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3 - University of Massachusetts Dartmouth Accounting 211...

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University of Massachusetts Dartmouth Accounting 211 – Principles of Accounting Chapter 3 Quiz Name: ______________________ True/False - Write “T” or “F” on the line provided. ____ 1. The operating cycle is the time it takes for a company to purchase goods, pay for the goods, sell them to customers, and collect the cash from the customers. ____ 2. The division of business activities into a series of equal time periods for accounting purposes is known as the time period assumption. ____ 3. In comparing the operating cycles of a retail company such as Target with a manufacturer of aeronautical products such as Boeing, it is most likely they would have similar length operating cycles. ____ 4. Gains are inflows of net assets from peripheral transactions. ____ 5. Interest expense connected to notes payable is an example of a non-operating or peripheral expense. ____ 6. Under accrual accounting, interest expense would be recognized when the interest has accrued with the passage of time even though cash has not been paid. ____ 7. A company that pays six months' rent in advance at the end of the year will report that amount as rent expense on the income statement. ____ 8. Revenue recognition most commonly occurs at the point of delivery of goods or services to the customer. ____ 9. When we pay for a two-year insurance policy, we have incurred an expense. ____ 10. Managers who commit accounting fraud may be fined but can not be charged with a crime punishable by jail time. ____ 11. Revenue collected in advance of being earned represents a liability until it is earned. ____ 12. An increase in expenses represents a decrease in stockholders' equity. Multiple Choice – circle the letter of the answer you select 13. Which of the following expenses is usually listed last on the income statement? A) Cost of sales B) Salaries and benefits expense C) Advertising expense D) General administrative expenses E) Income tax expense
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