ACCT 2101 Exam 2 Study Guide Chapters 4, 5, & 7 QUESTIONS WELL ANSWERED UPDATED 2022

Chapter 4 1.The periodicity assumption states that: a. a transaction can only affect one period of time. b. estimates should not be made if a transaction affects more than one time period. c. adjustments to the enterprise's accounts can only be made in the time period when the business terminates its operations. d. the economic life of a business can be divided into artificial time periods. 2.One of the accounting concepts upon which adjustments for prepayments and accruals are based is: a. expense recognition. b. cost. c. monetary unit. d. economic entity. 3.An accounting time period that is one year in length is called: a. a fiscal year. b. an interim period. c. the time period assumption. d. a reporting period. 4.Expenses are recognized when: a. they contribute to the production of revenue. b. they are paid. c. they are billed by the supplier. d. the invoice is received. 5.The revenue recognition principle dictates that revenue should be recognized in the accounting records: a. when cash is received. b. when it is earned. c. at the end of the month. d. in the period that income taxes are paid. 6.A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be earned? a. December 5 b. December 10 c. November 30 d. December 1 7.Under the cash basis of accounting: a. Revenue is recognized when services are performed. b. Expenses are matched with the revenue that is produced. c. cash must be received before revenue is recognized. d. a promise to pay is sufficient to recognize revenue. ACCT 2101 EXAM 2 STUDY 8.Under the accrual basis of accounting: a. cash must be received before revenue is recognized. b. net income is calculated by matching cash outflows against cash inflows. c. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. d. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles. 9.The following is selected information from L Corporation for the fiscal year ending October 31, 2011. Cash received from customers $300,000 Revenue earned 370,000 Cash paid for expenses 170,000 Cash paid for computers on November 1, 2010 that will be used for 3 years 48,000 Expenses incurred including any depreciation 216,000 Proceeds from a bank loan, part of which was used to pay for the computers 100,000 Based on the accrual basis of accounting, what is L Corporation’s net income for the year ending October 31, 2011? a. $184,000 b. $154,000 ( – ) c. $152,000 d. $170,000 10.La More Company had the following transactions during 2011:  Sales of $4,500 on account  Collected $2,000 for services to be performed in 2012  Paid $1,375 cash in salaries for 2011  Purchased airline tickets for $250 in December for a trip to take place in 2012 What is La More’s 2011 net income using accrual accounting? a. $3,375 b. $5,375 c. $5,125 d. $3,125 (4500 – 1375) 11.La More Company had the following transactions during 2011.  Sales of $4,500 on account  Collected $2,000 for services to be performed in 2012  Paid $1,125 cash in salaries  Purchased airline tickets for $250 in December for a trip to take place in 2012 What is La More’s 2011 net income using cash basis accounting?