The realization principle indicates that revenue usually should be recognized and recorded in the accounting records:

Select one:

a. When goods are sold or services are rendered to the customers.

b. When cash is collected from customers.

c. At the end of the accounting period.

d. Only when the revenue can be matched by an equal dollar amount of expenses.

The manager of Belle Home Improvements purchased several cash registers for the business on June 10 but does not remember whether he paid cash for the full price or still owes a balance to the vendor. Where is the best place for the manager to get the information about this transaction?

Select one:

a. A trial balance prepared at the end of June.

b. The general journal.

c. A balance sheet prepared at the end of June.

d. The ledger account for equipment.

Which of the following credit terms is the most advantageous to the purchaser of merchandise?

Select one:

a. 1/10, n/30.

b. 5/10, n/60.

c. 2/10, n/30.

d. 5/10, n/20.

Which of the following is not characteristic of financial accounting?

Select one:

a. Information used in financial statements is prepared in conformity with generally accepted accounting principles.

b. The information is confidential and is intended for use only by company management.

c. The information is used in a wide variety of business decisions

d. The information is developed according to well defined standards.

The historical cost principle is used to:

Select one:

a. Aid management in controlling costs.

b. Record transactions and events at fair market value.

c. Record transactions and events at their original cost.

d. Calculate cost of goods sold.

Merchandising companies that are small and do not use a perpetual inventory system may elect to use:

Select one:

a. A physical inventory system

b. A periodic inventory system

c. An inventory shrinkage method

d. An inventory subsidiary ledger system.

Net income is best described as:

Select one:

a. Cash receipts less cash payments made during a given accounting period.

b. Revenue earned during an accounting period, less expenses incurred during the period.

c. The increase in total assets over a given accounting period.

d. Revenue earned during an accounting period, less any cash payments made during the period.

Financial statements are prepared:

Select one:

a. Only for publicly owned business organizations.

b. For corporations, but not for sole proprietorships or partnerships.

c. For the benefit of both business managers and persons outside of the business organization.

d. In either monetary or nonmonetary terms, depending upon the need of the decision maker.

Gross profit is the difference between:

Select one:

a. Net sales and the cost of goods sold.

b. The cost of merchandise purchased and the cost of merchandise sold.

c. Net sales and net income.

d. Net sales and all expenses.

The accrual of interest on a note payable will

Select one:

a. Reduce total liabilities.

b. Increase total liabilities.

c. Have no effect upon total liabilities.

d. Will have no effect upon the income statement but will affect the balance sheet.

Which of the following would not be considered a user of financial information?

Select one:

a. A large pension fund

b. A real estate investor

c. Company management

d. All the above are considered interested in financial information.

An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the ending inventory valuation is:

Select one:

a. FIFO (first-in, first-out)

b. LIFO (last-in, first-out)

c. Retail

d. Weighted-average

The Retained Earnings statement is based upon which of the following relationships?

Select one:

a. Retained Earnings Net Income Dividends

b. Retained Earnings Net Income + Dividends

c. Retained Earnings + Net Income + Dividends

d. Retained Earnings + Net Income Dividends

The journal entry to record a particular business transaction includes a credit to the Cash account. This transaction is most likely also to include:

Select one:

a. Issuance of new capital stock.

b. The purchase of an asset on account.

c. Payment of an outstanding note payable.

d. A credit to Accounts Receivable.

Hefty Company wants to know the effect of different inventory methods on financial statements. The information provided below relates to beginning inventory and purchases for the current year:

January 2	Beginning Inventory	500 units at $3.00 per unit
April 7	Purchased	1,100 units at $3.20 per unit
June 30	Purchased	400 units at $4.00 per unit
December 7	Purchases	1,600 units at $4.40 per unit

Sales during the year were 2,700 units at $5.00. If Hefty used the first-in first-out method, ending inventory would be:

Select one:

a. $2,780.

b. $3,960.

c. $9,700.

d. $10,880.