Question 1

If a company receives the rent for January 2011 from a tenant in December 2010, this will be reported as:

Accepted Answer

A)   revenue in 2010.
B)   an expense in 2010.
C)   a liability in 2010.
D)   stockholders' equity in 2010.E) C) and D)
F) A) and B)

Question 2

What the amount of total expense to be reported on the Income Statement for t he month of January?

Accepted Answer

A)   $3,750
B)   $7,900
C)   $8,150
D)   $4,750E) A) and B)
F) A) and D)

Question 3

The matching principle indicates

Accepted Answer

A)   where expenses should be presented on the income statement.
B)   how expenses should be split between Cost of Goods Sold (sometimes called Cost of Sales)  and Selling Expenses.
C)   the ordering of current assets and current liabilities on the balance sheet.
D)   when costs are recognized as expenses on the income statement.E) B) and D)
F) A) and B)

Question 4

When a customer buys services on account, it should be recorded by the company as:

Accepted Answer

A)   a debit to Cash and a credit to Accounts Receivable.
B)   a debit to Accounts Receivable and a credit to Revenue.
C)   a credit to Unearned Revenue and a debit to Inventory.
D)   a debit to Cash and a credit to Accounts Payable.E) B) and C)
F) A) and D)

Question 5

When a business receives a payment on account from a customer, the total assets of the business are unchanged.

Accepted Answer

A) True 
 B)False

Question 6

An expense

Accepted Answer

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

Question 7

Which of the following would eventually cause a reduction in retained earnings?

Accepted Answer

A)   Receiving contributions from investors.
B)   Earning unearned revenue.
C)   Billing customers for services provided.
D)   Using up supplies.E) C) and D)
F) B) and D)

Question 8

Which of the following statements is TRUE about the activities for Maverick Law Firm for 2010?

Accepted Answer

A)   If Accounts receivable prior to February 1, 2010 was $25,000, the amount of Accounts Receivable to be reported on the Balance Sheet at December 31, 2010 will be $24,000.
B)   The $2,000 received from clients for law services to be performed next year will be reported as revenue on the Income Statement this year since cash was received.
C)   The $4,000 billed to clients for services rendered this year and unpaid as of December 31 will be reported on the Balance Sheet at December 31 as Accounts Payable.
D)   The $5,000 received this year from clients in payment of their accounts will be reported on the IncomeE) C) and D)
F) A) and D)

Question 9

Which of the following is the journal entry to record activity #5?

Accepted Answer

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

Question 10

A dance studio accepts $1,500 to provide a series of dance lessons to a youth group during the month of July. The studio decides to record the revenue in July. The studio decided to record the July expenses of rent, utilities and salaries in August, when it pays for them. One or both of these decisions:

Accepted Answer

A)   violate the matching principle.
B)   are an example of accrual accounting.
C)   violate the revenue principle.
D)   violate the accounting equation.E) B) and D)
F) A) and C)

Question 11

Costs that benefit future periods are reported as assets.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not a condition for reporting revenue?

Accepted Answer

A)   The goods or services have been delivered.
B)   The customer has already paid for the good or service.
C)   The price is fixed or determinable.
D)   Collection is reasonably assured.E) A) and D)
F) A) and C)

Question 13

Which of the following errors would most likely lead to an overstatement of net income in the current year?

Accepted Answer

A)   Recording revenue when the cash is collected next year although it is earned in the current year.
B)   Recording an expense when paid next year although it is incurred this year.
C)   Failing to adjust the Unearned Rent Revenue account for the portion of rent earned this year.
D)   Recording revenue earned in the current year when cash is collected this year.E) None of the above
F) A) and C)

Question 14

Which of the following groups of accounts contains only those that normally have credit balances?

Accepted Answer

A)   Accounts Payable; Retained Earnings; Service Revenue.
B)   Equipment; Cash; Contributed Capital.
C)   Notes Payable; Wages Payable; Rent Expense.
D)   Accounts receivable, Retained earnings, CashE) C) and D)
F) A) and C)

Question 15

What is the amount of Current Assets on the classified balance sheet at the end of January?

Accepted Answer

A)   $25,750
B)   $26,500
C)   $41,750
D)   $40,250E) C) and D)
F) B) and C)

Question 16

All revenues come from selling the company's goods or services.

Accepted Answer

A) True 
 B)False

Question 17

What is the amount of the total liabilities at December 31?

Accepted Answer

A)   $4,650
B)   $8,650
C)   $5,700
D)   $9,700E) B) and D)
F) A) and C)

Question 18

Recording the above transactions would include which of the following?

Accepted Answer

A)   Transaction #1 would include a debit to Revenue.
B)   Transaction #3 would include a credit to Cash.
C)   Transaction #4 would include a debit to Accounts receivable.
D)   Transaction #6 would include a debit to Unearned Revenue.E) A) and B)
F) A) and C)

Question 19

If a company decides to record an expenditure made this period as an expense, when it should have been recorded as an asset, net income will be overstated in the current period as a result.

Accepted Answer

A) True 
 B)False

Question 20

In September, a customer signed a contract to have his house painted and paid for the job in October. The painting company bought the paint in August on account and paid for it in September. The painting company painted the house in November. According to the revenue and matching principles, the painting company should record:

Accepted Answer

A)   the revenues in November and the expenses in September.
B)   the revenues and the expenses in September.
C)   the revenues and the expenses in November.
D)   the revenues in September and the expenses in August.E) C) and D)
F) A) and B)

Exam 3: Reporting Operating Results on the Income Statement

When a business receives a payment on account from a customer, the total assets of the business are unchanged.

Correct Answer
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If a company decides to record an expenditure made this period as an expense, when it should have been recorded as an asset, net income will be overstated in the current period as a result.

Correct Answer
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Recording the above transactions would include which of the following?

Correct Answer
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An expense

Correct Answer
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Which of the following groups of accounts contains only those that normally have credit balances?

Correct Answer
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Correct Answer
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What is the amount of the total liabilities at December 31?

Correct Answer
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Which of the following is not a condition for reporting revenue?

Correct Answer
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What is the amount of Current Assets on the classified balance sheet at the end of January?

Correct Answer
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The matching principle indicates

Correct Answer
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When a customer buys services on account, it should be recorded by the company as:

Correct Answer
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Which of the following is the journal entry to record activity #5?

Correct Answer
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What the amount of total expense to be reported on the Income Statement for t he month of January?

Correct Answer
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All revenues come from selling the company's goods or services.

Correct Answer
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Correct Answer
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Which of the following would eventually cause a reduction in retained earnings?

Correct Answer
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Costs that benefit future periods are reported as assets.

Correct Answer
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Which of the following errors would most likely lead to an overstatement of net income in the current year?

Correct Answer
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Which of the following statements is TRUE about the activities for Maverick Law Firm for 2010?

Correct Answer
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If a company receives the rent for January 2011 from a tenant in December 2010, this will be reported as:

Correct Answer
verified

Exam 3: Reporting Operating Results on the Income Statement

When a business receives a payment on account from a customer, the total assets of the business are unchanged.

Correct AnswerverifiedShow Answer

If a company decides to record an expenditure made this period as an expense, when it should have been recorded as an asset, net income will be overstated in the current period as a result.

Correct AnswerverifiedShow Answer

Recording the above transactions would include which of the following?

Correct AnswerverifiedShow Answer

An expense

Correct AnswerverifiedShow Answer

Which of the following groups of accounts contains only those that normally have credit balances?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the amount of the total liabilities at December 31?

Correct AnswerverifiedShow Answer

Which of the following is not a condition for reporting revenue?

Correct AnswerverifiedShow Answer

What is the amount of Current Assets on the classified balance sheet at the end of January?

Correct AnswerverifiedShow Answer

The matching principle indicates

Correct AnswerverifiedShow Answer

When a customer buys services on account, it should be recorded by the company as:

Correct AnswerverifiedShow Answer

Which of the following is the journal entry to record activity #5?

Correct AnswerverifiedShow Answer

What the amount of total expense to be reported on the Income Statement for t he month of January?

Correct AnswerverifiedShow Answer

All revenues come from selling the company's goods or services.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following would eventually cause a reduction in retained earnings?

Correct AnswerverifiedShow Answer

Costs that benefit future periods are reported as assets.

Correct AnswerverifiedShow Answer

Which of the following errors would most likely lead to an overstatement of net income in the current year?

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE about the activities for Maverick Law Firm for 2010?

Correct AnswerverifiedShow Answer

If a company receives the rent for January 2011 from a tenant in December 2010, this will be reported as:

Correct AnswerverifiedShow Answer

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