Question : 104.At the end of October, Flagship Marina received a bill : 1259737

 

 

104.At the end of October, Flagship Marina received a bill for fuel used in October. Payment is not due until November 30. This transaction:   

A. Should not be recorded in the accounting records until November.

 

B. Causes a decrease in assets and in owners’ equity in November, when the bill is paid.

 

C. Should be recorded as an expense of October, regardless of the payment date.

 

D. Is recorded as a liability in October, but is not considered an expense until paid.

 

 

 

 

105.On June 27, Healthy Life Services, Inc. performed extensive tests on lab specimens submitted by several customers and sent invoices totaling $5,200, due in 30 days.   

A. No revenue from rendering these services should be recorded until payment is received.

 

B. This situation causes an increase in assets and in revenue in June, but has no effect on owners’ equity until payment is received.

 

C. Revenue is earned in June, but assets are not increased until payment is received.

 

D. Assets, revenue, and owners’ equity are increased in June, regardless of when payments are received for the services rendered.

 

 

 

 

106.Green Systems sold and delivered modems to Blue Computers for $660,000 to be paid by Blue in three equal installments over the next three months. The journal entry made by Blue Computers to record the last of the three installment payments will include:   

A. A debit of $220,000 to Modem Expense.

 

B. A debit of $220,000 to Accounts Receivable.

 

C. A debit of $220,000 to Cash.

 

D. A debit of $220,000 to Accounts Payable.

 

 

 

 

107.Black Systems sold and delivered modems to White Computers for $330,000 to be paid by White in three equal installments over the next three months. The journal entry made by Black Systems to record this transaction will include:   

A. A debit to Sales Revenue for $330,000.

 

B. A debit to Accounts Receivable for $330,000.

 

C. A debit to Accounts Receivable for $110,000.

 

D. A debit to Cash for $330,000.

 

 

 

 

108.The statement “This business produced net income of $520,000” is unclear because it failed to specify:   

A. The accounting method, that is, accrual or cash basis.

 

B. Whether the amount earned is before or after expenses.

 

C. The time period.

 

D. The amount of cash withdrawn from the business by the owner.

 

 

 

 

109.The term revenue can best be described as:   

A. The selling price of goods and services rendered to customers during a given accounting period.

 

B. The cash received from selling goods and serving customers during a given accounting period.

 

C. The net increase in owners’ equity during a given period.

 

D. The “bottom line” in the income statement.

 

 

 

 

110.Net income is:   

A. The excess of debits over credits.

 

B. The increase in owners’ equity resulting from the profitable operations of the business.

 

C. The excess of liabilities over assets.

 

D. The increase in assets of a company during a year.

 

 

 

 

111.The reason that revenue is recorded by a credit entry to a revenue account is:   

A. That revenue always involves a debit to the Cash account.

 

B. Explained by the realization principle.

 

C. Explained by the matching principle.

 

D. That revenue increases owners’ equity.

 

 

 

 

112.Revenues increase owners’ equity because:   

A. Revenues increase net income which increases retained earnings.

 

B. Revenues are recorded by a debit.

 

C. Of the matching principle.

 

D. The conservatism principle requires revenues be recognized with an increase to owners’ equity.

 

 

 

 

113.The reason that both expenses and dividends are recorded by debit entries is that:   

A. All dividend and expense transactions involve offsetting credit entries to the Cash account.

 

B. Both expenses and dividends are offset against revenues in the income statement.

 

C. Both expenses and dividends reduce owners’ equity.

 

D. The statement is untrue-expenses are recorded by debits, but dividends are recorded by credits to the owners’ equity account.