Question 1

The following information is available from the most recent financial statements of the Carolyn Co.:   Total assets 400,000 Net income 60,000 Average total liabilities 200,000 Sales revenue 750,000 Total liabilities 250,000 Average total assets 350,000\begin{array}{lr}	ext { Total assets } & 400,000 \	ext { Net income } & 60,000 \	ext { Average total liabilities } & 200,000 \	ext { Sales revenue } & 750,000 \	ext { Total liabilities } & 250,000 \	ext { Average total assets } & 350,000\end{array} Total assets  Net income  Average total liabilities  Sales revenue  Total liabilities  Average total assets ​400,00060,000200,000750,000250,000350,000​  What is the company's net profit margin?

Accepted Answer

A)  8%
B)  12.5%
C)  15%
D)  17.1% E) C) and D)
F) None of the above

Question 2

Which of the following accounts does not have a normal credit balance?

Accepted Answer

A)  Common Stock
B)  Notes Payable
C)  Deferred Revenue
D)  EquipmentE) B) and D)
F) B) and C)

Question 3

Receiving cash from a customer for payment on account for a sale that was recorded previously will:

Accepted Answer

A)  have no effect on total assets.
B)  increase total assets.
C)  decrease total liabilities.
D)  increase stockholder's equity.E) A) and D)
F) A) and C)

Question 4

Which of the following statements about accrual basis accounting is not correct?

Accepted Answer

A)  It uses the revenue recognition principle.
B)  It uses the expense recognition principle.
C)  It is required for external accounting reports.
D)  It requires the timing of cash receipts be in the same period as revenues are recognized.E) B) and C)
F) A) and D)

Question 5

Which of the following would appear in the debit column on the unadjusted trial balance?

Accepted Answer

A)  Retained Earnings
B)  Deferred Revenue
C)  Prepaid Rent
D)  Note PayableE) A) and B)
F) B) and D)

Question 6

Which of the following statements about revenues and expenses is correct?

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.E) A) and D)
F) B) and C)

Question 7

Net income is based on estimates.

Accepted Answer

A) True 
 B)False

Question 8

Your company contracted for a 30-second commercial (an advertisement) that aired during the Super Bowl at a cost of $1.2 million.It is legally obligated to pay for the commercial,but has not yet done so.How is your company's balance sheet affected on the day the commercial aired?

Accepted Answer

A)  It increases both assets and liabilities by $1.2 million.
B)  It increases assets and decreases stockholders' equity by $1.2 million each.
C)  It does not affect the balance sheet.
D)  It increases liabilities and decreases stockholders' equity by $1.2 million each.E) All of the above
F) A) and C)

Question 9

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

Accepted Answer

A)  Accounts Payable,Service Revenue,and Retained Earnings
B)  Cash,Equipment,and Common Stock
C)  Notes Payable,Salaries and Wages Payable,and Rent Expense
D)  Cash,Accounts Receivable,and Retained EarningsE) B) and C)
F) None of the above

Question 10

If the cash is received before the related goods or services are delivered,which of the following will be recorded?

Accepted Answer

A)  Deferred Revenue,a liability.
B)  Accounts Receivable,an asset.
C)  Pre-earned Revenue,which increases Retained Earnings.
D)  Service Revenue,which increases Retained Earnings.E) C) and D)
F) All of the above

Question 11

Daube Company's operations for the month of July are summarized as follows:
A.Provided $10,000 of services on account.
B.Received $8,000 cash from customers for services provided in July.
C.Received $2,000 cash for services to be provided in August.
D.Received $6,000 cash from customers on account for services provided in June.
E.Paid June's warehouse rental bill on account in the amount of $2,000.
F.Received July's warehouse rental bill of $3,000;set it aside to be recorded at a later date.
Required:
a.Determine the net income for July using the cash basis of accounting.
b.Determine the net income for July using the accrual basis of accounting.

Accepted Answer

a.
Net income = Cash received ...

Question 12

During the year,Sand,Inc.had $120,000 in revenues,$48,000 in expenses,and paid $3,600 in dividends.Net income equals:

Accepted Answer

A)  $75,600.
B)  $68,400.
C)  $120,000.
D)  $72,000.E) A) and D)
F) B) and D)

Question 13

During June,the Grass Is Greener Company mows 100 lawns a week;the company bills customers and full payment is due by July 15.The company uses the accrual basis of accounting.How will these events affect the company's financial statements?

Accepted Answer

A)  In June,an asset and a liability account will both increase.
B)  In June,an asset and a revenue account will both increase.
C)  In July,an asset account will increase and a liability account will decrease.
D)  In July,a liability account will decrease and a revenue account will increase.E) None of the above
F) All of the above

Question 14

Somerdale Corp.received an order from a customer on November 10.It manufactured the ordered items on November 15,shipped the goods on November 17,and received payment on December 2.Under the accrual basis of accounting,Somerdale should record revenue on:

Accepted Answer

A)  November 10.
B)  November 15.
C)  November 17.
D)  December 2.E) B) and C)
F) A) and B)

Question 15

Dividing the long life of a company into shorter periods such as months,quarters,or years for reporting purposes is called the:

Accepted Answer

A)  time period assumption.
B)  expense recognition principle ("matching") .
C)  revenue recognition principle.
D)  separation principle.E) All of the above
F) B) and C)

Question 16

Quartz Instruments had Retained Earnings of $145,000 at December 31,2018.Net income for 2019 was $90,000,and dividends for 2019 were $30,000.What amount of Retained Earnings should be reported at December 31,2019?

Accepted Answer

A)  $205,000
B)  $235,000
C)  $140,000
D)  $175,000E) All of the above
F) B) and D)

Question 17

In accordance with the expense recognition principle,expenses are recorded in the period when the:

Accepted Answer

A)  related revenues are recorded.
B)  cash is paid.
C)  related assets are recorded.
D)  contract and performance obligations are identified.E) B) and C)
F) C) and D)

Question 18

The basic accounting equation may be expanded to include the income statement effects of operating activities.Which of the statements below is correct regarding the expanded accounting equation?

Accepted Answer

A)  Expenses are increased by credits and revenues are increased by debits.
B)  Net Income increases the Common Stock account.
C)  Expenses are increased by debits and revenues are increased by credits.
D)  Retained Earnings is reduced by net income.E) C) and D)
F) B) and D)

Question 19

Which of the following items is reported on the income statement as an expense?

Accepted Answer

A)  This month's cash sales
B)  The purchase of supplies
C)  This month's utility bill
D)  The purchase of landE) C) and D)
F) None of the above

Question 20

Which of the following statements about net profit margin is not correct?

Accepted Answer

A)  If a company's net profit margin increases from 12% to 18% this would be considered an improvement in profitability.
B)  A company with a net profit margin of 15% is using 85% of each dollar of revenue to cover costs and expenses.
C)  Net profit margin indicates how much net income is earned for each dollar of revenue.
D)  A company with a net profit margin of 8% may be evaluated differently depending upon which industry it is in.
E)  All of these statements are correct.F) A) and C)
G) B) and C)

Exam 3: The Income Statement

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

Correct Answer
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Which of the following would appear in the debit column on the unadjusted trial balance?

Correct Answer
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If the cash is received before the related goods or services are delivered,which of the following will be recorded?

Correct Answer
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The basic accounting equation may be expanded to include the income statement effects of operating activities.Which of the statements below is correct regarding the expanded accounting equation?

Correct Answer
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Your company contracted for a 30-second commercial (an advertisement) that aired during the Super Bowl at a cost of $1.2 million.It is legally obligated to pay for the commercial,but has not yet done so.How is your company's balance sheet affected on the day the commercial aired?

Correct Answer
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Which of the following statements about revenues and expenses is correct?

Correct Answer
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Which of the following items is reported on the income statement as an expense?

Correct Answer
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Correct Answer
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In accordance with the expense recognition principle,expenses are recorded in the period when the:

Correct Answer
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Somerdale Corp.received an order from a customer on November 10.It manufactured the ordered items on November 15,shipped the goods on November 17,and received payment on December 2.Under the accrual basis of accounting,Somerdale should record revenue on:

Correct Answer
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Receiving cash from a customer for payment on account for a sale that was recorded previously will:

Correct Answer
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Which of the following accounts does not have a normal credit balance?

Correct Answer
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Correct Answer
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a.
Net income = Cash received ...
View Answer

Quartz Instruments had Retained Earnings of $145,000 at December 31,2018.Net income for 2019 was $90,000,and dividends for 2019 were $30,000.What amount of Retained Earnings should be reported at December 31,2019?

Correct Answer
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During June,the Grass Is Greener Company mows 100 lawns a week;the company bills customers and full payment is due by July 15.The company uses the accrual basis of accounting.How will these events affect the company's financial statements?

Correct Answer
verified

During the year,Sand,Inc.had $120,000 in revenues,$48,000 in expenses,and paid $3,600 in dividends.Net income equals:

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

Correct Answer
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Dividing the long life of a company into shorter periods such as months,quarters,or years for reporting purposes is called the:

Correct Answer
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Which of the following statements about net profit margin is not correct?

Correct Answer
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Net income is based on estimates.

Correct Answer
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Exam 3: The Income Statement

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

Correct AnswerverifiedShow Answer

Which of the following would appear in the debit column on the unadjusted trial balance?

Correct AnswerverifiedShow Answer

If the cash is received before the related goods or services are delivered,which of the following will be recorded?

Correct AnswerverifiedShow Answer

The basic accounting equation may be expanded to include the income statement effects of operating activities.Which of the statements below is correct regarding the expanded accounting equation?

Correct AnswerverifiedShow Answer

Your company contracted for a 30-second commercial (an advertisement) that aired during the Super Bowl at a cost of $1.2 million.It is legally obligated to pay for the commercial,but has not yet done so.How is your company's balance sheet affected on the day the commercial aired?

Correct AnswerverifiedShow Answer

Which of the following statements about revenues and expenses is correct?

Correct AnswerverifiedShow Answer

Which of the following items is reported on the income statement as an expense?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In accordance with the expense recognition principle,expenses are recorded in the period when the:

Correct AnswerverifiedShow Answer

Somerdale Corp.received an order from a customer on November 10.It manufactured the ordered items on November 15,shipped the goods on November 17,and received payment on December 2.Under the accrual basis of accounting,Somerdale should record revenue on:

Correct AnswerverifiedShow Answer

Receiving cash from a customer for payment on account for a sale that was recorded previously will:

Correct AnswerverifiedShow Answer

Which of the following accounts does not have a normal credit balance?

Correct AnswerverifiedShow Answer

Correct Answerverifieda.Net income = Cash received ...View AnswerShow Answer

Quartz Instruments had Retained Earnings of $145,000 at December 31,2018.Net income for 2019 was $90,000,and dividends for 2019 were $30,000.What amount of Retained Earnings should be reported at December 31,2019?

Correct AnswerverifiedShow Answer

During June,the Grass Is Greener Company mows 100 lawns a week;the company bills customers and full payment is due by July 15.The company uses the accrual basis of accounting.How will these events affect the company's financial statements?

Correct AnswerverifiedShow Answer

During the year,Sand,Inc.had $120,000 in revenues,$48,000 in expenses,and paid $3,600 in dividends.Net income equals:

Correct AnswerverifiedShow Answer

Which of the following statements about accrual basis accounting is not correct?

Correct AnswerverifiedShow Answer

Dividing the long life of a company into shorter periods such as months,quarters,or years for reporting purposes is called the:

Correct AnswerverifiedShow Answer

Which of the following statements about net profit margin is not correct?

Correct AnswerverifiedShow Answer

Net income is based on estimates.

Correct AnswerverifiedShow Answer

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a.
Net income = Cash received ...
View Answer

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