11) To obtain a new customer, a business sells merchandise to the customer for $50. Normally, the merchandise sells for $100. For this sale, the business should record revenue of:
A) $50.
B) $100.
C) either amount.
D) an average of the two amounts.
12) Which of the following is a TRUE statement regarding expenses?
A) Expenses represent future assets.
B) The expense recognition principle is also called the matching principle.
C) Expenses must be paid immediately.
D) Expenses must always be less than revenues.
13) The revenue principle requires that a business record revenue when the business:
A) receives an order from a customer.
B) prepares the invoice for the customer.
C) delivers goods or services to a customer.
D) receives payment from a customer.
14) On November 1, 2014, a company using accrual-basis accounting pays $1,000,000 for a television advertising campaign. Commercials will run evenly over six months beginning on November 1, 2014. How much Advertising Expense will be reported on an income statement prepared for the year ended December 31, 2015?
A) $333,333
B) $500,000
C) $666,667
D) $1,000,000
15) A tax accountant prepares tax returns for clients and bills them after the work is completed. It usually takes two weeks of work to prepare the tax returns. It takes 30 days on average to receive payment from the clients. The accountant uses cash-basis accounting. When should the accountant record revenue?
A) when he starts working on the tax returns
B) when he completes working on the tax returns
C) when he bills the clients
D) when the clients send in their payments
16) The expense recognition principle requires:
A) the recognition of expenses in the same period as the related revenues are earned.
B) the recognition of expenses in the period they are paid.
C) the recognition of expenses in the period the benefits are received.
D) the recognition of expenses using depreciation theories and methods.
17) The Financial Accounting Standards Board(FASB) and the International Accounting Standards Board(IASB) are working together to develop similar standards. Which of the following statements is FALSE?
A) The FASB and IASB have recently developed a new standard that has a globally consistent and converged way to recognize revenue.
B) In the retail merchandising industry, FASB and IASB have used the same rules for revenue recognition.
C) In the retail merchandising industry, FASB and IASB have used different rules for revenue recognition.
D) FASB and IASB have developed similar standards for the past few years.
18) According to the converged standard for revenue recognition developed by FASB and IASB, which item below is NOT necessary?
A) identify the contract with the customer
B) identify the separate performance obligations in the contract
C) allocate the transaction price to the separate performance obligations in the contract
D) recognize expenses as the entity satisfies the performance obligations
19) Following the expense recognition principle, recognizing expenses along with the related revenues means to:
A) add expenses and revenues together to compute net income or net loss.
B) add all the expenses paid during the period and call it a net loss.
C) abandon the matching principle.
D) subtract expenses from the related revenues to compute net income or net loss.
20) On June 1, 2014, Starbucks paid the rent of $60,000 for 30 different stores in Washington and California. The rent covers the period, June 1, 2014 through November 30, 2014. On June 1, Starbucks will record ________. On June 30, Starbucks will record ________.
A) Rent Expense of $60,000; nothing
B) nothing; Rent Expense of $60,000
C) nothing; Rent Expense of $10,000
D) Prepaid Rent of $60,000; Rent Expense of $10,000
21) On January 1, 2015, a customer places an order for a new vehicle built especially for the customer. The contract price is $22,000. The vehicle is delivered to the dealer and customer on April 1, 2015. What amount of revenue does the dealer record on January 1, 2015 and April 1, 2015?
A) $22,000; $0
B) $11,000; $11,000
C) $7,333; $7,333
D) $0; $22,000