Question : Multiple Choice Questions 31. Which of the following best describes the operating : 1228491

Multiple Choice Questions
 

31. Which of the following best describes the operating cycle? 
A. It is the length of the manufacturing process.
B. It is the time that elapses from the purchase of inventory on account to the sale of inventory on account.
C. It is the time that elapses from the completion of the manufacturing process to the cash collection from sale of the manufactured goods.
D. It is the time that elapses from the cash payment to suppliers to collection of cash from customers.

32. Which of the following would lengthen the operating cycle? 
A. Faster collection of accounts receivables.
B. Selling inventory in a shorter period of time.
C. Increasing the number of customers who paid cash.
D. Relaxing credit terms and allowing customers more time to pay.

33. The primary difference between revenues and gains is 
A. gains are increases in net assets from peripheral activities while revenues are increases from ongoing activities.
B. revenues increase operating income and gains have no impact on net income.
C. revenues cause increases in net assets as a result of peripheral activities and gains cause increases through ongoing activities.
D. gains result in an increase in operating income whereas revenues do not impact operating income.

34. Which of the following best describes the time period assumption? 
A. It assumes we value a business as of the end of every month.
B. It is the cutoff point for asset and liability recognition.
C. It implies that financial statements are prepared at the end of a business entity’s operating cycle.
D. It assumes we divide the long life of a business into a series of shorter time periods for accounting and reporting purposes.

35. Which of the following costs is most likely to be the largest expense reported on the income statement of a merchandiser such as Wal-Mart? 
A. Salaries expense
B. Cost of goods sold
C. Advertising expense
D. Income tax expense

36. Which of the following businesses would most likely not report cost of goods sold on their income statement? 
A. A law firm
B. An automobile dealership
C. A pizza restaurant
D. A computer chip manufacturer

37. Which of the following describes the reporting of interest expense on the income statement? 
A. It is reported as an operating expense.
B. It is a component of operating income.
C. It is deducted from operating income.
D. It is added to operating income.

38. Which of the following statements is false? 
A. The income statement covers a period of time.
B. A loss on the sale of plant and equipment is considered a peripheral activity and is not reported on the income statement.
C. Rent expense is a component of operating income.
D. Interest expense isn’t a component of operating income.

39. Which of the following is not reported as an operating expense on the income statement? 
A. Salaries expense
B. Rent expense
C. Interest expense
D. Advertising expense

40. Which of the following statements is correct? 
A. Dividend income is a component of operating income.
B. Operating income is decreased by the loss from the sale of plant assets.
C. A gain on the sale of a stock investment doesn’t increase operating income.
D. Income before taxes doesn’t change when a gain results from the sale of plant assets.