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Exam 3: Reporting Operating Results on the Income Statement

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Question 121

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If a company has no Salaries and Wages Payable on its balance sheet,then one may conclude that:

A) there are salaries and wages to be paid in next period.
B) no salaries and wages were paid in the current period.
C) Salaries and Wages Expense was greater than the cash paid for wages during the period.
D) the salaries and wages were paid in advance.

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

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Question 122

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A net loss results when:

A) assets are greater than liabilities.
B) revenues are less than expenses.
C) revenues are greater than expenses.
D) cash paid is less than cash received.

E) B) and D)
F) B) and C)

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Question 123

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Which of the following statements about accrual basis accounting is not correct?

In January,Pizza Company bought pizza ingredients on account for $100,with payment due to the supplier in 90 days.The pizza ingredients were used for pizzas made and delivered in January.In which month should Pizza Company record the cost of the pizza ingredients as an expense?

When expenses exceed revenues in a period,stockholders' equity will increase.

Selected financial information presented below was obtained from the financial statements of the Napa Valley Brewery: What was the net profit margin ratio?

Which account is least likely to be credited when an expense is recorded?

Which of the following line items appear on an income statement?

Which of the following statements about net income is correct?

The expense recognition principle indicates:

Which of the following statements about the cash basis of accounting is correct?

The Rainbow House Painting Company has been contracted to paint a house for $3,600.One-half of that amount will be paid up front; the rest will be paid upon satisfactory completion.Rainbow should recognize the revenue when:

Geo Inc.had the following account balances on January 1,Year 2: During January,Year 2,Geo entered into the following transactions: A.Paid $689 on account for utilities that were used during December Year 1. B.Purchased $423 of supplies for cash. C.Signed a rental agreement for office space and paid $3,500 in advance for six months of rent beginning February 1,Year 2. D.Purchased $15,000 of new equipment,signing a promissory note. E.Provided $26,000 of services.$17,000 was received in cash and $9,000 was provided on credit. F.Paid workers $8,300 for work done in January. Required: Part a.Prepare journal entries to record the transactions identified among activities (A)through (F). Part b.Set up T-accounts for Cash,Accounts Receivable,Supplies,Prepaid Rent,Equipment,Accounts Payable,Note Payable,Common Stock,Retained Earnings,Service Revenue,and Salaries and Wages Expense.The beginning balance in each T-account should be the amount shown in the list of account balances above or $0 if the account does not appear above.Then,summarize the effects of each transaction in the appropriate T-accounts. Part c.After posting the journal entries to the T-accounts,compute ending balances for each of the T-accounts.

Which of the following is always true?

The following account balances are taken from the December 31, 2015, financial statements of ABZ Advertising Company.The company uses accrual basis accounting. The following activities occurred in 2016: 1.Performed advertising services on account, $55,000. 2.Received cash payments on account, $10,400. 3.Received deposits from customers for advertising services to be performed in 2017, $2,500. 4.Made payments to suppliers on account, $5,000. 5.Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was on account and unpaid as of the end of the year. -Use the information above to answer the following question.Which of the following is the journal entry that will be used to record activity #1?