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| 1 | |
The time it takes for a company to pay cash for supplies and other inventories, sell goods and/or services to customers, and collect cash from customers is called the operating cycle. |
| | A) | True |
| | B) | False |
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| 2 | |
The reporting of the long life of a company in shorter periods of one month, one quarter, or one year is supported by the time period assumption. |
| | A) | True |
| | B) | False |
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| 3 | |
Revenues may be defined as increases in assets or settlements of liabilities resulting from an earning process from ongoing operations. |
| | A) | True |
| | B) | False |
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| 4 | |
An expense is any outflow of money for any purpose. |
| | A) | True |
| | B) | False |
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| 5 | |
Activities affecting an income statement but not central to ongoing operations are called peripheral transactions. |
| | A) | True |
| | B) | False |
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| 6 | |
The payment of interest is considered a peripheral transaction. |
| | A) | True |
| | B) | False |
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| 7 | |
Investment income is considered to be a portion of revenue generated from ongoing operations. |
| | A) | True |
| | B) | False |
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| 8 | |
Losses on the disposal of operating equipment result from peripheral transactions. |
| | A) | True |
| | B) | False |
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| 9 | |
The asset turnover ratio is a measure of management's effectiveness in using assets to generate revenues. |
| | A) | True |
| | B) | False |
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| 10 | |
If the asset turnover ratio is 4.0 and the average total assets are $450,000, the operating revenues must be $1,800,000. |
| | A) | True |
| | B) | False |
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| 11 | |
A build up of inventories in anticipation of increased sales will decrease the asset turnover ratio. |
| | A) | True |
| | B) | False |
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| 12 | |
A company that recognizes revenue and expenses when the transaction that causes them occurs, not necessarily when cash is received or paid, is using accrual basis accounting. |
| | A) | True |
| | B) | False |
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| 13 | |
The two basic accounting principles that determine when revenues and expenses are recorded under accrual accounting are the revenue principle and historical cost principle. |
| | A) | True |
| | B) | False |
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| 14 | |
Collection from the customer must be reasonably assured before revenue can be recognized under the revenue principle. |
| | A) | True |
| | B) | False |
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| 15 | |
Revenues may result from the decrease in a liability, the payment of cash at the time of the delivery of goods or services to customers, or the payment of cash after the delivery of goods or services to customers. |
| | A) | True |
| | B) | False |
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| 16 | |
When a delivery of goods and services for $15,000 results in a cash receipt of $4,000 and the balance of $11,000 on account, the reported revenues for the time period are $4,000. |
| | A) | True |
| | B) | False |
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| 17 | |
If you received $1,500 for services to be performed in the subsequent time period, you should not record revenues of $1,500 for the current time period. |
| | A) | True |
| | B) | False |
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| 18 | |
The matching principle requires that expenses be recorded when incurred in generating revenues. |
| | A) | True |
| | B) | False |
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| 19 | |
If you paid $4,500 for three month's rent, beginning with the current month, you should record $4,500 of rent expense for the current month. |
| | A) | True |
| | B) | False |
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| 20 | |
Revenues have a normal credit balance and expenses have a normal debit balance. |
| | A) | True |
| | B) | False |
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| 21 | |
Accounts must be adjusted to reflect all revenues earned and expenses incurred before financial statements reflecting Generally Accepted Accounting Principles can be prepared. |
| | A) | True |
| | B) | False |
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