Question

4.

Revenues

Which of the following statements is incorrect regarding revenues?

a.Revenues are increases in assets during a period from delivering or producing goods, rendering services, or other activities that are the company's ongoing major or central operations.

b.Revenues are increases in the net assets of a company from all other events and circumstances during a period except those that result from investments by owners.

c.Operating activities that generate revenues are the company's ongoing primary activities in producing and delivering goods and services to customers.

d.Revenues are settlements of liabilities during a period from delivering or producing goods, rendering services, or other activities that are the company's ongoing major or central operations.

5.

Liability

In order to be considered a liability,

a.It must involve a responsibility that will be settled by a sacrifice (such as involving the transfer of assets).

b.The company must be bound by a legal, equitable, or constructive responsibility to transfer assets or provide services.

c.The transaction, event, or arrangement obligating the company must have occurred.

d.All of the choices are correct.

6.

Accounting Equation

Which of the following correctly represents the expanded accounting equation using the ten elements of financial accounting?

a.Assets = Liabilities + (Common Stock + Beginning Inventory + Beginning Cash - Revenues + Expenses + Gains - Losses - Dividends - Ending Inventory).

b.Assets = Liabilities + (Contributed Capital + Beginning Retained Earnings + Revenues - Expenses + Gains - Losses - Dividends + Beginning AOCI + Other Comprehensive Income).

c.Assets = Liabilities - (Contributed Capital - Beginning Retained Earnings - Beginning AOCI + Revenues - Expenses + Gains - Losses + Dividends + Other Comprehensive Income).

d.Assets = Liabilities + (Contributed Capital + Beginning Retained Earnings + Beginning Cash + Revenues - Expenses - Gains + Losses + Dividends - Ending Cash).

7.

Accounting Equation and T-accounts

A company's T-accounts

1. Are all increased by debits and decreased by credits.
2. Record debits on the right side or the left side of the T-account, depending on if the T-account represents an asset or a liability.

a.I only.

b.II only.

c.Neither I nor II.

d.I and II.

8. Permanent and Temporary Accounts

Which of the following is an incorrect description of the account and its behavior?

a.Cash is a temporary account whose balance is carried forward into the next accounting period.

b.Accounts payable is a permanent account whose balance is carried forward into the next accounting period.

c.Common Stock is a permanent account whose balance is carried forward into the next accounting period.

d.Sales is a temporary account whose balance is not carried forward to the next accounting period.

9.

Income Statement

The purposes of the income statement include all of the following except:

a.Assess the company's risk.

b.Assess the impact of economic factors on a company.

c.Compare the company's performance against other companies.

d.Report the resources of a firm and the claims on the firm as of a specific date.

10.

Accounting Cycle

The five major steps in the accounting cycle include all of the following except:

a.Prepare and post adjusting entries.

b.Prepare the financial statements.

c.Prepare and post closing entries.

d.Prepare reversing entries.

Answer 1

4. Revenues are increases in the net assets of a company from all other events and circumstances during a period except those that result from investments by owners.

5.

Inorder to be considered a liability,

1. The company must be bound by a legal, equitable, or constructive responsibility to transfer assets or provide services.

2. The transaction, event, or arrangement obligating the company must have occurred.

3. It must involve a responsibility that will be settled by a sacrifice (such as involving the transfer of assets)

6.Assets = Liabilities + (Contributed Capital + Beginning Retained Earnings + Revenues - Expenses + Gains - Losses - Dividends + Beginning AOCI + Other Comprehensive Income).

7.The debit entry of an asset account translates to an increase to the account, while the right side of the asset T-account represents a decrease to the account. This means that a business that receives cash, for example, will debit the asset account, but will credit the account if it pays out cash.