Question 1

Mama June Pizza Company determined that dough, sauce, cheese and other ingredients costing $8,700 were used to make pizzas during July. Which of the following statements is false with respect to the use of the ingredients?

Accepted Answer

A)  Cost of goods sold was debited for $8,700.
B)  Operating expenses increased $8,700.
C)  Operating income decreased $8,700.
D)  The Supplies account was debited for $8,700.E) C) and D)
F) A) and C)

Question 2

Daring Dolls, Inc. received an order to provide SuperDolls for a big department store. The store paid Daring Dolls in advance for the order of SuperDolls. Which of the following describes what will occur when Daring Dolls recognizes revenue?

Accepted Answer

A)  Cash will be increased.
B)  Accounts receivable will be increased.
C)  Deferred revenue will be decreased.
D)  Deferred revenue will be increaseD.When promised goods are delivered, and cash has already been received, a liability account, Deferred Revenue, is decreased, and the account Sales Revenue is increased.E) All of the above
F) A) and B)

Question 3

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

Accepted Answer

A)  Cash paid to purchase equipment.
B)  Cash paid to acquire land.
C)  Cash paid for dividends to the company's stockholders.
D)  Cash paid for wages.E) A) and B)
F) C) and D)

Question 4

Colby Corporation has provided the following information: • Operating revenues from customers were $199,700.
• Operating expenses for the store were $111,000.
• Interest expense was $9,200.
• Gain from sale of plant and equipment was $3,300.
• Dividend payments to Colby's stockholders were $7,700.
• Income tax expense was $36,000.
• Prepaid rent expense was $5,000.
How much was Colby's net income?

Accepted Answer

A)  $39,100.
B)  $48,300.
C)  $52,700.
D)  $46,800.E) None of the above
F) B) and D)

Question 5

A company purchased supplies for cash, which will be consumed during future months. Which of the following does not correctly describe the impact on the financial statements when the supplies are used during future months?

Accepted Answer

A)  Total assets will remain unchanged.
B)  Total assets will decrease.
C)  Operating expenses will increase.
D)  Operating income will decrease.E) A) and D)
F) B) and D)

Question 6

Which of the following expenses does not affect the reporting of operating income?

Accepted Answer

A)  Income tax expense.
B)  Cost of goods sold.
C)  Depreciation expense.
D)  Rent expense.E) B) and C)
F) All of the above

Question 7

Which of the following statements is false?

Accepted Answer

A)  A liability is created when cash is received prior to delivery of the goods or services to a customer.
B)  Revenue is recognized at the time of delivery of the goods or services to customers if cash is received.
C)  Revenue is not recognized at the time of delivery of goods and services to customers if cash is received after delivery of the goods and services.
D)  Collecting cash after delivery of a good or service to a customer does not create revenue on the income statement at the date of collection.E) None of the above
F) B) and C)

Question 8

Which of the following best describes the time period assumption?

Accepted Answer

A)  It assumes we value a business as of the end of every month.
B)  It is the cutoff point for asset and liability recognition.
C)  It implies that financial statements are prepared at the end of a business entity's operating cycle.
D)  It assumes we divide the long life of a business into a series of shorter time periods for accounting and reporting purposes.E) All of the above
F) None of the above

Question 9

According to the expense recognition principle, wages expense is recognized on the income statement when the wages are paid rather than when the employee provides the work.

Accepted Answer

A) True 
 B)False

Question 10

Describe the transaction that created the following journal entries (amounts omitted).

Accepted Answer

1. Cash was received from a customer in ...

Question 11

Describe the difference between operating expenses and losses from the sale of plant and equipment while providing examples of each.

Accepted Answer

Operating expenses result from ongoing o...

Question 12

Expense accounts have debit balances because they decrease net income, retained earnings, and stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following correctly applies the revenue recognition principle?

Accepted Answer

A)  Recognize revenue in December 2016 for products manufactured but not yet delivered to customers.
B)  Recognize cash received in advance from customers as revenue when the product is not yet shipped.
C)  Not recognize dividend revenue in 2016 until the cash is received in 2017.
D)  Recognize revenue in December 2016 for products sold but not yet paid for in full.E) C) and D)
F) B) and C)

Question 14

The following information has been provided by Flatiron Company for the year ended December 31, 2016:
Net income was $71,000;
Income tax expense was $47,000;
Dividends declared and paid totaled $7,500;
Interest expense was $8,700;
Loss on sale of plant assets was $15,000;
Operating expenses for rent, wages, and insurance totaled $91,000;
Cash collected from customers was $220,000.
Required:
Calculate Flatiron's operating income.

Accepted Answer

Working from the bottom of the income st...

Question 15

Which of the following is an example of revenue or expense to be recognized in the current period's income statement?

Accepted Answer

A)  Cash received from a client before the service is provided.
B)  Inventory purchased for sale to customers.
C)  Wages owed to employees who worked during the period.
D)  Cash collected from an account receivable.E) B) and D)
F) C) and D)

Question 16

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

Accepted Answer

A)  The sale of investments at a gain.
B)  Collection of cash from a customer for services to be provided at a later date.
C)  Providing a service to a customer on account.
D)  The receipt of cash dividends from an investment.E) None of the above
F) A) and D)

Question 17

The primary difference between revenues and gains is:

Accepted Answer

A)  Gains are increases in net assets from periodically selling assets other than inventory while revenues are increases from major or central ongoing operations of a business.
B)  Revenues increase operating income and gains have no impact on net income.
C)  Revenues cause increases in net assets as a result of infrequent 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) A) and B)

Question 18

Which of the following transactions would not be reported as cash flow from operating activities on a cash flow statement?

Accepted Answer

A)  Cash collected from customers.
B)  Cash paid to suppliers.
C)  Cash paid for employee wages.
D)  Cash paid for dividends to the company's stockholders.E) C) and D)
F) None of the above

Question 19

Expenses are the result of decreases in assets or increases in liabilities incurred in order to generate revenues.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following journal entries correctly records a transaction where services were provided to a customer on account?

Accepted Answer

A)  Cash xxxService revenueXxx
B)  Unearned revenue xxxService revenueXxx
C)  Accounts receivable xxxService revenueXxx
D)  Service revenueE) B) and D)
F) None of the above

Exam 3: Operating Decisions and the Accounting System

Which of the following best describes the time period assumption?

Correct Answer
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Which of the following statements is false?

Correct Answer
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Which of the following expenses does not affect the reporting of operating income?

Correct Answer
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Correct Answer
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Working from the bottom of the income st...
View Answer

The primary difference between revenues and gains is:

Correct Answer
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Describe the difference between operating expenses and losses from the sale of plant and equipment while providing examples of each.

Correct Answer
verified
Operating expenses result from ongoing o...
View Answer

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

Correct Answer
verified

Which of the following transactions would not be reported as cash flow from operating activities on a cash flow statement?

Correct Answer
verified

Describe the transaction that created the following journal entries (amounts omitted).

Correct Answer
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1. Cash was received from a customer in ...
View Answer

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

Correct Answer
verified

Correct Answer
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Expenses are the result of decreases in assets or increases in liabilities incurred in order to generate revenues.

Correct Answer
verified

Which of the following journal entries correctly records a transaction where services were provided to a customer on account?

Correct Answer
verified

Mama June Pizza Company determined that dough, sauce, cheese and other ingredients costing $8,700 were used to make pizzas during July. Which of the following statements is false with respect to the use of the ingredients?

Correct Answer
verified

Daring Dolls, Inc. received an order to provide SuperDolls for a big department store. The store paid Daring Dolls in advance for the order of SuperDolls. Which of the following describes what will occur when Daring Dolls recognizes revenue?

Correct Answer
verified

Which of the following is an example of revenue or expense to be recognized in the current period's income statement?

Correct Answer
verified

According to the expense recognition principle, wages expense is recognized on the income statement when the wages are paid rather than when the employee provides the work.

Correct Answer
verified

A company purchased supplies for cash, which will be consumed during future months. Which of the following does not correctly describe the impact on the financial statements when the supplies are used during future months?

Correct Answer
verified

Which of the following correctly applies the revenue recognition principle?

Correct Answer
verified

Expense accounts have debit balances because they decrease net income, retained earnings, and stockholders' equity.

Correct Answer
verified

Exam 3: Operating Decisions and the Accounting System

Which of the following best describes the time period assumption?

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

Which of the following expenses does not affect the reporting of operating income?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedWorking from the bottom of the income st...View AnswerShow Answer

The primary difference between revenues and gains is:

Correct AnswerverifiedShow Answer

Describe the difference between operating expenses and losses from the sale of plant and equipment while providing examples of each.

Correct AnswerverifiedOperating expenses result from ongoing o...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following transactions would not be reported as cash flow from operating activities on a cash flow statement?

Correct AnswerverifiedShow Answer

Describe the transaction that created the following journal entries (amounts omitted).

Correct Answerverified1. Cash was received from a customer in ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Expenses are the result of decreases in assets or increases in liabilities incurred in order to generate revenues.

Correct AnswerverifiedShow Answer

Which of the following journal entries correctly records a transaction where services were provided to a customer on account?

Correct AnswerverifiedShow Answer

Mama June Pizza Company determined that dough, sauce, cheese and other ingredients costing $8,700 were used to make pizzas during July. Which of the following statements is false with respect to the use of the ingredients?

Correct AnswerverifiedShow Answer

Daring Dolls, Inc. received an order to provide SuperDolls for a big department store. The store paid Daring Dolls in advance for the order of SuperDolls. Which of the following describes what will occur when Daring Dolls recognizes revenue?

Correct AnswerverifiedShow Answer

Which of the following is an example of revenue or expense to be recognized in the current period's income statement?

Correct AnswerverifiedShow Answer

According to the expense recognition principle, wages expense is recognized on the income statement when the wages are paid rather than when the employee provides the work.

Correct AnswerverifiedShow Answer

A company purchased supplies for cash, which will be consumed during future months. Which of the following does not correctly describe the impact on the financial statements when the supplies are used during future months?

Correct AnswerverifiedShow Answer

Which of the following correctly applies the revenue recognition principle?

Correct AnswerverifiedShow Answer

Expense accounts have debit balances because they decrease net income, retained earnings, and stockholders' equity.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Working from the bottom of the income st...
View Answer

Correct Answer
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Correct Answer
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Operating expenses result from ongoing o...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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1. Cash was received from a customer in ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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