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1. When a company receives a utility bill but will not pay it right away, it should (Points : 1) debit Utilities Expense and credit Accounts Receivable. |
2. Is the purchase of equipment treated as an expense at the time of purchase? Why or why not? (Points : 1)
No, GAAP requires that 1
0
% of the cost be expensed each year. This minimizes attempts to mislead financial statement users.
Yes, the matching principle requires that the cost be expensed in the period of purchase.
No, the cost needs to be allocated to the years of expected use.
Yes, the actual life of the asset is not known, thus there is no acceptable way to allocate the cost.
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3. Unearned revenue is classified as a(n): (Points : 1) asset account. |
4. Given the data below for a firm in its first year of operation, determine net income under the accrual basis of accounting.
Cash received from customers
$44,000
Accounts receivable
12,000
Cash paid for expenses
2
6
,000
Accounts payable (related to expenses)
3,000
Prepaid rent for next period
7,000
(Points : 1)
$18,000
$27,000
$20,000
$11,000
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5. The Vintage Laundry Company purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $2,000 on hand. The adjusting entry that should be made by the company on June 30 is: (Points : 1) debit Laundry Supplies Expense, $2,000; credit Laundry Supplies, $2,000. |
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6. In the first month of operations, the total of the debit entries to the Cash account amounted to $1,200 and the total of the credit entries to the Cash account amounted to $800. The Cash account has a (Points : 1) $800 credit balance. |
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7. Which of the following accounts has a normal credit balance? (Points : 1) Prepaid Rent |
8. The following is selected information from C Corporation for the fiscal year ending October 31, 2011.
Cash received from customers
$150,000
Revenue earned
19
5,000
Cash paid for expenses
85,000
Cash paid for computers on November 1, 2010 that
will be used for 3 years
24
,000
Expenses incurred including any depreciation
109,000
Proceeds from a bank loan, part of which was used to
pay for the computers
50,000
Based on the accrual basis of accounting, what is C Corporation’s net income for the year ending October 31, 2011? (Points : 1)
$102,000
$87,000
$86,000
$95,000
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9. Expenses are recognized when: (Points : 1) they contribute to the production of revenue. |
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10. Assets normally show (Points : 1) credit balances. |
0
26
0
3
36
23992
MultipleChoice
25
33623984
MultipleChoice
24
0
33623985
MultipleChoice
6
0
33623986
MultipleChoice
36
0
33623987
MultipleChoice
28
0
33623988
MultipleChoice
34
0
33623989
MultipleChoice
16
0
33623990
MultipleChoice
19
0
33623991
MultipleChoice
