50) Smith Corporation has provided the following information:
Cash sales totaled $125,000.
Credit sales totaled $279,000.
Cash collections from customers for services yet to be provided totaled $38,000.
An $11,000 gain from the sale of property and equipment occurred.
Interest income totaled $7,700.
How much of these items was included in operating income?
A) $415,000.
B) $411,700.
C) $442,000.
D) $460,700.
51) Lantz Company has provided the following information:
• Cash sales totaled $255,000.
• Credit sales totaled $479,000.
• Cash collections from customers for services yet to be provided totaled $88,000.
• A $22,000 loss from the sale of property and equipment occurred.
• Interest income was $7,700.
• Interest expense was $19,900.
• Supplies expense was $336,000.
• Rent expense for the store was $36,000.
• Wages expense was $49,000.
• Other operating expenses totaled $79,000.
• Unearned revenue was $4,000.
What is the amount of Lantz’s operating revenues?
A) $734,000.
B) $822,000.
C) $826,000.
D) $833,700.
52) Lantz Company has provided the following information:
• Cash sales totaled $255,000.
• Credit sales totaled $479,000.
• Cash collections from customers for services yet to be provided totaled $88,000.
• A $22,000 loss from the sale of property and equipment occurred.
• Interest income was $7,700.
• Interest expense was $19,900.
• Supplies expense was $336,000.
• Rent expense for the store was $36,000.
• Wages expense was $49,000.
• Other operating expenses totaled $79,000.
• Unearned revenue was $4,000.
What is the amount of Lantz’s total operating expenses?
A) $421,000.
B) $500,000.
C) $522,000.
D) $541,900.
53) Lantz Company has provided the following information:
• Cash sales totaled $255,000.
• Credit sales totaled $479,000.
• Cash collections from customers for services yet to be provided totaled $88,000.
• A $22,000 loss from the sale of property and equipment occurred.
• Interest income was $7,700.
• Interest expense was $19,900.
• Supplies expense was $336,000.
• Rent expense for the store was $36,000.
• Wages expense was $49,000.
• Other operating expenses totaled $79,000.
• Unearned revenue was $4,000.
What is the amount of Lantz’s income from operations (operating income)?
A) $221,800.
B) $212,000.
C) $199,800.
D) $234,000.
54) Lantz Company has provided the following information:
• Cash sales totaled $255,000.
• Credit sales totaled $479,000.
• Cash collections from customers for services yet to be provided totaled $88,000.
• A $22,000 loss from the sale of property and equipment occurred.
• Interest income was $7,700.
• Interest expense was $19,900.
• Supplies expense was $336,000.
• Rent expense for the store was $36,000.
• Wages expense was $49,000.
• Other operating expenses totaled $79,000.
• Unearned revenue was $4,000.
What is the amount of Lantz’s income before income taxes?
A) $553,800.
B) $465,800.
C) $199,800.
D) $531,800.
55) Which of the following correctly describes the impact of collecting cash from customers for
services to be provided in the future?
A) Assets and stockholders’ equity increase.
B) Assets and revenues increase.
C) Assets and liabilities increase.
D) Assets and operating income increase.
56) Colby Corporation has provided the following information:
• Operating revenues from customers were $199,700.
• Operating expenses for the store were $111,000.
• Interest expense was $9,200.
• Gain from sale of plant and equipment was $3,300.
• Dividend payments to Colby’s stockholders were $7,700.
• Income tax expense was $36,000.
• Prepaid rent expense was $5,000.
What is the amount of Colby’s operating revenues?
A) $88,000.
B) $91,300.
C) $199,700.
D) $203,000.
57) Colby Corporation has provided the following information:
• Operating revenues from customers were $199,700.
• Operating expenses for the store were $111,000.
• Interest expense was $9,200.
• Gain from sale of plant and equipment was $3,300.
• Dividend payments to Colby’s stockholders were $7,700.
• Income tax expense was $36,000.
• Prepaid rent was $5,000.
What is the amount of Colby’s total operating expenses?
A) $111,000.
B) $114,300.
C) $116,000.
D) $120,200.
58) Colby Corporation has provided the following information:
• Operating revenues from customers were $199,700.
• Operating expenses for the store were $111,000.
• Interest expense was $9,200.
• Gain from sale of plant and equipment was $3,300.
• Dividend payments to Colby’s stockholders were $7,700.
• Income tax expense was $36,000.
• Prepaid rent was $5,000.
What is the amount of Colby’s operating income (income from operations)?
A) $81,000.
B) $83,700.
C) $88,700.
D) $92,000.
59) Colby Corporation has provided the following information:
• Operating revenues from customers were $199,700.
• Operating expenses for the store were $111,000.
• Interest expense was $9,200.
• Gain from sale of plant and equipment was $3,300.
• Dividend payments to Colby’s stockholders were $7,700.
• Income tax expense was $36,000.
• Prepaid rent was $5,000.
What is the amount of Colby’s income before income taxes?
A) $70,100.
B) $75,100.
C) $82,800.
D) $92,000.
60) Colby Corporation has provided the following information:
• Operating revenues from customers were $199,700.
• Operating expenses for the store were $111,000.
• Interest expense was $9,200.
• Gain from sale of plant and equipment was $3,300.
• Dividend payments to Colby’s stockholders were $7,700.
• Income tax expense was $36,000.
• Prepaid rent was $5,000.
How much was Colby’s net income?
A) $46,800.
B) $39,100.
C) $48,300.
D) $52,700.
61) Which of the following does not correctly describe the cash basis of accounting?
A) It is not accepted for external reporting purposes.
B) Revenues are recognized when cash is collected from customers.
C) Expenses are recognized when they are paid for.
D) Cash payments for long-term assets are recognized as an expense at the time of payment.
62) A landlord collected $5,000 cash from a tenant for December 2019’s rent but the contract rate
set for the tenant’s December rent is $8,000. Which of the following is true with respect to the
landlord’s financial statements using generally accepted accounting principles?
A) $8,000 would be reported on the statement of cash flows.
B) $8,000 would appear on the balance sheet as rent receivable.
C) $8,000 would appear on the income statement as rent revenue.
D) $5,000 would appear on the balance sheet as prepaid rent.
63) Which of the following is not a step pertaining to the revenue recognition principle
beginning in year 2018, for more complex customer contracts, according to both U.S. GAAP and
to International Financial Reporting Standards (IFRS)?
A) Determine the transaction price.
B) Identify the performance obligations.
C) Identify the contract between the company and its supplier of goods
D) Allocate the transaction price to the performance obligations.
64) Which of the following statements does not properly describe the accrual basis of
accounting?
A) Expenses are recognized when incurred in generating revenues regardless of the timing of
cash flows.
B) Revenues are recognized when the company transfers promised goods or services to
customers regardless of the timing of cash flows.
C) Generally accepted accounting principles require use of the accrual basis.
D) Accrual accounting should not be used when providing financial statements to external
decision makers.
65) Which of the following statements is false?
A) A liability is created when cash is received prior to delivery of the goods or services to a
customer.
B) Revenue is recognized at the time of delivery of the goods or services to customers if cash is
received.
C) Revenue is not recognized at the time of delivery of goods and services to customers if cash is
received after delivery of the goods and services.
D) Collecting cash after delivery of a good or service to a customer does not create revenue on
the income statement at the date of collection.
66) Which of the following journal entries is prepared when cash is received from a customer
prior to delivery of the goods or services?
A)
Cash
xxx
Revenue
xxx
B)
Cash
xxx
Unearned revenue
xxx
C)
Unearned revenue
xxx
Cash
xxx
D)
Cash
xxx
Accounts receivable
xxx
67) Which of the following journal entries is prepared by an auto repair shop when a customer
will pay cash subsequent to delivery of goods or services?
A)
Accounts receivable
xxx
Revenue
xxx
B)
Cash
xxx
Unearned revenue
xxx
C)
Unearned revenue
xxx
Cash
xxx
D)
Revenue
xxx
Accounts receivable
xxx
68) Yelena Company received cash from a customer in advance of providing the service to the
customer. Which of the following does not accurately describe the impact on the financial
statements when Yelena later provides the service?
A) Liabilities are decreased.
B) Operating income increases.
C) Retained earnings increases.
D) Assets are increased.
69) Toby Toy Store has noticed the following items that need to be considered for its income
statement for the year ended December 31, 2019:
• Commissions of $3,000 for salespeople who made sales in December will be paid January 3,
2020.
• The phone bill of $400 for December was received and will be paid January 20, 2020.
• The store rent of $2,000 for January 2020 was paid on December 28, 2019.
• At the beginning of November, Toby paid $1,500 for advertising in a monthly magazine that is
distributed in November and December of 2019, and January of 2020.
What is the proper amount of expenses to be included in the income statement for the year?
A) $4,400.
B) $6,900.
C) $6,400.
D) $5,900.
70) Which of the following best describes the expense recognition principle?
A) It requires expenses to be recorded when they are paid for.
B) It requires expenses to be recorded when incurred to generate revenues.
C) It requires expenses to be recorded consistent with the cash basis of accounting.
D) It does not allow expenses to be recorded if they are incurred prior to being paid.
71) During 2019, Sigma Company earned service revenue amounting to $700,000, of which
$630,000 was collected in cash; the balance will be collected in January, 2020. Also in 2019,
there were collections of cash prior to the delivery of goods/services totaling $10,000. What
amount should the 2019 income statement report for service revenue?
A) $630,000.
B) $700,000.
C) $70,000.
D) $570,000.
72) A company purchased supplies for cash, which will be consumed during future months.
Which of the following correctly describes the impact of the supplies purchase on the financial
statements?
A) Total assets will remain unchanged.
B) Total assets will decrease.
C) Operating expenses will increase.
D) Operating income will decrease.
73) A company purchased supplies for cash, which will be consumed during future months.
Which of the following does not correctly describe the impact on the financial statements when
the supplies are used during future months?
A) Total assets will remain unchanged.
B) Total assets will decrease.
C) Operating expenses will increase.
D) Operating income will decrease.
74) June’s Printing Shop had the following information for office supplies:
• Ordered $1,200 of supplies March 3
• Received half the order of supplies on March 16
• Used one-third of the received supplies during March
What is the total amount that should be reported as supplies expense for the month of March?
A) $100.
B) $200.
C) $400.
D) $600.
75) Daring Dolls, Inc. received an order to provide SuperDolls for a big department store. The
store paid Daring Dolls in advance for the order of SuperDolls. Which of the following describes
what will occur when Daring Dolls recognizes revenue?
A) Cash will be increased.
B) Accounts receivable will be increased.
C) Unearned revenue will be decreased.
D) Unearned revenue will be increased.
76) The core revenue recognition principle has two requirements for recognizing revenue. Which
of the following is one of these requirements?
A) The customer has paid for the goods or services.
B) Delivery of goods or performance of service has been scheduled.
C) The amount the company expects to receive is determinable.
D) The customer has signed a contract.
77) Revenue may be recognized:
A) Before goods are delivered
B) After goods are delivered
C) When goods are delivered
D) Either before goods are delivered, after goods are delivered, or when goods are delivered.