2006SummerTest1 - MGT120 Summer2006 Term Test #1 1...

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MGT120 Summer2006 Term Test #1 1 Summer2006 Term Test #1 Part A (9 marks) 1. Under the revenue principle, a business should record revenue when the business: a) receives an order from a customer for goods or services b) prepares the invoice (bill) for goods or services c) delivers goods or services to a customer d) receives payment from a customer for goods or services. 2. If a bank statement included an EFT payment of $670 for insurance, the journal entry to record this reconciling item would include a: a) debit to Cash for $670 b) debit to Accounts Payable for $670 c) credit to Cash for $670 d) credit to Prepaid Insurance for $670 3. If the debit amount of an entry to record the purchase of supplies on account was not posted: a) liabilities would be understated b) liabilities would be overstated c) assets would be overstated d) assets would be understated 4. When a business sells inventory in exchange for cash, which of the following accounts is credited? a) Revenue b) Cash c) Owners’ Equity d) Accounts Payable 5. A company using the cash basis of accounting pays for one year of rent in advance. The entry to record this transaction will involve a debit to: a) Deferred Rent Revenue b) Rent Revenue c) Rent Expense d) Prepaid Rent
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6. Using the aging-of-accounts-receivable method to estimate uncollectible receivables, Alamosa West Corporation estimates that $3,750 of its accounts receivable will be uncollectible. Prior to adjustment, the Allowance for Uncollectible Accounts has a credit balance of $600. Uncollectible account expense to be reported on the income statement is:
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2006SummerTest1 - MGT120 Summer2006 Term Test #1 1...

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