Question 1

Which of the following is true of income statement accounts?

Accepted Answer

A)   Costs incurred to help generate revenue are only reported as expenses on the income statement if they are paid in cash in the same period as the revenue received.
B)   Revenue accounts are shown after the amount of expense accounts on the income stat ement.
C)   Revenue accounts include accounts receivable, unearned revenue and cash accounts.
D)   There is no net income account.E) A) and B)
F) A) and C) D

Question 2

Trudy's Café paid employees $50,000 in September for work done that month. What journal entry will Trudy's record in September, assuming Trudy's did not owe any amounts to employees at the end of August?

Accepted Answer

A)   Debit Cash, credit Wages Revenue.
B)   Debit Cash, credit Wages Payable.
C)   Debit Wages Revenue, credit Cash.
D)   Debit Wages Expense, credit Cash.E) A) and D)
F) A) and C)

Question 3

Second's Best Retail Store receives and immediately pays a $3,500 utility bill from the City Gas & Electric Company. The entry by the City Gas & Electric Company to record receipt of this payment would include a:

Accepted Answer

A)   credit to accounts payable.
B)   credit to utilities expense.
C)   debit to utilities revenue.
D)   debit to cash.E) A) and B)
F) C) and D)

Question 4

Which of the following is not true of the unadjusted trial balance?

Accepted Answer

A)   A trial balance is an internal report used to determine whether total debits equal total credits.
B)   A trial balance lists every account name in one column, usually in the order of assets, liabilities, stockholders' equity, revenues and expenses.
C)   A trial balance shows the ending balances obtained from the ledger listed in either the debit or credit column.
D)   If debits equal credits in the unadjusted trial balance, it means that no errors were made in the recording ofE) A) and D)
F) C) and D)

Question 5

How many of the following statements regarding the debit/credit processing of revenues and expenses are true?
Debits reduce expenses.
The total credits recorded in revenue accounts must equal the total debits recorded in expense accounts.
Across all revenue accounts, the total value of all debits must equal the total value of all credits.

Accepted Answer

A)   None
B)   One
C)   Two
D)   ThreeE) B) and C)
F) None of the above

Question 6

A credit of $500 to Equipment was mistakenly credited to Revenue. What is the effect of this error?

Accepted Answer

A)   Equipment is understated and Revenue is understated.
B)   Equipment is overstated and Revenue is overstated.
C)   Equipment is overstated and Revenue is understated.
D)   Equipment is understated and Revenue is overstated.E) A) and D)
F) A) and C)

Question 7

Which of the following is an expense of this period?

Accepted Answer

A)   Costs of items used up this period but paid for next period.
B)   Costs of items paid for in this period but used up next period.
C)   Cost of land purchased and paid for this period.
D)   Repayment of debt from a loan in a prior period.E) A) and B)
F) B) and D)

Question 8

Which of the following is not true about the financial statements of Dudley Do-Right Repair Shop?

Accepted Answer

A)   The balance sheet at December 31 will show Total Liabilities of $10,500.
B)   The balance sheet at December 31 will show Retained earnings of $68,700.
C)   The Income Statement for the year will not include the dividends of $48,000.
D)   The Income Statement for the year will show Total Revenue of $175,000.E) None of the above
F) B) and D)

Question 9

West Corporation issued a $1,000 gift certificate. What journal entry will West Corporation record?

Accepted Answer

A)   Debit Cash, credit Sales Revenue.
B)   Debit Cash, credit Unearned Revenue.
C)   Debit Unearned Revenues, credit Cash.
D)   Debit Accounts Receivable, credit Cash.E) B) and C)
F) A) and D)

Question 10

During 2011, a company provided services for cash of $21, 000 and services on credit of $15,000. The company collected accounts receivable of $8,000 and incurred operating expenses of $22,700, $14,000 of which were paid during the year. The amount of net income(loss)  for the year is

Accepted Answer

A)   $13,300
B)   ($1,700) 
C)   $22,000
D)   $6,300E) A) and B)
F) A) and C) A

Question 11

During June, the Grass is Greener Company mows 100 lawns a week and is paid in July by those customers. The company uses the accrual basis of accounting. How will these events affect the company's financial statements?

Accepted Answer

A)   The income statement shows the effects of the transactions in June.
B)   The income statement shows the effects of the transactions in July.
C)   The balance sheet shows no effect from the transactions in June.
D)   The transactions have no effect on the balance sheet.E) A) and D)
F) B) and D) A

Question 12

In January, a company pays for advertising space in the local paper for ads to be run during the months of January, February, and March at $1,500 a month. The payment would be recorded in January as a:

Accepted Answer

A)   debit of $4,500 to Cash, a credit of $1,500 to Advertising Expense, and a credit of $3,000 to Prepaid Advertising.
B)   debit of $4,500 to Accounts Payable and a credit of $4,500 to Cash.
C)   debit of $4,500 to Accounts Payable and a credit of $4,500 to Stockholders' Equity.
D)   debit of $1,500 to Advertising Expense, a debit of $3,000 to Prepaid Advertising, and a credit of $4,500 toE) B) and C)
F) A) and D)

Question 13

What is the amount of Total Assets at December 31?

Accepted Answer

A)   $16,500
B)   $22,000
C)   $17,350
D)   $13,500E) A) and C)
F) B) and D)

Question 14

Sparkling Pools received a bill for $1,200 for running newspaper ads during the last two weeks of July; the bill will be paid on August 1. Advertising expense should be:

Accepted Answer

A)   credited for $1,200 in July.
B)   credited for $1,200 in August.
C)   debited for $1,200 in July.
D)   debited for $1,200 in August.E) A) and D)
F) A) and C)

Question 15

Which of the following would most likely be reported as an asset?

Accepted Answer

A)   Service Revenue.
B)   Wages.
C)   Prepaid Rent.
D)   Unearned Revenue.E) B) and D)
F) All of the above

Question 16

When expenses exceed revenues in a period, stockholders' equity will be increased.

Accepted Answer

A) True 
 B)False

Question 17

In October, your company prepays rent of $7,000 for November and December. Which of the following describes the effects of this transaction in October?

Accepted Answer

A)   Assets decrease $7,000 and liabilities decrease $7,000.
B)   Assets increase $7,000 and stockholders' equity increases $7,000.
C)   There is no change to total assets, liabilities or stockholders' equity.
D)   Liabilities decrease $7,000 and stockholders' equity increases $7,000.E) None of the above
F) A) and C)

Question 18

Which of the following would not be reported on the Income Statement?

Accepted Answer

A)   Utilities expense in the amount of a bill received for utilities used during the current period but unpaid as of the end of the period.
B)   Rent expense in the amount of rent paid during the period for use of a storage facility in the current period.
C)   Revenue in the amount of services provided to customers who promise to pay in the next period.
D)   Cost of land, paid in cash, and purchased for future use.E) A) and B)
F) None of the above

Question 19

If contributed capital was $100,000 at the beginning of the year, what was the amount at the end of the year?

Accepted Answer

A)   $100,000
B)   $110,000
C)   $115,000
D)   $170,000E) All of the above
F) A) and B)

Question 20

The Rainbow House Painting Company has been contracted to strip, repair, prime and paint a house for $3,600 to be paid in installments as phases of the work are completed. Rainbow should recognize the revenue
When

Accepted Answer

A)   the work begins.
B)   the first payment is received.
C)   half of the work is complete and half of the payments have been received.
D)   the work is complete.E) All of the above
F) A) and B)

Exam 3: Reporting Operating Results on the Income Statement

Which of the following is true of income statement accounts?

Correct Answer
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D

Trudy's Café paid employees $50,000 in September for work done that month. What journal entry will Trudy's record in September, assuming Trudy's did not owe any amounts to employees at the end of August?

Correct Answer
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Second's Best Retail Store receives and immediately pays a $3,500 utility bill from the City Gas & Electric Company. The entry by the City Gas & Electric Company to record receipt of this payment would include a:

Correct Answer
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Which of the following is not true of the unadjusted trial balance?

Correct Answer
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A credit of $500 to Equipment was mistakenly credited to Revenue. What is the effect of this error?

Correct Answer
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Which of the following is an expense of this period?

Correct Answer
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Which of the following is not true about the financial statements of Dudley Do-Right Repair Shop?

Correct Answer
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West Corporation issued a $1,000 gift certificate. What journal entry will West Corporation record?

Correct Answer
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During 2011, a company provided services for cash of $21, 000 and services on credit of $15,000. The company collected accounts receivable of $8,000 and incurred operating expenses of $22,700, $14,000 of which were paid during the year. The amount of net income(loss) for the year is

Correct Answer
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A

During June, the Grass is Greener Company mows 100 lawns a week and is paid in July by those customers. The company uses the accrual basis of accounting. How will these events affect the company's financial statements?

Correct Answer
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A

In January, a company pays for advertising space in the local paper for ads to be run during the months of January, February, and March at $1,500 a month. The payment would be recorded in January as a:

Correct Answer
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What is the amount of Total Assets at December 31?

Correct Answer
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Sparkling Pools received a bill for $1,200 for running newspaper ads during the last two weeks of July; the bill will be paid on August 1. Advertising expense should be:

Correct Answer
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Which of the following would most likely be reported as an asset?

Correct Answer
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When expenses exceed revenues in a period, stockholders' equity will be increased.

Correct Answer
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In October, your company prepays rent of $7,000 for November and December. Which of the following describes the effects of this transaction in October?

Correct Answer
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Which of the following would not be reported on the Income Statement?

Correct Answer
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If contributed capital was $100,000 at the beginning of the year, what was the amount at the end of the year?

Correct Answer
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The Rainbow House Painting Company has been contracted to strip, repair, prime and paint a house for $3,600 to be paid in installments as phases of the work are completed. Rainbow should recognize the revenue When

Correct Answer
verified

Exam 3: Reporting Operating Results on the Income Statement

Which of the following is true of income statement accounts?

Correct AnswerverifiedD

Trudy's Café paid employees $50,000 in September for work done that month. What journal entry will Trudy's record in September, assuming Trudy's did not owe any amounts to employees at the end of August?

Correct AnswerverifiedShow Answer

Second's Best Retail Store receives and immediately pays a $3,500 utility bill from the City Gas & Electric Company. The entry by the City Gas & Electric Company to record receipt of this payment would include a:

Correct AnswerverifiedShow Answer

Which of the following is not true of the unadjusted trial balance?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A credit of $500 to Equipment was mistakenly credited to Revenue. What is the effect of this error?

Correct AnswerverifiedShow Answer

Which of the following is an expense of this period?

Correct AnswerverifiedShow Answer

Which of the following is not true about the financial statements of Dudley Do-Right Repair Shop?

Correct AnswerverifiedShow Answer

West Corporation issued a $1,000 gift certificate. What journal entry will West Corporation record?

Correct AnswerverifiedShow Answer

During 2011, a company provided services for cash of $21, 000 and services on credit of $15,000. The company collected accounts receivable of $8,000 and incurred operating expenses of $22,700, $14,000 of which were paid during the year. The amount of net income(loss) for the year is

Correct AnswerverifiedA

During June, the Grass is Greener Company mows 100 lawns a week and is paid in July by those customers. The company uses the accrual basis of accounting. How will these events affect the company's financial statements?

Correct AnswerverifiedA

In January, a company pays for advertising space in the local paper for ads to be run during the months of January, February, and March at $1,500 a month. The payment would be recorded in January as a:

Correct AnswerverifiedShow Answer

What is the amount of Total Assets at December 31?

Correct AnswerverifiedShow Answer

Sparkling Pools received a bill for $1,200 for running newspaper ads during the last two weeks of July; the bill will be paid on August 1. Advertising expense should be:

Correct AnswerverifiedShow Answer

Which of the following would most likely be reported as an asset?

Correct AnswerverifiedShow Answer

When expenses exceed revenues in a period, stockholders' equity will be increased.

Correct AnswerverifiedShow Answer

In October, your company prepays rent of $7,000 for November and December. Which of the following describes the effects of this transaction in October?

Correct AnswerverifiedShow Answer

Which of the following would not be reported on the Income Statement?

Correct AnswerverifiedShow Answer

If contributed capital was $100,000 at the beginning of the year, what was the amount at the end of the year?

Correct AnswerverifiedShow Answer

The Rainbow House Painting Company has been contracted to strip, repair, prime and paint a house for $3,600 to be paid in installments as phases of the work are completed. Rainbow should recognize the revenue When

Correct AnswerverifiedShow Answer

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