ACCT 2030 chapter 3

In May, Just In Thyme, Inc. billed a customer $1,000 for services performed in May. In June, Just In Thyme collected the $1,000. Which of the following is true assuming accrual accounting?

$1,000 of revenue should be recorded in May.

Monster Music Company provided music lessons to customers for $10,000, receiving $6,000 in cash and the rest on account. What is Monster Music Company's revenue under the accrual basis of accounting?

10,000

If Revenues is credited, then the possible debits are ______. (Select all that apply.)

Accounts Receivable Cash Deferred Revenue

Which ratio change provides good news about a company?

An increase in the net profit margin ratio

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

During the month of September, AppGame Company wrote checks to employees totaling $8,100 for wages earned in September and not previously expensed. Which of the following is the correct entry?

Debit Wages Expense and credit Cash for $8,100

Which of the following is not one of the five steps to apply when determining revenue?

Identify that the cash has been received

Which of the following is correct?

Measurement of net income involves estimations.

The journal entry to record the purchase of supplies on account is debit ______.

Supplies and credit Accounts Payable

basis accounting is the only acceptable method for external reporting of net income.

accrual

the GAAp requirement that revenues and expenses be recorded when there is an exchange, NOT when cash changes hands

accrual basis

Revenue on the income statement for the year ended December 31, 2020 equals the ______.

amount recognized by selling goods or services to customers during 2020

What type of an account is Accounts Receivable?

asset

Which of the following should be classified as stockholders' equity? (Check all that apply.)

common stock retained earnings

Revenues are increased with ______.

credits because they increase stockholders' equity

The correct journal entry to record a transaction that involves paying cash for an expense incurred in the same period is ______.

debit an expense and credit cash

The ending balance of Accounts Receivable in the ledger is calculated by adding the ______.

debits and subtracting the credits recorded during the period to the beginning debit balance to arrive at the ending debit balance

Expenses are increased with ______.

debits because they decrease stockholders' equity

Which of the following is not a revenue account that appears on the income statement?

deffeered revenue

economic resources used in the operation of a business

expenses

True or false: In accordance with generally accepted accounting principles, the timing of cash receipts dictates when revenues are recognized.

false

Revenues are recognized when ______, even when the cash is collected in a different accounting period than the obligation to the customer has been performed.

goods are delivered services are performed

the financial statement that shows a companys results of operations for a particular period of time

income statement

Net income appears on the ______. (Select all that apply.)

income statement statement of retained earnings

If the purchase of supplies on account is not recorded then ______.

liabilities will be understated

related revenues and expanses should be in the same period

matching principle

Identifying the performance obligation is an important step in determining whether to recognize revenue especially when the contract involves ______.

multiple obligations

the excess of a company's revenues over its expenses for a period of time

net income

Retained Earnings represents ______. (Check all that apply.)

net income generated by the company through profitable operations that has not been distributed to its stockholders amounts earned (revenues minus expenses) that have been kept by the company

In June, customers paid $3,900 for services they received in May. How much revenue should be recognized in June under accrual accounting?

none

Collecting cash from customers for services provided is a(n) ______ activity.

operating

Fill in the blank question. Investing activities are concerned with acquiring long-term assets; financing activities provide the money needed to operate the business and to provide the capital for investing activities; and activities are involved with providing goods and services to the customer.

operating

In accrual basis accounting, revenue is recorded when the seller ______.

performs the work promised to the customer and thus is entitled to receive compensation

Under the expanded accounting equation, assets equal liabilities plus common stock and

retained

The net profit margin ratio is calculated by dividing net income by ______.

revenue

is the quantity sold times the price charged from selling goods or services to customers. (Enter one word per blank.)

revenue

revenues should be recognized when they are earned

revenue recognition principle

economic resources provided to a business by its customers in exchange for its goods and services

revenues

If a company debits Cash and credits Sales Revenue, it is recording the ______.

sale of goods to a customer for cash

Accounts Receivable arises when a company ______.

sells on credit and is an asset

Revenues are recognized when ______, even when the cash is collected in a different accounting period than the obligation to the customer has been performed.

services are performed goods are delivered

Revenue is recognized when ______. (Check all that apply.)

services are provided even if cash has not yet been collected, if using accrual basis accounting cash is collected from customers, if using cash basis accounting

If a company has no Wages Payable on its balance sheet, then one may conclude ______.

the wages expensed in the period were paid

True or false: A company generates Retained Earnings by operating profitably.

true