payment in the current month is:

Correct AnswerverifiedShow Answer

Which of the following items is not a specific account in a company's chart of accounts?

Correct AnswerverifiedShow Answer

What is the amount of Revenue for July?

Correct AnswerverifiedShow Answer

One of the ways companies can mislead investors is to inappropriately capitalize costs. When is it appropriate to capitalize costs?

Correct AnswerverifiedShow Answer

If a company is paid in full for services provided this month, how will the basic accounting equation be affected?

Correct AnswerverifiedShow Answer

Dividing up the continuing life of a company into shorter periods is called the time period assumption.

Correct AnswerverifiedShow Answer

Your company received payment last month for a service that you provided this month. How will the business activity of the current month affect the basic accounting equation?

Correct AnswerverifiedShow Answer

Your company orders and receives supplies in January, pays for them in February, provides services that use those goods up in March and is paid by customers in April. Using the accrual basis of accounting:

Correct AnswerverifiedShow Answer

What is Melody's Net Income for May using the accrual basis of accounting?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following accounts would appear on the Income Statement?

Correct AnswerverifiedShow Answer

Unearned Revenue is a liability account.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Galvan Corporation (GC) capitalized a $20,000 automobile. Which of the following is true?

Correct AnswerverifiedShow Answer

Which of the following is not true of the Income Statement of a company that was formed 10 years ago?

Correct AnswerverifiedShow Answer

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