Ch.3

During 2018, a company provided services for cash of $33,600 and services on credit of $24,000. The company collected accounts receivable of $12,800 and incurred operating expenses of $36,320, $22,400 of which were paid during the year. The amount of net income (loss) for the year is:

$21,280. $2,720. $36,320. $10,080. (X) Net Income = 33600+(12800-36320)

What type of account is Accounts Receivable?

Asset

dividing the long life of a company into shorter periods such as months, quarters, or years for reporting purposes is called the ______ _____ _______.

Time Period Assumption

Which of the following September transactions would impact the September income statement?

Collecting cash related to an account receivable Providing services to new customers Purchasing supplies Issuing stock to new shareholders (x)

The Fastbank Motorcycle Service Company wins a $10 million bid to provide the repair services for a recall on a popular brand of motorcycles. No money is exchanged. The repair services are expected to be performed early next year. Which of the steps of the five-step model for revenue recognition is not yet complete?

Determine the transaction price. Identify the seller's performance obligation(s). (X) Identify the contract. Recognize revenue when (or as) each performance obligation is satisfied.

Under the accrual basis of accounting, the ________ recognition ("matching") principle requires that expenses be recognized in the same period as the related revenues.

Expense

Which of the following statements about accrual basis accounting is correct?

If a company uses accrual basis accounting, the company should not record revenue until payments are actually received. If a company uses accrual basis accounting, the company should record expenses in the same period as the revenues they generate. (X) IFRS does not allow accrual basis accounting for external reporting of income. The items reported on the income statement continue to have an impact beyond the current period, whereas the items reported on the balance sheet impact just the current period.

Which of the following statements about cash basis accounting and accrual basis accounting is correct?

If payment is received at the same time a service is provided, it does not matter whether cash basis accounting or accrual basis accounting is used; both would record the transaction with the same journal entry. (x) The cash basis of accounting works best when a lengthy delay exists between the timing of cash flows and the underlying business activities to which they relate. If a company receives a bill for rent for the period and decides to delay payment, the rent will not be recorded as an expense if accrual basis accounting is used. If the cash basis of accounting is used, the Deferred Revenue account is increased when a company receives a deposit in advance of services to be performed by the company.

Which of the following items is not a specific account in a company's chart of accounts?

Income Tax Expense Sales Revenue Deferred Revenue Net Income (X)

Which activity is not part of the operating cycle?

Repaying a bank loan used to purchase manufacturing equipment ( X ) Purchasing goods from suppliers for resale to customers Paying employees for hours worked Collecting cash from sales on account made last month

Which of the following statements about the income statement and income statement accounts is correct?

The income statement reports the financial position of a company at a point in time. Income statement accounts are permanent accounts, while balance sheet accounts are temporary accounts. Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts. (X) The income statement reports the cash received and paid during the period.

If an apartment leasing company receives the rent for January 2018 from a tenant in December 2017, this will be reported by the leasing company as:

revenue in 2017. an expense in 2017. a liability in 2017. (X) stockholders' equity in 2017.