Accounting 284 Chapter 3

Total revenues equals $80,000 and Net Income equals $20,000, then Total Expenses equals $__________.

60000

A seller records an increase to the asset account called ___________ when it sells to a customer on credit.

Accounts Receivable

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

Accrual

Which of the following are true?

Amounts in the balance sheet will continue to have financial impact beyond the current accounting period, The income statement reports the results of activities for an accounting period of time.

In which order, from top to bottom, is the order of the unadjusted trial balance

Assets Liabilities Common Stock Retained Earnings Revenues Expenses

In accrual accounting, according to the _______ recognition principle, revenues should be recognized when the seller performs the work promised, not necessarily when cash is received.

revenue

Which activities are part of the operating cycle?

Buying goods and services, paying cash to suppliers, collecting cash from customers

When a company receives cash from a customer in advance of performing the service, the company will debit __________ and credit _________ ___________.

Cash; Deferred Revenue

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

Deferred Revenue

Collections occur in advance of the performance of the service

Cash

Collections occur in the same period as the services

Bank 'n' Roll, Inc. pays its employees once a month and records the expense at the time of payment. On May 31, Bank 'n' Roll, Inc. paid its employees $10,000 for work performed in May. The entry to record the payment includes a ____________ for $10,000.

Debit to Wages Expense, Credit to Cash

The entry to record the sale of services for cash includes a _______

Debit to cash and credit to Service Revenue.

Assets are increased with _________ and liabilities and stockholders equity are increased with __________.

Debit; Credit

When a company collects cash in advance from customers it records a liability called ________ ________.

Deferred Revenue

Which of the following accounts will be found on the balance sheet?

Deferred Revenue, Accounts Receivable, Accounts Payable, Prepaid Advertising

_______________________ are the costs of operating a business that are incurred to generate revenues in the period covered by the income statement.

Expenses

True or false: The timing of cash receipts dictates when revenues are recognized.

False

Receiving cash from a customer to pay for a previously recorded accounts receivable will _______.

Have no affect on liabilities, stockholders' equity or assets

During the year, a company had $100,000 in revenues, $40000 in expenses, and paid $3000 in dividends. The net of these items cause retained earnings to _________.

Increase by $57000

In January, Pizza co bought pizza ingredients on account for $100, with payment due to the supplier in March. The pizza ingredients were used for pizzas made in January. In which month should Pizza co record the cost of pizza ingredients as an expense.

January

Cash basis accounting may distort net income when a company _________.

Makes credit sales, collects cash in advance of providing services to customers, pays for expenses in a later accounting period than when the resources are used, pays for expenses in advance of when the resources are used.

ABC Company paid $6000 cash for insurance in June that provides coverage for 6 months, from July through December. How much expense should be recognized in June to be in accordance with generally accepted accounting principles?

No expense should be recognized in June

Place the items found on Noodlecake Studios' Income Statement in the proper order from top to bottom.

Noodlecake Studios Inc Income Statement For month ended.... Total Revenues Total Expenses Net Income

Place the line items found on Noodlecake Studios' income statement in the proper order from top to bottom.

Noodlecake Studios, INC Income Statement For the month ended... Total Revenues Total Expenses Net Income

On October 31, Pizza Company sold pumpkin spice pizzas for Halloween parties on account. The customers have 30 days to pay for the pizzas. In which month should Pizza Company record the revenue under accrual accounting.

October

____________ activities are the primary source of revenues and expenses and affect whether a company earns a profit or incurs a loss.

Operating

Prepaid Advertising

Payment occurs in advance of when the advertisement is run.

After posting all entries to the ledger, the Accounts Payable T-account will show which of the following?

Payments made on the debit side, ending balance on the bottom of the credit side, beginning balance on the top left of the credit side, purchases on account on the credit side.

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.

Debits will increase which of the following T-accounts?

Prepaid Rent, Utilities Expense, Accounts Receivable

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

Retained

Which of the following are found on an income statement?

Revenue, net income, expenses

_______________ is the quantity sold times the price charged from selling goods or services to customers.

Revenues

A net loss results when _______.

Revenues are less than expenses

Credits will increase which of these T-accounts?

Sales Revenue, Accounts Payable, Deferred Revenue.

In an expanded accounting equation, revenues and expenses are an expanded part of _______.

Stockholders' equity and retained earnings.

Accounts Payable

The service happens prior to the payment

Accounts Receivable

The service is performed prior to the collections

Wages expense is ______________, while wages payable is _____________.

an expense on the income statement; a liability on the income statement.

The __________ takes stock of what exists at a point in time. The _________ depicts a flow of what happened during a period of time.

balance sheet; income statement

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.

The trial balance is an internal report used to determine whether total debits ___________ total credits.

equal

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

expense

In its 1st year of operation, City Perk paid Salaries Expense of $1.1 million. On December 31, it recorded an entry for additional Salaries Expense of $100,000 that will be paid at the beginning of the 2nd year. How much Salaries Expense for the 1st year ended equal.?

$1.2 million

In June, Cellars, Inc. collected $1000 from a customer in advance. In July, Cellars completed the first half of the job. In August, Cellars completed the work. If Cellars uses the cash basis of accounting, it will record revenues of ___________.

$1000 in June when the cash is collected.

On June 1, Pizza Company paid $100 for advertisements to be run on June 1. Pizza Company's entry to record this payment will include a $100 _________.

Credit to cash; debit to advertising expense