Question 1

Explain why the net income reported on the income statement is usually not equal to net cash flows from operating activities on the statement of cash flows.

Accepted Answer

Net income on the income statement is an application of the accrual basis of accounting;revenues are reported when earned and expenses incurred are matched to those earned revenues.The net cash flows from operating activities on the statement of cash flows are reported on the cash basis of accounting.That is,amounts received from customers and amounts paid for expenses are on the statement of cash flows.Therefore,the difference in net income and net cash from operating activities is a timing issue.

Question 2

On December 31,2019,Pack-and-Deliver Company completed its first year of operations.The following information has been provided for the year:
a.Sold packing supplies for $30,000 and provided $280,000 of delivery services.
b.All packing supplies sales were for cash.
c.Collected $212,000 of delivery service revenue.
d.Paid $15,000 cash to rent packing equipment,with $10,000 for rental in 2019 and the remaining amount for rental in 2020.
e.Spent $4,000 cash to repair delivery equipment during the year.
f.Bought packing supplies at a total cost of $46,000 and paid for $25,000 of these supplies.There were $20,000 of these supplies that have not yet been sold or used.
g.Paid employees $80,000 during the year.
h.Paid $16,000 for advertising for the year.
i.Used $14,000 in fuel for the delivery equipment.
j.Sold investments for $8,000 that had been purchased earlier in the year for $7,000.
k.Ordered $500 in spare parts and supplies.
l.Income tax expense for the year is $18,000.
Prepare an income statement for Pack-and-Deliver Company for the year ended December 31,2019.

Accepted Answer

Pack-and-Deliver,Inc...

Question 3

Which of the following statements is correct?

Accepted Answer

A)  Dividend revenue is a component of Income from Operations.
B)  Income from Operations is decreased by a loss from the sale of plant assets.
C)  A gain on the sale of a stock investment increases Income from Operations.
D)  Income before taxes occurs before Other Items on the income statement.E) A) and D)
F) All of the above

Question 4

Which of the following statements is correct?

Accepted Answer

A)  Recording revenue results in an increase in assets or a decrease in liabilities.
B)  Recording revenue results in an increase in assets or a decrease in stockholders' equity.
C)  Recording expenses results in a decrease in assets or a decrease in liabilities.
D)  Recording expenses results in an increase in assets or an increase in liabilities.E) All of the above
F) None of the above

Question 5

The net profit margin ratio is a measure of how much profit was created per sales dollar.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is false when Mama June Pizza Company paid $47,000 cash on accounts owed to suppliers?

Accepted Answer

A)  The cash account was credited for $47,000.
B)  Accounts payable was debited for $47,000.
C)  Supplies expense was increased by $47,000.
D)  Operating income was not changed by the payment to the suppliers.E) C) and D)
F) A) and B)

Question 7

Which of the following journal entries is prepared by an auto repair shop when a customer will pay cash subsequent to delivery of goods or services?

Accepted Answer

A)   
B)   
C)   
D)   E) None of the above
F) A) and B)

Question 8

A company receives a $50,000 cash deposit from a customer on October 15 but will not deliver the goods until November 20.Which of the following statements is true?

Accepted Answer

A)  Cash will be reported on the statement of cash flows for the month of November.
B)  Revenue will be recorded and reported on the income statement for October.
C)  A liability will be reported on the balance sheet at the end of October.
D)  A prepaid asset will be reported on the balance sheet at the end of October.E) B) and C)
F) A) and D) C

Question 9

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) B) and C)
F) A) and C)

Question 10

During 2019,Sensa Corporation incurred operating expenses amounting to $100,000,of which $75,000 was paid in cash;the balance will be paid during 2020.Which of the following is correct for the 2019 year-end balance sheet?

Accepted Answer

A)  Stockholders' equity decreases $75,000 and assets decrease $75,000.
B)  Assets decrease $100,000 and stockholders' equity decreases $100,000.
C)  Assets decrease $100,000,liabilities increase $25,000,and stockholders' equity decreases $100,000.
D)  Stockholders' equity decreases $100,000,assets decrease $75,000,and liabilities increase $25,000.E) B) and C)
F) B) and D)

Question 11

Under accrual accounting,rent expense for February 2019 would be recognized on the income statement in February 2019 even though it had been paid for in January of 2019.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

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

Question 13

The trial balance needs to be prepared prior to preparation of the income statement.

Accepted Answer

A) True 
 B)False

Question 14

The following accounts for Carthage Enterprises,Inc.are listed randomly.Enter the number associated with each transaction to identify the accounts that would be used in the journal entry for each transaction given below.

Accepted Answer

Transactio...

Question 15

The time period assumption implies that the life of a business entity can be reported in time periods such as quarters and years.

Accepted Answer

A) True 
 B)False  True

Question 16

Which of the following best describes operating revenues?

Accepted Answer

A)  They are increases in assets or increases in liabilities as a result of peripheral transactions.
B)  They are decreases in assets or decreases in liabilities as a result of central ongoing operations.
C)  They are increases in assets or decreases in liabilities as a result of central ongoing operations.
D)  They are decreases in assets or increases in liabilities as a result of peripheral transactions.E) All of the above
F) B) and C)

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) All of the above
F) C) and D)

Question 18

June's Printing Shop had the following information for office supplies: • Ordered $1,200 of supplies March 3
• Received half the order of supplies on March 16
• Used one-third of the received supplies during March
What is the total amount that should be reported as supplies expense for the month of March?

Accepted Answer

A)  $100.
B)  $200.
C)  $400.
D)  $600.E) A) and D)
F) A) and C)

Question 19

Which of the following statements is false?

Accepted Answer

A)  The income statement covers a period of time.
B)  A loss on the sale of plant and equipment is considered a peripheral activity and is not reported on the income statement.
C)  Rent expense is a component of operating income.
D)  Interest expense is not a component of operating income.E) All of the above
F) B) and C)

Question 20

Which of the following describes the transaction resulting in a journal entry with a debit to Wages Payable and a credit to Cash?

Accepted Answer

A)  Wages expense has been incurred but is unpaid.
B)  Cash was used to pay for wages that were previously recorded as an expense.
C)  Cash was used to pay for wages that were not previously recorded as an expense.
D)  Cash was used to prepay employee wages.E) None of the above
F) A) and D)

Exam 3: Operating Decisions and the Accounting System

Explain why the net income reported on the income statement is usually not equal to net cash flows from operating activities on the statement of cash flows.

Correct Answer
verified
Pack-and-Deliver,Inc...
View Answer

Which of the following statements is correct?

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

The net profit margin ratio is a measure of how much profit was created per sales dollar.

Correct Answer
verified

Which of the following statements is false when Mama June Pizza Company paid $47,000 cash on accounts owed to suppliers?

Correct Answer
verified

Which of the following journal entries is prepared by an auto repair shop when a customer will pay cash subsequent to delivery of goods or services?

Correct Answer
verified

A company receives a $50,000 cash deposit from a customer on October 15 but will not deliver the goods until November 20.Which of the following statements is true?

Correct Answer
verified
C

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

Correct Answer
verified

During 2019,Sensa Corporation incurred operating expenses amounting to $100,000,of which $75,000 was paid in cash;the balance will be paid during 2020.Which of the following is correct for the 2019 year-end balance sheet?

Correct Answer
verified

Under accrual accounting,rent expense for February 2019 would be recognized on the income statement in February 2019 even though it had been paid for in January of 2019.

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

The trial balance needs to be prepared prior to preparation of the income statement.

Correct Answer
verified

The following accounts for Carthage Enterprises,Inc.are listed randomly.Enter the number associated with each transaction to identify the accounts that would be used in the journal entry for each transaction given below.

Correct Answer
verified
Transactio...
View Answer

The time period assumption implies that the life of a business entity can be reported in time periods such as quarters and years.

Correct Answer
verified
True

Which of the following best describes operating revenues?

Correct Answer
verified

The primary difference between revenues and gains is:

Correct Answer
verified

Correct Answer
verified

Which of the following statements is false?

Correct Answer
verified

Which of the following describes the transaction resulting in a journal entry with a debit to Wages Payable and a credit to Cash?

Correct Answer
verified

Exam 3: Operating Decisions and the Accounting System

Explain why the net income reported on the income statement is usually not equal to net cash flows from operating activities on the statement of cash flows.

Correct AnswerverifiedPack-and-Deliver,Inc...View AnswerShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The net profit margin ratio is a measure of how much profit was created per sales dollar.

Correct AnswerverifiedShow Answer

Which of the following statements is false when Mama June Pizza Company paid $47,000 cash on accounts owed to suppliers?

Correct AnswerverifiedShow Answer

Which of the following journal entries is prepared by an auto repair shop when a customer will pay cash subsequent to delivery of goods or services?

Correct AnswerverifiedShow Answer

A company receives a $50,000 cash deposit from a customer on October 15 but will not deliver the goods until November 20.Which of the following statements is true?

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

During 2019,Sensa Corporation incurred operating expenses amounting to $100,000,of which $75,000 was paid in cash;the balance will be paid during 2020.Which of the following is correct for the 2019 year-end balance sheet?

Correct AnswerverifiedShow Answer

Under accrual accounting,rent expense for February 2019 would be recognized on the income statement in February 2019 even though it had been paid for in January of 2019.

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

The trial balance needs to be prepared prior to preparation of the income statement.

Correct AnswerverifiedShow Answer

The following accounts for Carthage Enterprises,Inc.are listed randomly.Enter the number associated with each transaction to identify the accounts that would be used in the journal entry for each transaction given below.

Correct AnswerverifiedTransactio...View AnswerShow Answer

The time period assumption implies that the life of a business entity can be reported in time periods such as quarters and years.

Correct AnswerverifiedTrue

Which of the following best describes operating revenues?

Correct AnswerverifiedShow Answer

The primary difference between revenues and gains is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

Which of the following describes the transaction resulting in a journal entry with a debit to Wages Payable and a credit to Cash?

Correct AnswerverifiedShow Answer

Correct Answer
verified
Pack-and-Deliver,Inc...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Transactio...
View Answer

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified