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Exam 3: Reporting Operating Results on the Income Statement

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Question 31

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Trudy's Café paid employees $1,700 in September for work performed that month.What journal entry will Trudy's prepare to record that transaction?

A) Debit Cash and credit Wages Revenue for $1,700.
B) Debit Cash and credit Salaries and Wages Payable for $1,700.
C) Debit Salaries and Wages Revenue and credit Cash for $1,700.
D) Debit Salaries and Wages Expense and credit Cash for $1,700.

E) C) and D)
F) All of the above

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Question 32

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On Time Computer Repair uses accrual basis accounting.A computer was repaired on May 15.The customer picked up the computer on June 1 and mailed the payment on June 5.On Time Computer Repair received the check in the mail on June 10.The revenue should be recognized as earned on which date?

A) May 15
B) August 1
C) June 5
D) June 10

E) A) and B)
F) A) and C)

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Question 33

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During April,the Grass is Greener Company buys and pays for a six-month supply of fertilizer in order to receive a bulk discount.The company uses accrual basis accounting.The cost of fertilizer recorded:

Dividing up the continuing life of a company into shorter periods is called the time period assumption.

Which of the following would not be reported on the income statement?

In January,a company pays for advertising space in the local paper for ads to be run during the months of January,February,and March at $1,500 a month.The journal entry to record the payment would debit to:

A business purchased supplies for cash.The business will decrease its Cash account and:

A company has sales revenues of $200,000 and expenses of $50,000.What is its net profit margin?

A company does not need to record the receipt of a bill for utilities used during this year if the company will not pay the bill until next year.

During January 2015, the first month of operations, a consulting firm had following transactions: 1.Issued common stock to owners in exchange for $20,000 cash. 2.Purchased $5,000 of equipment, paying $1,000 cash and signing a promissory note for $4,000. 3.Received $9,000 in cash for consulting services performed in January. 4.Purchased $1,500 of supplies on account; all of the supplies were used in January. 5.Provided consulting services on account in the amount of $16,000. 6.Paid $750 on account. 7.Paid $3,000 to employees for work performed during January. 8.Received a bill for utilities for January of $3,400; the bill remains unpaid. -Use the information above to answer the following question.What is the amount of total revenue to be reported on the income statement for the month of January?

The basic accounting equation may be expanded to include the income statement effects of operating activities.Which of the statements below is correct regarding the expanded accounting equation?

Pandey Inc.had the following activities during the month: A.Borrowed $7,000,000 cash,signing a promissory note. B.Bought a building for $800,000,paying $200,000 in cash and signing a promissory note for $600,000. C.Rented equipment at a cost of $10,000 per month and issued a check covering six months' rent. D.Provided $104,000 of services and billed customers. E.Purchased $30,000 of supplies on account. F.Received a utility bill for the current period in the amount of $1,200. G.Raised sales prices on 200 units from $400 per unit to $440 per unit. H.Received a 50% deposit from a customer on a $20,000 order to be filled next month. Required: Analyze each of the activities (A)through (H)above with the goal of indicating their effects on the basic accounting equation by completing the table below.Indicate the accounts and amounts involved.Include a plus (+)or minus (-)sign before each number to show its effect on the accounting equation.If the activity should not to be recorded as a transaction,enter the word "None" in the first column for that activity.

Jim's Gymnastics Training's operations for the month of October are summarized as follows: A.Provided $5,000 of training to students on account. B.Received $4,000 cash from students for training provided in October. C.Received $1,000 cash for training to be provided in November. D.Received $3,000 cash from students on account for training provided in September. E.Paid September's gym rental bill on account in the amount of $1,000. F.Received October's rental bill of $1,500; set it aside. Required: Part a.Determine the net income for October using the cash basis of accounting. Part b.Determine the net income for October using the accrual basis of accounting.

An increase in operating expenses would have which of the following effects on a company's profit margin?

Which of the following items is not a specific account in a company's chart of accounts?

Your company received payment from a customer last month for a service that you provided this month.How will the business activity of the current month affect the basic accounting equation?

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

Which of the following statements about net profit margin is not correct?

A dance studio accepts $1,500 to provide a series of dance lessons to a youth group during the month of July.The studio decides to record the revenue in July.The studio incurs rent,utilities,and salaries expenses in July.The studio decides to record those expenses in August,when it pays for them.One or both of these decisions:

During January,services totaling $1,500 were performed on account for a customer.The company collected that $1,500 from the customer in March.The journal entry to record the receipt of cash from the customer is recorded with a debit to: