Ch. 4-6 Practice Questions Flashcards
Accountants have developed two principles to use as guidelines in determining the amount of revenue and expenses to be reported in a given period. These principles are the:
Both cash basis accounting principles and revenue recognition principle are correct
Which of the following is NOT true concerning cash basis accounting?
Matches expenses with revenues they help produce
In order for revenues to be recorded in the period in which the services are performed, and for expenses to be recognized in the period in which they are incurred:
Adjusting entries are made
Unearned revenues are:
Both deferrals and liabilities are correct
All of the following are examples of prepaid expenses except:
Unearned revenues
Depreciation is:
The process of allocating the cost of an asset to expense over its useful life
Accumulated depreciation is:
Contra asset account
Which of the following companies would probably NOT have learned revenue?
Poppa John’s Pizza
Adjusting entries for accruals:
Both are required in order to record revenues fo services performed and expenses incurred in the current accounting period that have not been recognized through daily entries and thus are not yet reflected in the accounts and will increase both a balance sheet and an income statement account are correct.
An assumption that the economic life of a business can be divided into artificial time periods is the:
Periodicity assumption
Wal-mart is a prime example of which type organization:
Merchandising concern
Under the perpetual inventory system, purchases of merchandise for sale are recorded in a account called:
Inventory
A purchaser, dissatisfied with merchandise received, may return the goods to the seller for credit. This transaction is known by the seller, as a:
Sales return
All of the following are examples of business documents except:
Memorandum describing merchandise
In a periodic inventory system, the cost if goods sold is determined:
At the end of the accounting period
Freight costs incurred by the seller on outgoing merchandise are considered:
Operating expenses to the seller
If a sales invoice shows credit terms of 2/10, n/30, the descend period is:
10 days
The revenue recognition principle requires that sales revenues be recognized
When the goods are transferred from the seller to the buyer
Sales return and allowances and sales discounts are:
Contra revenue accounts
The income statement of a merchanting company contains the following unique features:
Sales revenue, cost of goods sold, and gross profit
In order to be classified as merchandise inventory, merchandise must be:
Both owned by the company and in a form ready for sale to customers in the ordinary course of business
General Motors would classify automobiles on the assembly line in various stages of completion as:
Work in progress
When purchases of merchandise are recorded in the purchases account rather than the inventory account the inventory system being used is the:
Periodic system
To determine cogs under a periodic inventory system all of the following are necessary except:
Total cash register receipts for the period
In some lines of business, it is customary to hold the goods of other parties and try to sell the good for them for a fee. These good are called:
Consigned goods
When legal title of the goods remains with the seller until the goods reach the buyer the terms are said to be:
FOB destination
The three assumed cost flow methods are:
FIFO, LIFO, and average-cost
Which of the following statements are not true regarding LIFO:
Ending inventory is based on the price of the most recent units purchased
In a period of increasing prices, the inventory system that will yield the highest net income is:
FIFO
Under lower-of-cost-or-market (LCM), market is defined as:
Current replacement cost
