MBA 700 Exam 2 UPDATED ACTUAL
Questions and CORRECT Answers
April of 2023 - CORRECT ANSWER Calvin books a cruise and pays for the cruise in
November 2022, but the cruise isn't scheduled to sail until April 2023. When does Carnival
report revenue from the ticket sale? (accrual basis)
when Calvin pays off his credit card - CORRECT ANSWER Calvin buys a Jimmy Buffet
CD from Best Buy. Instead of paying cash, Calvin uses his Best Buy credit card to buy the CD.
When does Best Buy recognize revenue? (accrual basis)
april (month of cruise) - CORRECT ANSWER In march, cash went out for purchase of
supplies. In April, cash went out for purchase of fuel. In May, cash went out for payment of
salaries. When would expenses (and revenue) be recognized? (accrual basis)
November 2022 - CORRECT ANSWER In November 2022, company receives cash from
Ruby & Calvin for Hawaiian cruise next April. When is revenue recognized? (cash-basis)
March 2023 - CORRECT ANSWER In March 2023, the company pays cash for supplies
to be used next month. When is expense recognized? (cash basis)
April 2023 - CORRECT ANSWER In April 2023, the company pays cash for the fuel used
during the cruise next month. When is expense recognized? (cash & accrual basis)
May 2023 - CORRECT ANSWER In May 2023, the company pays cash to employees for
salaries earned last month. When is expense recognized?
accrual basis - CORRECT ANSWER accounting records revenues when earned and
expenses when incurred
revenue recognition principle - CORRECT ANSWER The principle that companies
recognize revenue in the accounting period in which the performance obligation is satisfied.
, matching principle - CORRECT ANSWER recognize expenses in the same period as the
revenues they help to generate
expense recognition principle - CORRECT ANSWER expenses are reported when they are
incurred; expenses are often recognized with the revenues they help to generate
cash basis accounting - CORRECT ANSWER Reporting income when the cash is received
and expenses when the cash is paid.
purpose of adjusting entries - CORRECT ANSWER - To record events that have occurred
but which have not been recorded.
- To record revenues in the period earned.
- To record expenses in the period they are incurred in the generation of those revenues.
- To correctly state assets and liabilities in the balance sheet.
prepayments: prepaid expenses - CORRECT ANSWER we paid cash (or had an obligation
to pay cash) for the purchase of an asset before we use the asset (incurred the expense)
prepayments: unearned revenues - CORRECT ANSWER we received cash and recorded a
liability before we earned revenue
accruals: accrued expenses - CORRECT ANSWER we paid cash after we incurred
expense and recorded a liability
accruals: accrued revenue - CORRECT ANSWER we received cash after we warned
revenue and recorded an asset
adjusted trial balance - CORRECT ANSWER list of all accounts and their balances after
we have updated account balances for adjusting entries
Questions and CORRECT Answers
April of 2023 - CORRECT ANSWER Calvin books a cruise and pays for the cruise in
November 2022, but the cruise isn't scheduled to sail until April 2023. When does Carnival
report revenue from the ticket sale? (accrual basis)
when Calvin pays off his credit card - CORRECT ANSWER Calvin buys a Jimmy Buffet
CD from Best Buy. Instead of paying cash, Calvin uses his Best Buy credit card to buy the CD.
When does Best Buy recognize revenue? (accrual basis)
april (month of cruise) - CORRECT ANSWER In march, cash went out for purchase of
supplies. In April, cash went out for purchase of fuel. In May, cash went out for payment of
salaries. When would expenses (and revenue) be recognized? (accrual basis)
November 2022 - CORRECT ANSWER In November 2022, company receives cash from
Ruby & Calvin for Hawaiian cruise next April. When is revenue recognized? (cash-basis)
March 2023 - CORRECT ANSWER In March 2023, the company pays cash for supplies
to be used next month. When is expense recognized? (cash basis)
April 2023 - CORRECT ANSWER In April 2023, the company pays cash for the fuel used
during the cruise next month. When is expense recognized? (cash & accrual basis)
May 2023 - CORRECT ANSWER In May 2023, the company pays cash to employees for
salaries earned last month. When is expense recognized?
accrual basis - CORRECT ANSWER accounting records revenues when earned and
expenses when incurred
revenue recognition principle - CORRECT ANSWER The principle that companies
recognize revenue in the accounting period in which the performance obligation is satisfied.
, matching principle - CORRECT ANSWER recognize expenses in the same period as the
revenues they help to generate
expense recognition principle - CORRECT ANSWER expenses are reported when they are
incurred; expenses are often recognized with the revenues they help to generate
cash basis accounting - CORRECT ANSWER Reporting income when the cash is received
and expenses when the cash is paid.
purpose of adjusting entries - CORRECT ANSWER - To record events that have occurred
but which have not been recorded.
- To record revenues in the period earned.
- To record expenses in the period they are incurred in the generation of those revenues.
- To correctly state assets and liabilities in the balance sheet.
prepayments: prepaid expenses - CORRECT ANSWER we paid cash (or had an obligation
to pay cash) for the purchase of an asset before we use the asset (incurred the expense)
prepayments: unearned revenues - CORRECT ANSWER we received cash and recorded a
liability before we earned revenue
accruals: accrued expenses - CORRECT ANSWER we paid cash after we incurred
expense and recorded a liability
accruals: accrued revenue - CORRECT ANSWER we received cash after we warned
revenue and recorded an asset
adjusted trial balance - CORRECT ANSWER list of all accounts and their balances after
we have updated account balances for adjusting entries
