Learning Objective 2-4
1) Team Shirts purchased T-shirts in July. The T-shirts were sold to customers in August. Team Shirts received the final cash payments in September. According to the revenue-recognition principle, when should revenue be recorded?
A) July
B) August
C) September
D) both August and September
2) Team Shirts ordered T-shirts from its supplier in June. The T-shirts were delivered in July. Team Shirts paid the bill in August and sold the T-shirts in September. When should Team Shirts recognize an expense using accrual accounting?
A) June
B) September
C) August
D) July
3) Accrual accounting is an accounting system in which ________.
A) measurement of income is NOT based on cash receipts and cash disbursements
B) measurement of income is based on cash receipts and cash disbursements
C) all businesses prepare reports required by the FASB
D) there are no timing differences
4) Clean Sweep performed cleaning services and billed the customer for $900. This transaction includes ________.
A) revenue and an account payable
B) revenue and an account receivable
C) revenue and cash
D) revenue and retained earnings
5) During the year, Mega, Inc. had revenues of $400,000 of which $310,000 was collected from customers. It also had expenses of $360,000 of which $280,000 was paid. The shareholders were paid $20,000 in dividends. Net income for the year equals ________.
A) $10,000
B) $30,000
C) $40,000
D) $20,000
6) Team Shirts ordered T-shirts from its supplier in June. The T-shirts were delivered in July. Team Shirts paid the bill in August and sold the T-shirts in September. When should Team Shirts recognize an expense using cash-basis accounting?
A) June
B) September
C) August
D) July
7) During May, Team Shirts spent $4,000 to buy 800 T-shirts and sold 300 of them for $15 each. Team Shirts should recognize ________ as expense for May.
A) $4,500
B) $1,500
C) $3,750
D) $4,000
8) During May, Team Shirts spent $4,000 to buy 800 T-shirts. In May, Team Shirts sold 300 of them for $15 each. The rest were sold for cash of $12 each in June. Net income for May and June was ________.
A) $4,500 in May and $6,000 in June
B) $3,000 in May and $3,500 in June
C) $1,500 in May and $2,500 in June
D) $500 in May and $6,000 in June
9) An accrual transaction is one in which ________.
A) the action comes before the cash
B) cash comes before the action
C) a company postpones recognizing cash transactions
D) the exchange of cash coincides with the economic substance of a transaction
10) A deferral transaction is one in which ________.
A) the action comes before the cash
B) cash comes before the action
C) a company postpones recognizing cash transactions
D) the exchange of cash coincides with the economic substance of a transaction