Question 1

0 out of 10 points
Harvest Catering is a local catering service. Conceptually, when should Harvest
recognize revenue from its catering service?
Answer
Selected Answer: At the date the customer's payment is received
Correct Answer: At the date the meals are served
Question 2
10 out of 10 points
A pool cleaning service signs a contract with a new customer on May 1. The pool
is vacuumed and shocked for the customer on June 1, and the bill for the services
is paid on July 1. Under the accrual basis, the business should recognize revenu
e on:
Answer
Selected Answer: June 1
Correct Answer: June 1
Question 3
10 out of 10 points
Starlight Associates, Inc. recorded salary expense of $100,000 in 2014. However,
additional salaries of $5,000 had been earned, but not paid or recorded at Dece
mber 31, 2014. After the adjustments are recorded and posted at December 31, 201
4, the balances in the Salaries Expense and Salaries Payable accounts will be

Salaries Expense ; Salaries Payable
Answer
Selected Answer: $105,000; $5,000
Correct Answer: $105,000; $5,000
Question 4
10 out of 10 points
Measurement of the economic effects on an entity involves each of the following
except
Answer
Selected Answer: Recording the economic effects in the financial state
ments
Correct Answer: Recording the economic effects in the financial statements
Question 5
0 out of 10 points
Zebra Company overstated its December 31, 2014 inventory by $5,200. Which statem
ent is true concerning Zebras financial statement amounts for 2014?
Answer
Selected Answer: Net income is understated.
Correct Answer: The current ratio is overstated.
Question 6
10 out of 10 points
If a company understates its ending inventory balance for 2012 by $15,500, what
are the effects on its net income for 2012 and 2011?

Effect on 2012 Net Income Effect on 2011 Net Income
Answer
Selected Answer: Understated by $15,500 No effect
Correct Answer: Understated by $15,500 No effect
Question 7
0 out of 10 points
The following information is reported in the operating activities section of Gat
eway's statement of cash flows for 2014:

Net income
$1,200,000
Increase in inventories
600,000
Decrease in accounts payable
400,000

Which one of the following conclusions can be assumed from the information provi
ded?
Answer
Selected Answer: Cash payments for merchandise purchases were less tha
n the amount of merchandise purchased on credit during 2014.
Correct Answer: Gateway purchased more merchandise than it sold in 2014.
Question 8
0 out of 10 points
A company using the periodic inventory system has the following account balances
: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650;
Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discount
s, $330. The cost of merchandise purchased is equal to
Answer
Selected Answer: $12,670
Correct Answer: $9,070
Question 9
10 out of 10 points
The comparative balance sheets for Spring Co. for 2014 and 2013 indicate that ac
counts receivable decreased during 2014. Spring uses the indirect method of prep
aring the operating activities section of its statement of cash flows. How will
the decrease in accounts receivable be reported on the statement of cash flows?
Answer
Selected Answer: It will be added to net income in the operating activ
ities section.
Correct Answer: It will be added to net income in the operating activities se
ction.
Question 10
10 out of 10 points
Which one of the following is an accurate description of Allowance for Doubtful
Accounts?
Answer
Selected Answer: Contra account
Correct Answer: Contra account
Question 11
10 out of 10 points
What is the impact on the cash flow statement from a decrease in accounts receiv
able, assuming the indirect method is used?
Answer
Selected Answer: An increase in the cash flow from operating activitie
s
Correct Answer: An increase in the cash flow from operating activities
Question 12
10 out of 10 points
Refer to information for Satin Corporation

If Satin uses 2% of net credit sales to estimate its bad debts, what will be the
balance in the Allowance for Doubtful Accounts account after the adjustment for
bad debts?
Answer
Selected Answer: $31,800
Correct Answer: $31,800
Question 13
0 out of 10 points
Arena, Inc. uses straight-line depreciation for its equipment. Arena purchased e
quipment for $300,000 and estimated its useful life at 8 years. The bookkeeper f
ailed to consider the residual value of $50,000. What is the impact on earnings
per share and operating income of failing to consider the residual value?
Answer
Selected Answer: Earnings per share will be overstated and operating i
ncome will be understated.
Correct Answer: Both earnings per share and operating income will be understa
ted.
Question 14
10 out of 10 points
All of the following are included in the acquisition cost of property, plant, an
d equipment except:
Answer
Selected Answer: maintenance costs
Correct Answer: maintenance costs
Question 15
0 out of 10 points
Grover, Inc. purchased a crane at a cost of $80,000. The crane has an estimated
residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of op
eration. The crane was purchased on January 1, 2013 and was used 2,700 hours in
2013 and 2,600 hours in 2014.

If Grover uses the units-of-production method, what is the depreciation rate per
hour for the equipment?
Answer
Selected Answer: $7.50
Correct Answer: $6.00
Question 16
0 out of 10 points
Eagles Nest sold equipment for $4,000 cash. This resulted in a $1,500 loss. What
is the impact of this sale on the working capital?
Answer
Selected Answer: Has no effect on working capital
Correct Answer: Increases working capital