Question 1

The term, "realization," in revenue recognition refers to which of the following?

Accepted Answer

A)   The entity has completed, or substantially completed, the activities it must perform to be entitled to the revenue benefits.
B)   The product or service has been exchanged for cash, claims to cash, or an asset that is readily convertible to a known amount of cash or claims to cash.
C)   The entity has received an irrevocable order for goods or services.
D)   Cash has been received with an irrevocable order for goods or services.
E)   None of these. B

Question 2

Sparkle Cleaners, Inc., had net income of $516,050 for its fiscal year ended September 30, 2014. During the year, the company had outstanding 24,000 shares of 8%, $50 par value preferred stock, and 135,500 shares of common stock. Calculate the basic earnings per share of common stock for the 2014 fiscal year.

Accepted Answer

The answer of Sparkle Cleaners, Inc., had net income of...

Question 3

Income from operations is:

Accepted Answer

A)   sometimes called the "bottom line."
B)   sometimes used in the ROI calculation.
C)   usually used in the ROE calculation.
D)   usually calculated after income tax expense.

Question 4

Gwinnett Park Co. reported net income of $506,600 for its fiscal year ended September 30, 2014. At the beginning of that year, 150,000 shares of common stock were outstanding. On February 1, 2014, an additional 30,000 shares were issues. On September 1, 2014, 12,000 shares were purchased as treasury stock. During the year, the company paid the annual dividend on 14,000 shares of its 8%, $60 par value preferred stock that were outstanding during the entire fiscal year. Calculate the basic earnings per share of common stock for the year ended September 30, 2014.

Accepted Answer

Weighted-average number of shares of com...

Question 5

Use the appropriate information from the data provided below to calculate operating income for the year ended December 31, 2014. $$\begin{array} { | l | c | } 
\hline \text { Research and development expenses } & \$ 43,000 \
\hline \text { Loss from discontinued operations } & 17,000 \
\hline \text { Provision for income taxes } & 34,000 \
\hline \text { Net sales } & 511,000 \
\hline \text { Interest expense } & 36,000 \
\hline \text { Net cash provided by operations } & 73,000 \
\hline \text { Gross profit } & 146,000 \
\hline \text { Selling, general and administrative expenses } & 31,000 \
\hline \text { Accounts receivable } & 67,000 \
\hline \begin{array} { l } 
\text { Extraordinary gain from lawsuit settlement, } \
\text { net of tax expense of } \$ 13,000
\end{array} & 45,000 \
\hline
\end{array}$$

Accepted Answer

The answer of Use the appropriate information from the data...

Question 6

Gains differ from revenues because gains:

Accepted Answer

A)   are not a result of the entity's ongoing, central operations.
B)   do not have to be realized.
C)   are reported as income from operating activities.
D)   do not involve any offsetting costs or expenses.

Question 7

Recognition of revenue in accrual accounting requires:

Accepted Answer

A)   that cash be received.
B)   only that the amount of cash to be received from the sale of a product or service be known.
C)   only that a product be delivered or a service be performed.
D)   that the revenue be realized or realizable, and earned.

Question 8

In the statement of cash flows, an increase in the accounts receivable balance from the beginning of the period to the end of the period would:

Accepted Answer

A)   be added to net income because this represents earned revenues that have not been collected.
B)   be subtracted from net income because this represents earned revenue provided by operating earnings.
C)   be added to net income because this means that revenues were less than cash collected.
D)   be subtracted from net income because this means that revenues were more than cash collected.

Question 9

Norman's Cabinet, Inc., had net income of $424,800 for its fiscal year ended October 31, 2014. During the year, the company had outstanding 53,000 shares of 9%, $60 par value preferred stock, and 36,960 shares of common stock. Calculate the basic earnings per share of common stock for the 2014 fiscal year.

Accepted Answer

$$\begin{array} { | l | c | } 
\hline \text { Net income } & \$ 424,800 \
\hline \text { Less: Preferred stock dividends } \left( 53,000 ^ { * } \$ 60 * .09 \right) & ( 286,200 ) \
\hline \text { Net income available to common stockholders } & \$ 138,600 \
\hline \text { Common shares outstanding } & 36,960 \
\hline \text { Earnings per share } & \mathbf { \$ } \quad \mathbf { 3 . 7 5 } \
\hline
\end{array}$$

Question 10

The gross profit ratio is useful to the manager for each of the following purposes except that:

Accepted Answer

A)   it can be used to determine the selling price to set for an item.
B)   it can be used to estimate the amount of inventory lost in a fire.
C)   it can be used to determine the amount available from a given amount of revenue to cover operating expenses.
D)   it can be used to estimate the amount of operating expenses for a period.

Question 11

In the statement of cash flows, depreciation and amortization expense is added back to net income because:

Accepted Answer

A)   these expenses do not affect cash, but were subtracted in the determination of net income.
B)   these expenses affect investing activities, not operating activities.
C)   the cash disbursements for these accrued expenses will be made in a future period.
D)   these expenses are recognized for accounting purposes, but they do not represent economic costs.

Question 12

Most entities satisfy the accounting criteria for recognizing an expense when:

Accepted Answer

A)   a commitment is made to purchase a product or service.
B)   cash is paid to a supplier.
C)   a cost is incurred in the revenue generating process.
D)   a dividend is paid to stockholders.

Question 13

The concept of matching revenue and expense refers to the fact that:

Accepted Answer

A)   expenses for a period equal the revenues for the period.
B)   all costs incurred in the process of earning revenues during a period are recorded as expenses in that period.
C)   all cash disbursements during a period are subtracted from all cash receipts during the period.
D)   costs incurred in the process of earning revenues during a period are deferred and expensed in a future period.

Question 14

Which of the following accounts/captions are not ever included in the calculation for Gross Profit?

Accepted Answer

A)   Revenues.
B)   Cost of Goods Sold.
C)   Net Sales.
D)   General and Selling Expenses.

Question 15

Under most circumstances, in order to recognize revenue:

Accepted Answer

A)   cash must have been received.
B)   the entity must expect to receive cash in the future.
C)   the entity must have paid for all expenses incurred in generating the revenue.
D)   the revenue must be realized or realizable, and earned.

Question 16

The term, "earned," in revenue recognition refers to which of the following?

Accepted Answer

A)   The entity has completed, or substantially completed, the activities it must perform to be entitled to the revenue benefits.
B)   The product or service has been exchanged for cash, claims to cash, or an asset that is readily convertible to a known amount of cash or claims to cash.
C)   The entity has received an irrevocable order for goods or services.
D)   Cash has been received with an irrevocable order for goods or services.

Question 17

Revenue may be recognized:

Accepted Answer

A)   from the sale of a company's own common stock.
B)   if a company trades inventory at its usual selling price for newspaper advertising.
C)   if management believes the market value of land held for future development has increased during the year.
D)   in 2013 from the sale of subscriptions of a magazine to be published in 2014. B

Question 18

An item that cost $90 is sold for $120. The gross profit ratio for this item is:

Accepted Answer

A)   20%.
B)   25%.
C)   33.3%.
D)   60%.

Question 19

When the periodic inventory system is used:

Accepted Answer

A)   operating profit from the sale of an item from inventory is known when the item is sold.
B)   gross profit from the sale of an item from inventory is known when the item is sold.
C)   cost of goods sold can be calculated by subtracting the ending inventory amount from the sum of beginning inventory and net purchases.
D)   a physical inventory must be taken in order to estimate the cost of goods sold.

Question 20

Presented below is a partially completed balance sheet for Baldin, Inc., at December 31, 2014, together with comparative data for the year ended December 31, 2013. From the Statement of Cash Flows for the year ended December 31, 2014, you determine that:
• Net income for the year ended December 31, 2014, was $106,000.
• Dividends paid during the year ended December 31, 2014, were $42,000.
• Accounts receivable increased $14,000 during the year ended December 31, 2014.
• The cost of new buildings acquired during 2014, was $85,000.
• No buildings were disposed of during 2014.
• The land account was not affected by any transactions during the year, but the fair value of the land at December 31, 2014, is $210,000.  Required:
(a.) Complete the December 31, 2014, balance sheet.
(b.) Prepare a statement of cash flows for the year ended December 31, 2014.

Accepted Answer

The answer of Presented below is a partially completed balance...

Exam 9: The Income Statement and the Statement of Cash Flows

The term, "realization," in revenue recognition refers to which of the following?

Correct Answer
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B

Correct Answer
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Income from operations is:

Correct Answer
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Correct Answer
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Weighted-average number of shares of com...
View Answer

Correct Answer
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Gains differ from revenues because gains:

Correct Answer
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Recognition of revenue in accrual accounting requires:

Correct Answer
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In the statement of cash flows, an increase in the accounts receivable balance from the beginning of the period to the end of the period would:

Correct Answer
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The gross profit ratio is useful to the manager for each of the following purposes except that:

Correct Answer
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In the statement of cash flows, depreciation and amortization expense is added back to net income because:

Correct Answer
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Most entities satisfy the accounting criteria for recognizing an expense when:

Correct Answer
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The concept of matching revenue and expense refers to the fact that:

Correct Answer
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Which of the following accounts/captions are not ever included in the calculation for Gross Profit?

Correct Answer
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Under most circumstances, in order to recognize revenue:

Correct Answer
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The term, "earned," in revenue recognition refers to which of the following?

Correct Answer
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Revenue may be recognized:

Correct Answer
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B

An item that cost $90 is sold for $120. The gross profit ratio for this item is:

Correct Answer
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When the periodic inventory system is used:

Correct Answer
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Correct Answer
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Exam 9: The Income Statement and the Statement of Cash Flows

The term, "realization," in revenue recognition refers to which of the following?

Correct AnswerverifiedB

Correct AnswerverifiedShow Answer

Income from operations is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedWeighted-average number of shares of com...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Gains differ from revenues because gains:

Correct AnswerverifiedShow Answer

Recognition of revenue in accrual accounting requires:

Correct AnswerverifiedShow Answer

In the statement of cash flows, an increase in the accounts receivable balance from the beginning of the period to the end of the period would:

Correct AnswerverifiedShow Answer

The gross profit ratio is useful to the manager for each of the following purposes except that:

Correct AnswerverifiedShow Answer

In the statement of cash flows, depreciation and amortization expense is added back to net income because:

Correct AnswerverifiedShow Answer

Most entities satisfy the accounting criteria for recognizing an expense when:

Correct AnswerverifiedShow Answer

The concept of matching revenue and expense refers to the fact that:

Correct AnswerverifiedShow Answer

Which of the following accounts/captions are not ever included in the calculation for Gross Profit?

Correct AnswerverifiedShow Answer

Under most circumstances, in order to recognize revenue:

Correct AnswerverifiedShow Answer

The term, "earned," in revenue recognition refers to which of the following?

Correct AnswerverifiedShow Answer

Revenue may be recognized:

Correct AnswerverifiedB

An item that cost $90 is sold for $120. The gross profit ratio for this item is:

Correct AnswerverifiedShow Answer

When the periodic inventory system is used:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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B

Correct Answer
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Correct Answer
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Weighted-average number of shares of com...
View Answer

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B

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