BUA201 Jones exam 2
The periodicity assumption states that: a. a transaction can only affect one period of time. b. estimates should not be made if a transaction affects more than one-time period. c. adjustments to the enterprise's accounts can only be made in the time period when the business terminates its operations. the economic life of a business can be divided into artificial time periods.
c
A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause: a. expenses to be overstated. b. net income to be overstated. c. liabilities to be understated. d. revenues to be understated.
x
The terms 2/10, net/30 mean that a 2 percent discount is allowed on payments made within the 10 days discount period. a. True b. False
true
Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs. a. True b. False
true
When the terms of sale include a sales discount, it usually is advisable for the buyer to pay within the discount period. (Yes, this is an easy question) a. True b. False
true
An accounting time period that is one year in length is called: a. a fiscal year. b. an interim period. c. the time period assumption. d. a reporting period.
a
Anderson Inc. sells $1,200 of merchandise on account to Baltic Company with credit terms of 2/10, n/30. If Baltic Company remits a check taking advantage of the discount offered, what is the amount of Baltic Company's check? a. $1,176 b. $1,200 c. $1,080 d. $1,120
a
Bob Dole's Tune-Up Shop follows the revenue recognition principle. Bob services a pug on August 31. The customer picks up the pug on September 1 and mails the payment to Bob on September 5. Bob receives the check in the mail on September 6. When should Bob show that the revenue was recognized? a. August 31 b. August 1 c. September 5 d. September 6
a
Expenses are recognized when: a. they contribute to the production of revenue. b. they are paid. c. they are billed by the supplier. d. the invoice is received.
a
Generally, the revenue account for a merchandising enterprise is called a. Sales Revenue or Sales. b. Investment Income. c. Gross Profit. d. Net Sales.
a
Given the data below for a firm in its first year of operation, determine net income under the accrual basis of accounting. Revenue recognized $19,000 Accounts receivable 3,000 Expenses incurred 7,250 Accounts payable (related to expenses) 750 Supplies purchased with cash 1,800 a. $11,750 b. $14,000 c. $9,500 d. $12,200
a
If a purchaser using a perpetual inventory system pays the transportation costs, then the a. Inventory account is increased. b. Inventory account is not affected. c. Freight-Out account is increased. d. Delivery Expense account is increased.
a
One of the accounting concepts upon which adjustments for prepayments and accruals are based is: a. expense recognition. b. cost. c. monetary unit. d. economic entity.
a
Prepaid expenses are: a. paid and recorded in an asset account before they are used or consumed. b. paid and recorded in an asset account after they are used or consumed. incurred but not yet paid or recorded
a
Under a perpetual inventory system a. accounting records continuously disclose the amount of inventory. b. increases in inventory resulting from purchases are debited to purchases. c. there is no need for a year-end physical count. d. the account purchase returns and allowances is credited when goods are returned to vendors.
a
Unearned revenues are: a. received and recorded as liabilities before they are recognized. b. recognized and recorded as liabilities before they are received. c. recognized but not yet received or recorded. d. recognized and already received and recorded.
a
At the beginning of the year, Uptown Athletic had an inventory of $600,000. During the year, the company purchased goods costing $2,250,000. If Uptown Athletic reported ending inventory of $750,000 and sales of $3,000,000, their cost of goods sold and gross profit rate would be a. $1,500,000 and 70%. b. $2,100,000 and 30%. c. $1,500,000 and 30%. d. $2,100,000 and 70%.
b
Crowder Corporation recorded the return of $200 of goods originally sold on credit to Discount Industries. Using the periodic inventory approach, Crowder would record this transaction as: a. Inventory 200 Accounts Receivable 200 b. Sales Returns and Allowances 200Accounts Receivable 200 c. Accounts Payable 200 Sales Returns and Allowances 200 d. Accounts Receivable 200Sales Returns and Allowances 200
b
The revenue recognition principle dictates that revenue should be recognized in the accounting records: a. when cash is received. b. when the performance obligation is satisfied. c. at the end of the month. d. in the period that income taxes are paid.
b
Accrued revenues are: a. received and recorded as liabilities before they are recognized. b. recognized and recorded as liabilities before they are received. c. recognized but not yet received or recorded. d. recognized and already received and recorded.
c
Erin Corporation purchases $500 of merchandise on credit. Using the periodic inventory approach, Erin would record this transaction as: a. Inventory 500 Accounts Payable 500 b. Accounts Payable 500 Purchases 500 c. Purchases 500 Accounts Payable 500 d. Accounts Payable 500 Inventory 500
c
Greese Company purchased office supplies costing $7,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,500 still on hand. The appropriate adjusting journal entry to be made at the end of the peri-od would be: a. debit Supplies Expense, $2,500; credit Supplies, $2,500. b. debit Supplies, $4,500; credit Supplies Expense, $4,500. c. debit Supplies Expense, $4,500; credit Supplies, $4,500. d. debit Supplies, $2,500; credit Supplies Expense, $2,500.
c
Inventory becomes part of cost of goods sold when a company a. pays for the inventory. b. purchases the inventory. c. sells the inventory. d. receives payment from the customer.
c
Which of the following is an example of a deferral adjusting entry? a. Accrued expense b. Accrued revenue c. Prepaid expense d. All of these choices are correct.
c
Under the accrual basis of accounting: a. cash must be received before revenue is recognized. b. net income is calculated by matching cash outflows against cash inflows. c. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.
c
Under the cash basis of accounting: a. revenue is recognized when services are performed. b. expenses are matched with the revenue that is produced. c. cash must be received before revenue is recognized. d. a promise to pay is sufficient to recognize revenue.
c
Under the perpetual inventory system, in addition to making the entry to record a sale, a company would a. debit Inventory and credit Cost of Goods Sold. b. debit Cost of Goods Sold and credit Purchases. c. debit Cost of Goods sold and credit Inventory. make no additional entry until the end of the period
c
Which of the following items does not result in an adjustment in the merchandise inventory account under a perpetual system? a. A purchase of merchandise. b. A return of merchandise inventory to the supplier c. Payment of freight costs for goods shipped to a customer d. Payment of freight costs for goods received from a supplier
c
Which of the following would not be considered a merchandising operation? a. Retailer b. Wholesaler c. Service firm d. Merchandising company
c
A company spends $20 million dollars for an office building. Over what period should the cost be written off? a. When the $20 million is expended in cash. b. All in the first year. c. After $20 million in revenue is earned. d. None of these answer choices are correct.
d
If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales a. discount. b. return. c. contra asset. d. allowance.
d
La Pug Company had the following transactions during 2016: Sales of $9,000 on account Collected $4,000 for services to be performed in 2017 Paid $3,750 cash in salaries for 2016 Purchased airline tickets for $500 in December for a trip to take place in 2017 What is La Pug's 2016 net income using accrual accounting? a. $5,750 b. $9,750 c. $9,250 d. $5,250
d
Net income will result if gross profit exceeds a. cost of goods sold. b. operating expenses. c. purchases. d. cost of goods sold plus operating expenses.
d
The balance in the prepaid rent account before adjustment at the end of the year is $12,000 and represents three months rent paid on December 1. The adjusting entry required on December 31 is: a. debit Prepaid Rent, $4,000; credit Rent Expense $4,000. b. debit Prepaid Rent, $8,000; credit Rent Expense, $8,000. c. debit Rent Expense, $12,000; credit Prepaid Rent, $12,000. d. debit Rent Expense, $4,000; credit Prepaid Rent, $4,000.
d
Which of the following companies would be most likely to use a perpetual inventory system? a. Grain company b. Beauty salon c. Clothing store d. Car dealer
d
A revenue account is closed (zeroed) with a credit to the revenue account and a debit to Income Summary. a. True b. False
false
If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future. a. True b. False
false
Sales revenue minus operating expenses equals gross profit. a. True b. False
false
The Dividends account is closed to the Income Summary account at the end of each year. a. True b. False
false
A periodic inventory system does not require a detailed record of inventory items. a. True b. False
true
Adjusting entries are often made because some business events are not recorded as they occur. a. True b. False
true
Expense recognition is tied to revenue recognition. a. True b. False
true
If net sales are $750,000 and cost of goods sold is $600,000, the gross profit rate is 20%. a. True b. False
true
The only accounts that are closed are temporary accounts. a. True b. False
true
The periodicity assumption states that the economic life of a business entity can be divided into artificial time periods. a. True b. False
true