Question 1

Unearned revenues are reported as liabilities on the balance sheet.

Accepted Answer

True

Question 2

Selling inventory to a customer on account results in an increase in both assets and revenues.

Accepted Answer

True

Question 3

The time period assumption implies that the life of a business entity can be reported in time periods such as quarters and years.

Accepted Answer

True

Question 4

Interest revenue is reported as operating revenue and therefore increases operating income.

Accepted Answer

The answer of Interest revenue is reported as operating revenue...

Question 5

Application of generally accepted accounting principles requires that the accrual basis of accounting be used for reporting revenues and expenses on the income statement.

Accepted Answer

The answer of Application of generally accepted accounting principles requires...

Question 6

The revenue recognition principle recognizes revenue when the goods or services are transferred to customers, regardless of the timing of the cash collection from customers.

Accepted Answer

The answer of The revenue recognition principle recognizes revenue when...

Question 7

An example of operating revenue would be the revenue created by the sale of an automobile by a car dealership.

Accepted Answer

The answer of An example of operating revenue would be...

Question 8

A gain resulting from the sale of buildings and equipment is not reported as operating income on the income statement.

Accepted Answer

The answer of A gain resulting from the sale of...

Question 9

Under accrual accounting, rent expense for February, 2016 would be recognized on the income statement in February, 2016 even though it had been paid for in January of 2016.

Accepted Answer

The answer of Under accrual accounting, rent expense for February,...

Question 10

Expenses are the result of decreases in assets or increases in liabilities incurred in order to generate revenues.

Accepted Answer

The answer of Expenses are the result of decreases in...

Question 11

According to the revenue recognition principle, revenue is recognized at the time that cash is collected from a customer for services to be provided in the future.

Accepted Answer

The answer of According to the revenue recognition principle, revenue...

Question 12

Cash received prior to the providing of the goods or service results in an increase in both assets and liabilities.

Accepted Answer

The answer of Cash received prior to the providing of...

Question 13

Using cash to purchase office supplies, which will be consumed later, results in an increase in expenses and a decrease in assets at the time of purchase.

Accepted Answer

The answer of Using cash to purchase office supplies, which...

Question 14

The expense recognition principle requires expenses to be recorded on the income statement in the same period they are incurred in generating revenues.

Accepted Answer

The answer of The expense recognition principle requires expenses to...

Question 15

According to the expense recognition principle, wages expense is recognized on the income statement when the wages are paid rather than when the employee provides the work.

Accepted Answer

The answer of According to the expense recognition principle, wages...

Question 16

Interest expense is reported on the income statement as an operating expense.

Accepted Answer

The answer of Interest expense is reported on the income...

Question 17

The operating cycle is the time that elapses between a company's cash payment to suppliers for inventory purchases and the collection of cash from sale of inventory to customers.

Accepted Answer

The answer of The operating cycle is the time that...

Question 18

Under accrual basis accounting, revenues are recognized when goods or services are transferred to customers, and expenses are recognized when incurred to generate that revenue.

Accepted Answer

The answer of Under accrual basis accounting, revenues are recognized...

Question 19

A retail store would likely have a shorter operating cycle than an automobile manufacturer.

Accepted Answer

The answer of A retail store would likely have a...

Question 20

Earnings per share must be either reported on the income statement or disclosed in the notes to the financial statements.

Accepted Answer

The answer of Earnings per share must be either reported...

Quiz 3: Operating Decisions and the Accounting System

Unearned revenues are reported as liabilities on the balance sheet.

Selling inventory to a customer on account results in an increase in both assets and revenues.

The time period assumption implies that the life of a business entity can be reported in time periods such as quarters and years.

Interest revenue is reported as operating revenue and therefore increases operating income.

Application of generally accepted accounting principles requires that the accrual basis of accounting be used for reporting revenues and expenses on the income statement.

The revenue recognition principle recognizes revenue when the goods or services are transferred to customers, regardless of the timing of the cash collection from customers.

An example of operating revenue would be the revenue created by the sale of an automobile by a car dealership.

A gain resulting from the sale of buildings and equipment is not reported as operating income on the income statement.

Under accrual accounting, rent expense for February, 2016 would be recognized on the income statement in February, 2016 even though it had been paid for in January of 2016.

Expenses are the result of decreases in assets or increases in liabilities incurred in order to generate revenues.

According to the revenue recognition principle, revenue is recognized at the time that cash is collected from a customer for services to be provided in the future.

Cash received prior to the providing of the goods or service results in an increase in both assets and liabilities.

Using cash to purchase office supplies, which will be consumed later, results in an increase in expenses and a decrease in assets at the time of purchase.

The expense recognition principle requires expenses to be recorded on the income statement in the same period they are incurred in generating revenues.

According to the expense recognition principle, wages expense is recognized on the income statement when the wages are paid rather than when the employee provides the work.

Interest expense is reported on the income statement as an operating expense.

The operating cycle is the time that elapses between a company's cash payment to suppliers for inventory purchases and the collection of cash from sale of inventory to customers.

Under accrual basis accounting, revenues are recognized when goods or services are transferred to customers, and expenses are recognized when incurred to generate that revenue.

A retail store would likely have a shorter operating cycle than an automobile manufacturer.

Earnings per share must be either reported on the income statement or disclosed in the notes to the financial statements.