Question 1

Revenues measure the inflow of net assets from operating activities.

Accepted Answer

A) True 
 B)False

Question 2

Most firms display the components of cost of sales.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not an example of an adjusting entry?

Accepted Answer

A)  recognition of depreciation on equipment purchased during the year
B)  recording the expiration of a portion of the cost of prepaid insurance that was purchased during the previous year
C)  recognition of income tax expense on the net income earned during the period
D)  recording of collections received from customers during the period
E)  recognition of warranty expense on cars sold during the periodF) B) and C)
G) C) and E)

Question 4

The beginning balance of the shareholders' equity account Retained Earnings plus net income from the income statement less dividends equals the ending balance of Retained Earnings.

Accepted Answer

A) True 
 B)False

Question 5

Under the accrual method, the timing of revenue recognition is influenced by

Accepted Answer

A)  where the purchaser gets funds to pay the seller.
B)  whether the buyer pays with cash or a promise.
C)  when the services or product are provided.
D)  when the seller has received a form of payment in settlement of a purchaser's promise.
E)  the nature of the services or product provided.F) B) and E)
G) A) and D)

Question 6

When examining the work an accountant performs for many organizations, many of the challenges revolve around creating adjusting entries that bring the accounts into an accrual accounting basis.Four such adjusting entries may include accounting for accrued revenues (unrecorded revenues), accrued expenses (unrecorded expenses), deferred revenue (previously recorded revenues), and deferred expenses (previously recorded expenses).
Required:
For each type of adjusting entry listed above, discuss an example adjusting entry that a lighting retailer might make.

Accepted Answer

Adjusting entries often bring accounts t...

Question 7

Under accrual accounting, revenue is recognized when

Accepted Answer

A)  the firm has performed all, or most of, the services it expects to provide.
B)  the firm has received cash, or some other asset such as a receivable, whose cash-equivalent value it can measure with reasonable precision.
C)  the firm has significant uncertainty about the amount and timing of the cash inflows and outflows from the sales transaction.
D)  both a and b must be present.
E)  none of the above.F) C) and D)
G) All of the above

Question 8

Cost is the economic sacrifice made to acquire goods or services.

Accepted Answer

A) True 
 B)False

Question 9

Adjusting entries may increase or decrease balances in balance sheet accounts and income statement accounts.

Accepted Answer

A) True 
 B)False

Question 10

The _____ are linked (that is, they articulate)  through the shareholders' equity account, Retained Earnings.

Accepted Answer

A)  balance sheet and the income statement
B)  balance sheet and the statement of cash flows
C)  statement of cash flows and the income statement
D)  all of the above
E)  none of the aboveF) A) and C)
G) A) and B)

Question 11

If the firm measures an asset at acquisition cost on the balance sheet, it measures expenses based on the _____ of the asset consumed.

Accepted Answer

A)  fair market value
B)  acquisition cost
C)  current value
D)  liquidation value
E)  replacement valueF) A) and C)
G) A) and D)

Question 12

A T-account is a device or convention for organizing and accumulating the accounting entries of transactions that affect an individual account. Which of the following is/are true?

Accepted Answer

A)  Increases in assets appear on the left side, and decreases in assets appear on the right side of T-accounts.
B)  Increases in liabilities appear on the right side, and decreases in liabilities appear on the left side of T-accounts.
C)  Increases in shareholders' equity appear on the right side, and decreases in shareholders' equity appear on the left side of T-accounts.
D)  All of the above are true.
E)  None of the above are true.F) B) and E)
G) All of the above

Question 13

Which of the following is not true?

Accepted Answer

A)  Net income or profit for a period is the difference between revenues from selling goods and services and the expenses incurred to generate those revenues, plus some gains or losses of the period.
B)  If the expenses plus losses exceed the revenues plus gains, the result is a net loss.
C)  U.S.GAAP and IFRS require the accrual basis of accounting, which detaches the recognition of revenue from the receipt of cash.
D)  A seller recognizes revenues when it has performed all, or nearly all, of its obligations to the customer and when it has received cash or an asset that is convertible to cash.
E)  The firm recognizes and reports expenses that have a causal link with revenues, such as cost of sales, in the next accounting period.F) C) and D)
G) B) and D)

Question 14

Many firms provide similar types of airline services with similar types of assets.They each received unqualified opinions from their independent auditors.Yet, Flash Airlines appears to apply its accounting principles more aggressively in income-enhancing ways relative to its competitors.The choices for Flash Airlines in applying generally accepted accounting principles under the accrual basis of accounting include(s) :

Accepted Answer

A)  depreciable lives for buildings and equipment.
B)  estimated uncollectibles for accounts receivable.
C)  estimated warranty costs.
D)  all of the above.
E)  none of the above.F) All of the above
G) A) and B)

Question 15

The matching convention assigns _____ to the related _____.

Accepted Answer

A)  expenses; revenues
B)  revenues; revenues
C)  assets; liabilities
D)  liabilities; assets
E)  assets; shareholders' equityF) B) and E)
G) C) and D)

Question 16

Over sufficiently long time periods, the amount of net income equals

Accepted Answer

A)  cash inflows minus cash outflows from operating activities.
B)  cash inflows minus cash outflows from operating and investing activities.
C)  cash inflows minus cash outflows from operating, investing, and debt servicing activities.
D)  cash inflows minus cash outflows from operating and debt servicing activities.
E)  cash inflows minus cash outflows from investing and debt servicing activities.F) B) and E)
G) None of the above

Question 17

What are common-size income statements?

Accepted Answer

COMMON-SIZE INCOME STATEMENT
One tool fo...

Question 18

Which of the following is an example of a contra account?

Accepted Answer

A)  Merchandise Inventory
B)  Accounts Payable
C)  Cost of Goods Sold
D)  Accumulated Depreciation
E)  Deferred income taxes payableF) B) and E)
G) A) and B)

Question 19

The accrual basis of accounting is often contrasted with the cash basis of accounting.Which of the following is true of the cash basis of accounting?

Accepted Answer

A)  The cash basis is not subject to manipulation
B)  Most larger companies use the cash basis of accounting
C)  The cash basis of accounting provides a strong basis to determine the total assets of the company
D)  The cash basis provides an inferior picture of operating performance
E)  The cash basis provides an superior picture of operating performanceF) B) and C)
G) B) and D)

Question 20

When assets and income from operations that a firm has decided to discontinue (and dispose of or abandon) , separating the two income components allows users to form better predictions of

Accepted Answer

A)  past earnings.
B)  current earnings.
C)  future earnings.
D)  all of the above
E)  none of the aboveF) B) and E)
G) C) and E)

Exam 3: The Basics of Record Keeping and Financial Statement Preparation: Income Statement

What are common-size income statements?

Correct Answer
verified
COMMON-SIZE INCOME STATEMENT
One tool fo...
View Answer

Revenues measure the inflow of net assets from operating activities.

Correct Answer
verified

Which of the following is an example of a contra account?

Correct Answer
verified

A T-account is a device or convention for organizing and accumulating the accounting entries of transactions that affect an individual account. Which of the following is/are true?

Correct Answer
verified

Which of the following is not an example of an adjusting entry?

Correct Answer
verified

The accrual basis of accounting is often contrasted with the cash basis of accounting.Which of the following is true of the cash basis of accounting?

Correct Answer
verified

Which of the following is not true?

Correct Answer
verified

When assets and income from operations that a firm has decided to discontinue (and dispose of or abandon) , separating the two income components allows users to form better predictions of

Correct Answer
verified

Under the accrual method, the timing of revenue recognition is influenced by

Correct Answer
verified

Correct Answer
verified

The beginning balance of the shareholders' equity account Retained Earnings plus net income from the income statement less dividends equals the ending balance of Retained Earnings.

Correct Answer
verified

Adjusting entries may increase or decrease balances in balance sheet accounts and income statement accounts.

Correct Answer
verified

Under accrual accounting, revenue is recognized when

Correct Answer
verified

The matching convention assigns _ to the related _.

Correct Answer
verified

Over sufficiently long time periods, the amount of net income equals

Correct Answer
verified

Most firms display the components of cost of sales.

Correct Answer
verified

If the firm measures an asset at acquisition cost on the balance sheet, it measures expenses based on the _____ of the asset consumed.

Correct Answer
verified

The _____ are linked (that is, they articulate) through the shareholders' equity account, Retained Earnings.

Correct Answer
verified

Cost is the economic sacrifice made to acquire goods or services.

Correct Answer
verified

Correct Answer
verified
Adjusting entries often bring accounts t...
View Answer

Exam 3: The Basics of Record Keeping and Financial Statement Preparation: Income Statement

What are common-size income statements?

Correct AnswerverifiedCOMMON-SIZE INCOME STATEMENTOne tool fo...View AnswerShow Answer

Revenues measure the inflow of net assets from operating activities.

Correct AnswerverifiedShow Answer

Which of the following is an example of a contra account?

Correct AnswerverifiedShow Answer

A T-account is a device or convention for organizing and accumulating the accounting entries of transactions that affect an individual account. Which of the following is/are true?

Correct AnswerverifiedShow Answer

Which of the following is not an example of an adjusting entry?

Correct AnswerverifiedShow Answer

The accrual basis of accounting is often contrasted with the cash basis of accounting.Which of the following is true of the cash basis of accounting?

Correct AnswerverifiedShow Answer

Which of the following is not true?

Correct AnswerverifiedShow Answer

When assets and income from operations that a firm has decided to discontinue (and dispose of or abandon) , separating the two income components allows users to form better predictions of

Correct AnswerverifiedShow Answer

Under the accrual method, the timing of revenue recognition is influenced by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The beginning balance of the shareholders' equity account Retained Earnings plus net income from the income statement less dividends equals the ending balance of Retained Earnings.

Correct AnswerverifiedShow Answer

Adjusting entries may increase or decrease balances in balance sheet accounts and income statement accounts.

Correct AnswerverifiedShow Answer

Under accrual accounting, revenue is recognized when

Correct AnswerverifiedShow Answer

The matching convention assigns _____ to the related _____.

Correct AnswerverifiedShow Answer

Over sufficiently long time periods, the amount of net income equals

Correct AnswerverifiedShow Answer

Most firms display the components of cost of sales.

Correct AnswerverifiedShow Answer

If the firm measures an asset at acquisition cost on the balance sheet, it measures expenses based on the _____ of the asset consumed.

Correct AnswerverifiedShow Answer

The _____ are linked (that is, they articulate) through the shareholders' equity account, Retained Earnings.

Correct AnswerverifiedShow Answer

Cost is the economic sacrifice made to acquire goods or services.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedAdjusting entries often bring accounts t...View AnswerShow Answer

Correct Answer
verified
COMMON-SIZE INCOME STATEMENT
One tool fo...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The matching convention assigns _ to the related _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Adjusting entries often bring accounts t...
View Answer