FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 3: Operating Decisions and the Accounting System

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 51

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following best describes the time period assumption?

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) A) and B)
F) B) and D)

Correct Answer

verified

Show Answer

Question 52

True/False

Review LaterAdd Note

Review Later

Using cash to purchase office supplies,which will be consumed later,results in an increase in expenses and a decrease in assets at the time of purchase.

A) True
B) False

Correct Answer

verified

Show Answer

Question 53

Multiple Choice

Review LaterAdd Note

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

Colby Company has provided the following selected information for the year ended December 31,2019: Cash collected from customers was $392,000. Cash received from stockholders in exchange for stock totaled $46,000. Cash paid to suppliers was $183,000. Cash paid to employees was $102,000. Cash received from a long-term bank loan was $75,000. Cash paid to stockholders for dividends was $17,000. Cash received from sale of a building was $125,000. Cash paid for rent was $19,000. Cash received for interest and dividends was $4,000. Cash paid for income taxes was $28,000. Based on the selected information provided,calculate Colby's cash flow from operating activities.

Which of the following describes the reporting of interest expense on the income statement?

Under accrual basis accounting,revenues are recognized when goods or services are transferred to customers,and expenses are recognized when incurred to generate that revenue.

The following information has been provided by Hable Company: • Advertising expense $9,900 • Interest expense $3,700 • Rent expense for store $12,000 • Loss on sale of property and equipment $5,700 • Cost of goods sold $21,300 • Depreciation expense $7,100 • Prepaid insurance $1,000 - What is the amount included in the Other Items section of Hable's income statement?

Reporting revenues on the income statement that were previously reported as unearned revenues on the balance sheet results in a decrease in liabilities and an increase in net income,retained earnings,and stockholders' equity.

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 was $5,000. - What is the amount of Colby's total operating expenses?

Why might managers be tempted to violate the revenue recognition principle and the expense recognition principle when preparing an income statement?

Lantz Company has provided the following information: • Cash sales totaled $255,000. • Credit sales totaled $479,000. • Cash collections from customers for services yet to be provided totaled $88,000. • A $22,000 loss from the sale of property and equipment occurred. • Interest income was $7,700. • Interest expense was $19,900. • Supplies expense was $336,000. • Rent expense for the store was $36,000. • Wages expense was $49,000. • Other operating expenses totaled $79,000. • Unearned revenue was $4,000. - What is the amount of Lantz's operating revenues?

Toby Toy Store has noticed the following items that need to be considered for its income statement for the year ended December 31,2019: • Commissions of $3,000 for salespeople who made sales in December will be paid January 3,2020. • The phone bill of $400 for December was received and will be paid January 20,2020. • The store rent of $2,000 for January 2020 was paid on December 28,2019. • At the beginning of November,Toby paid $1,500 for advertising in a monthly magazine that is distributed in November and December of 2019,and January of 2020. What is the proper amount of expenses to be included in the income statement for the year?

McNeil Company owed its employees for services performed and recorded a liability for the wages owed the employees.Which of the following correctly describes the impact on the financial statements when the employee wages are subsequently paid?

Revenue may be recognized:

Which of the following is not a step pertaining to the revenue recognition principle beginning in year 2018,for more complex customer contracts,according to both U.S.GAAP and to International Financial Reporting Standards (IFRS) ?

When the board of directors declares a cash dividend,the retained earnings account is debited.

Which of the following transactions will not decrease the net profit margin ratio?

Revenue accounts have credit balances because they increase stockholders' equity.

Which of the following costs is most likely to be the largest expense reported on the income statement of a merchandiser,such as Walmart Stores,Inc.?

The operating cycle is the time that elapses between a company's cash payment to suppliers for inventory purchases and the collection of cash from sale of inventory to customers.