Version A Econ. 3A Midterm #2 Winter 2005 Name __Solution_______ Intial _A___ Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question. PLACE YOUR ANSWERS ON A SCANTRON.____ 1. Companies like Burger King sell franchises to individuals as well as operate company-owned stores. When franchises are sold to individuals, a franchise fee is charged for assistance provided in the startup phase, typically a period of 30 to 60 days. Assume there is an up-front franchise fee of $340,000 per store, and the franchise license lasts for 10 years. When should Burger King recognize revenue from the franchise fee of $340,000? a. Over the period during which Burger King provides the services for which the franchise fee is paid b. When the franchise is awarded c. At the end of the 10-year term d. When the franchise operator goes out of business ____ 2. Which one of the following adjusting entries will increase assets? a. Interest incurred during the period but not yet paid is accrued. b. The use of supplies is recorded. c. Depreciation for the period is recorded. d. Rent revenue is recorded for amounts owed by a tenant but not yet paid. ____ 3. One effect one the accounting equation of lending money is ____ 4. A credit means Exhibit 3-2 Recall that the basic accounting records include accounts, journals, ledgers, a chart of accounts, and a trial balance. Identify the correct term for each statement in the following set of questions.____ 5. Refer to Exhibit 3-2. The record used to accumulate monetary information for each individual asset, liability, owners' equity, revenue, and expense item.
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