Question 3 (10 marks): (1 marks each)

A. Choose the best answer for each of the following questions with explanation :

1) Which of the following accounting elements does the matching principle help to match?

A) revenues and liabilities

B) expenses and assets

C) expenses and revenues

D) expenses and liabilities

2) The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

A) Cash basis accounting.

B) Operating cycle accounting.

C) Accrual basis accounting.

D) Revenue recognition accounting.

3)Unearned Revenue is classified as a(n) ________ account.

A) liability

B) asset

C) revenue

D) equity

4) The following contains information from the records of XYZ Company.

XYZ Company

Selected Financial Information

December 31, 2017

Current Assets	$90,000
Current Liabilities	30,000
Long-Term Assets	95,000
Long-Term Liabilities	65,000
Total Revenues	50,000
Total Expenses	37,000

Calculate the current ratio. (Round your answer to two decimals.)

A) 1.46

B) 3.00

C) 0.64

D) 2.28

5) ABC Company earned revenues of $19,000 and incurred expenses of $4,000. The company declared and paid cash dividends of $1,500. What is the balance in the Income Summary account after closing net income or loss to the Retained Earnings account?

A) debit balance of $19,000

B) credit balance of $4,000

C) credit balance of $15,000

D) balance of $0

6) Merchandise inventory:

A) Is a long-term asset.

B) Is a current asset.

C) Includes supplies the company will use in future periods.

D) Is classified with investments on the balance sheet.

7) The credit terms 2/10, n/30 are interpreted as:

A) 2% cash discount if the amount is paid within 10 days, or the balance due in 30 days.

B) 10% cash discount if the amount is paid within 2 days, or the balance due in 30 days.

C) 30% discount if paid within 2 days.

D) 30% discount if paid within 10 days.

8) Quality Jewelers uses the perpetual inventory system. On April 2, Quality sold merchandise for $60,000 to a customer on account with terms of 2/15, n/30. The allowances and returns on this sale amounted to $10,000. The cost of goods sold was $23,000. On April 20, Quality received payment from the customer. Calculate the amount of gross profit.

A) $50,000

B) $23,000

C) $27,000

D) $25,800

9) During a period of steadily rising costs, the inventory valuation method that yields the highest reported net income is:

A) Specific identification method.

B) Average cost method.

C) Weighted-average method.

D) FIFO method.

10) Which of the following principles states that a business's financial statements must report enough information for outsiders to make knowledgeable decisions about the company?

A) Conservatism

B) Materiality concept

C) Disclosure principle

D) Consistency principle