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ACCT 284 > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

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

A

Accrual

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2
Q

What type of an account is Accounts Receivable?

A

Asset

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3
Q

In May, Sea the World Cruises, Inc. collected $1,000 cash from a customer for services to be performed in June. When should this transaction be recorded? May or June

A

June

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4
Q

In June, Cellars, Inc. collected $1,000 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 in______.

A

June

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5
Q

Morris Lest, Inc. received and paid a $500 electric bill in June for electricity used in May. In which month should Morris Lest record the expense in accordance with Generally Accepted Accounting Principles?

A

May

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6
Q

Under which of the following circumstances would cash basis accounting report lower revenue than accrual basis accounting in a company’s 1st year of business?

A

When it makes sales on account

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7
Q

The key factor in determining whether revenue should be recognized is whether the ______.

A

seller has provided the goods or services to the customer

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8
Q

Accounts Receivable is on the ______ and reports the amount ______.

A

Balance Sheet, not yet collected

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9
Q

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?

A

October

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10
Q

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 will Salaries Expense for the 1st year ended equal?

A

1.2 million

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11
Q

Stockholders’ equity consists of ______, which is the amount contributed, and ______, which is generated from profitable operations (i.e., from revenues being greater than expenses).

A

Common Stock, Retained Earnings

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12
Q

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

A

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

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13
Q

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

A

have no effect on liabilities, total assets and stockholders equity

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14
Q

Quartz Instruments had Retained Earnings of $145,000 at December 31, 2020. Net Income for 2021 was $90,000, and Dividends for 2021 were $30,000. What amount of Retained Earnings should be reported at December 31, 2021?

A

$205,000

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15
Q

ABC Company paid $6,000 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?

A

No expense should be recognized in June.

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16
Q

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

A

retained

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17
Q

Revenues increase net income and retained earnings, so revenues are recorded with a _________ just like all increases in stockholders’ equity.

A

credit

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18
Q

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

A

False

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19
Q

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

A

True

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20
Q

If Sales Revenue is credited, then which of the following would be the corresponding debit?
Inventory, Retained Earnings, Accounts Payable, Cash

A

Cash

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21
Q

Revenues are increased with ______, because they increase _______.

A

credits, stockholders’ equity

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22
Q

Accounts Receivable arises when a company sells on______, and is an ____.

A

credit, asset

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23
Q

If expenses are greater than revenues, Retained Earnings will ______.

A

decrease

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24
Q

If a company records a debit to Cash and a credit to Deferred Revenue, it must be recording the ______.

A

collection of cash from customers in advance of the revenue being generated

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25
Q

If a company debits Cahs and credits Sales Revenue, it is recording the:

A

sale of goods to a customer for cash

26
Q

Expenses are increased with ______.

A

debits because they decrease stockholders’ equity

27
Q

Pizza Company sold pizzas on account. The journal entry to record the sales will include a _________________

A

debit to accounts receivable, credit to sales revenue

28
Q

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.

A

debit to wages expense, credit to cash

29
Q

The entry to record cash collected from customers in advance includes a _________

A

debit to cash, credit to deferred revenue

30
Q

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

A

supplied and credit accounts payable

31
Q

What is the most liquid asset

A

Cash

32
Q

If a company records a debit to Accounts Receivable and a credit to Revenue, it must be recording the ______

A

sale of goods on account

33
Q

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

A

the wages expensed in the period were paid

34
Q

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

A

Cash, Deferred Revenue

35
Q

All assets are increased by ______

A

Debit

36
Q

Expenses decrease net income and retained earnings, so expenses are recorded with a __________, just like all decreases in stockholders’ equity.

A

debit

37
Q

If the purchase of supplies on account is not recorded then ___________

A

Liabilities will be understated

38
Q

Utilities expense is _________

A

debited when the service is received.

39
Q

Credits will increase which of these T-accounts? (many choices) (Advertising expense, Deferred revenue, Accounts payable, Sales revenue)

A

Deferred revenue, accounts payable, sales revenue

40
Q

The journal entry a law firm records when it provides legal services for a client who will pay in a later period includes a ______.

A

credit to service revenue, debit to accounts receivable

41
Q

When Pizza Company sells three $100 gift cards at the beginning of the month, it should record a debit to ______ and credit to ______ for $300.

A

Cash, Deferred Revenue

42
Q

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 ______.

A

debit to Advertising Expense, credit to Cash

43
Q

The Accounts Receivable T-account will have ____ on the credit side.

A

collections of sales made on account

44
Q

Performing services on account will increase ______.

A

Total assets, stockholders equity

45
Q

True or false: The unadjusted trial balance reports the increases and decreases in each account that occurred during the accounting period.

A

false

46
Q

When revenue is credited, the possible three debits are _____, accounts _______, and _______ revenue.

A

cash, receivable, deferred

47
Q

Which ratio change provides good news about a company?

A

An increase in the net profit margin ratio

48
Q

Multiple Choice Question
The ending balance of Accounts Receivable in the ledger is calculated by adding the ______

A

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

49
Q

If a company records a debit to Accounts Receivable and a credit to Revenue, it must be recording the ______.

A

sale of goods on account

50
Q

If a company records a debit to Accounts Receivable and a credit to Revenue, it must be recording the ______.

A

sale of goods on account

51
Q

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

A

equal

52
Q

If Revenues is credited, then the possible debits are ______.

A

Cash, Accounts Receivable, Deferred Revenue

53
Q

Which are 3 common misconceptions users of an income statement may have?

A

Net income does not include estimates,
Net Income equals cash,
Net Income reports all changes of value that occurred during the accounting period

54
Q

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

A

revenue

55
Q

If the Accounts Receivable ending balance is greater than its beginning balance, then its debits were ______ than its credits during the period.

A

greater

56
Q

When AppGame Company delivers pizza to customers on account and bills its customer accounts, it should record a debit to Blank______ and a credit to Blank______.

A

Accounts Receivable; Sales Revenue

57
Q

True or false: The unadjusted trial balance reports the increases and decreases in each account that occurred during the accounting period.

A

False

58
Q

True or False: Measurement of net income involves estimations.

A

True

59
Q

Accounts Payable, Sales Revenue, and Deferred Revenue are all ______ by T-accounts

A

increased

60
Q

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

A

ACCT 284 (1 decks)

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