UND Acct 200, Chapter 3 LS
T or F: A trial balance is the same as a balance sheet
False
In May, Sea the World Cruises Inc. collected $1,000 cash from a customer for services to be performed in June. Which of the following is true assuming accrual accounting?
$1,000 of revenue should be recorded in June
Brazzer's Income statement shows Service Revenue of $40,000, Wages Expense of $25,000, then a Net income of $1,000. The other expenses must equal ________ in order for this income statement to be correct
$14,000
On July 1, 2018, a firm prepaid $200,000 for 2 years' rent of an office building beginning on July 1. What amount will be shown for prepaid rent on and one-half years later on December 31, 2019 balance sheet?
$50,000
What of the following appears on the income statement?
1) Advertising expense 2) Sales revenue
Cash basis accounting may distort net income when a company ______
1) Collects cash in advance of providing services to customers 2) Makes credit sales 3) Pays for expenses in a later accounting period than when the resources are used 4) Pays for expenses in advance of when the resources are used
The journal entry a law firm records when it provides legal services for a client who will pay in a later period includes a _______
1) Credit to Service Revenue 2) Debit to accounts receivable
the entry to record the sale of services for cash includes:
1) Debit to cash 2) credit to service revenue
Revenues are recognized when _____, when when the cash is collected in a different accounting period than the revenue is earned
1) Goods are delivered 2) services are performed
On May 25th, Dew Drop Inn purchased $500 of supplies on account. In June, $300 of supplies was used and $400 was paid to the supplier. Which of the following are true statements?
1) In June, Supplies Expense of $300 was recorded 2) In May, the assets, Supplies, is increased by $500
The net profit margin ratio _____
1) Indicates how well expenses are controlled 2) Means improved performance if it increases
Accounts Payable _______
1) Is a liability 2) Represents amounts owed
Accrual basis accounting differs from cash basis accounting in that accrual basis accounting records...
1) Revenues in the period when the revenue is earned, even though the cash has not yet been collected 2) expenses in the period incurred, even though cash has not yet been paid
Revenue is recognized when...
1) cash is collected from customers on a cash basis accounting 2) services are provided even if cash has not yet been collected, if using accural basis accounting
Yo mama Inc. pays its employees once a month and records the expense at the time of payment. On May 31, Yo mama Inc. paid its employees $10,000 for work performed in May. The entry to record the payment includes a ______ for $10,000
A debit to Wages Expense, and a Credit to Cash
Which ratio change provides good news about a company?
An increase in the net profit margin ratio
What type of an account is Accounts Receivable?
Asset
Which of the following is true? A)The income statement reports the financial position of a company at a point in time B) Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts C)The balance sheet reports financial activities only for the current accounting period
B
Which of the following is correct? A) Net income equals the amount of cash generated by the business during the reporting period B) Net income represents the change in the market value of the company's stock during the period C) Measurement of net income involves estimations
C
Reporting revenues only when cash is involved is called ______basis accounting
Cash
When Pizza Company delivers pizza to customers for $100 cash, it should record a $100 debit to ______ and a $100 credit to ______
Cash, Sales Revenue
When a company receives cash from a customer in advance of performing the service, the company will debit ______ and credit _______
Cash, Unearned Revenue
Revenues increase net income and retained earnings, so revenues are recorded with a _____, just like all increases in stockholder's equity
Credit
Expenses decrease net income and retained earnings, so expenses are recorded with a ______, just like all decreases in stockholder's equity
Debit
A service company receives a check from a customer as partial payment of his account balance. This transaction does not involve the sale of additional services. How should this entry be recorded?
Debit Cash; Credit Accounts Receivable
On May 29th, Lox, Stock and Bagel Inc. Received a $100 invoice for advertising run in May. The bill will be paid in June. The entry to record in May includes a $100 _______
Debit to Advertising Expense, Credit to Accounts Payable
On June 1st, Deja Vu paid $100 for advertisements to be run on June 1st. Deja Vu's entry to record this payment will include a $100 _______
Debit to Advertising Expense, Credit to Cash
The entry to record cash collected from customers in advance is a _______
Debit to Cash; Credit to Unearned Revenue
The entry to record the sale of services for cash includes a....
Debit to cash, and a credit to service revenue
Under the accrual basis of accounting, the _____ recognition (matching) principle requires that expenses be recognized in the same period as the related revenues
Expense
Assets, on the balance sheet, provide future benefits for a company, while _____, on the income statement, are used-up benefits
Expenses
______ are the costs of operating a business that are incurred to generate revenues in the period covered by the income statement
Expenses
In June, Customers paid $3,900 for services they received in May. How much revenue should be recognized in June under accrual accounting?
No revenue recorded in June
On October 31st, Deja Vu sold pumpkin spice dances for Halloween parties on account. The customers have 30 days to pay for the dances. In which month should Deja Vu record the revenue under accural accounting
October
The primary source of revenues and expenses comes from _____ activities
Operating
Which of the following would increase the net profit margin ratio in the current year?
Postpone routine maintenance work that was to be done this year
When a company pays cash in advance for rent that is to be used over the next 2 years, the company records a debit to _____ and a credit to _____
Prepaid Rent, Cash
In the expanded accounting equation, assets=liabilities + stockholder's equity + ___________
Retained Earnings
In accrual accounting, according to the _______ recognition principle, revenues should be recognized when they are earned, not necessarily when cash is received
Revenue
Increases to stockholders' equity are recorded on the _______ side of the T-Account
Right
The Net Profit Margin is calculated by dividing net income by _______
Sales Revenue
Which one of these activities is part of the operating cycle?
Selling goods and services
If a company has no Wages Payable on its balance sheet, then one may conclude....
The wages expensed in the period were paid
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
Performing services on account will increase....
Total assets, and stockholder's equity
T or F: Revenues appear above expenses on the income statement
True
______ Revenue arises when a business receives cash in one period, but does not earn all of it until a later period
Unearned
When a company collects cash in advance from customers it records a liability called _____ ______
Unearned Revenue
The correct journal entry to record a transaction that involves paying cash for an expense incurred in the same period is...
debit an expense, credit cash
The ending balance of accounts receivable in the ledger is calculated by adding the...
debits, then subtracting the credits recorded during the period to the beginning debit balance, to arrive at the ending debit balance
A business just acquired and paid something that provides benefit in future periods. The business will decrease cash and _____
increase an asset such as Supplies
