Generally Accepted Accounting Principles and Cash

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ACG6026 Boot Camp Quiz
Fall 2013

1. Which of the following is the fundamental accounting equation? a. Current assets + Current liabilities = Owners' equity
b. Assets + Owners' equity = Liabilities
c. Cash = Debts + Common stock
d. Assets = Liabilities + Owners' equity

2. Which one of the following best describes a balance sheet? a. A description of the entity's operations over a period of time b. A snapshot at a point in time of an entity's assets, liabilities and owners' equity c. A reconciliation of an entity's bank account balance

d. A description of the company's cash flows over a period of time

3. Which one of the following is the best definition of owners' equity? a. The market value of the outstanding common stock
b. The amount that owners would receive if they sold the entity c. The cash balance less outstanding debts
d. The difference between assets and liabilities

4. Neura Pharma, Inc. has purchased a drug patent with a remaining useful life of 13 years. How should this new asset be classified? a. A current tangible asset
b. A non-current tangible asset
c. A non-current intangible asset
d. A current intangible asset

5. On January 1, 2005, Mansfield Company has a retained earnings balance of $256,000. During 2005, its net income is $44,000 and it announces and pays $12,000 in dividends. There is no other dividend-related activity during the year. Its December 31, 2005 retained earnings balance is: a. $212,000

b. $288,000
c. $300,000
d. $224,000

6. On April 30, Jemison Engineering receives a special order for a swing set, to be delivered to the customer in a month's time. Jemison purchases a number of items specifically for the construction of the swing set: lumber, chains, railings and paint. According to the matching concept, when will Jemison Engineering record the cost of those special items as a cost of goods sold expense: a. As each item is purchased

b. As each item is used in the production of the swing set
c. When the revenue for the swing set is recorded
d. As soon as the special order is received
7. Tournas Sports receives a special order for 100 team jerseys. The customer pays the full amount, $2,000, at the time of the order. The jerseys will be delivered in two weeks. Choose the statement that best reflects the application of the revenue recognition concept at the time of the order: a. Revenue of $2,000 has been earned and realized

b. Revenue of $2,000 has been earned but not realized
c. Revenue of $2,000 has been realized but it has not been earned d. Revenue of $2,000 has neither been earned nor realized

8. On October 10, Jayson Company receives an order for a $700 TV which it will deliver to the customer on October 17. The customer pays the full amount in cash at the time of the order. Besides recording the receipt of $700 cash, what else should Jayson record on October 10? a. Record $700 revenue

b. Record some of the $700 as revenue now and the rest on delivery of the TV c. Record a $700 liability
d. Make no record at this time; record revenue and receipt of cash on delivery of TV

9. During November 2010, Asler Inc., performs consulting services. The client does not pay Asler until January, 2011. a. Using the accrual basis of accounting, the revenue is reported in January 2011. b. Using the cash basis of accounting, the revenue is reported in November 2010. c. Using the accrual basis of accounting, the revenue is reported in November 2010. d. Using the accrual basis of accounting, the revenue is reported when Asler's expenses are paid.

10. On April 30, Jemison Engineering receives a special order for a swing set, to be delivered to the customer in a month's time. Jemison purchases a number of items specifically for the construction of the swing set: lumber, chains, railings and paint. According to the matching concept, when will Jemison Engineering record the cost of those special items as a cost of goods sold expense?...
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