Accounting Principles Quiz

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Under accrual accounting, when is revenue recognized?

When the service is provided (correct)

When expenses are paid

When payment is received

At the end of the fiscal year

Cash accounting recognizes revenue before payment is received.

False

What is the annual depreciation expense for a lawn mower bought for $10,000 with a useful life of 4 years?

$2,500

Under cash accounting, the entire equipment cost is recorded as an expense in ______.

March Signup and view all the answers

Using the basic accounting equation, what is the stockholders' equity if total assets are $500,000 and total liabilities are $300,000?

$200,000 Signup and view all the answers

Net income is calculated by subtracting expenses from revenues.

True Signup and view all the answers

Under cash accounting, when is revenue recognized for a service worth $5,000 provided in December with cash received in January?

January Signup and view all the answers

Under accrual accounting, a company records utility expenses in December even if it pays the bill in January.

True Signup and view all the answers

What is the annual depreciation expense for equipment costing $50,000 with a useful life of 5 years?

$10,000 Signup and view all the answers

Match the financial terms with their definitions:

Assets = Resources owned by a company Liabilities = Obligations owed to creditors Net Income = Profit after expenses are subtracted from revenues Retained Earnings = Accumulated net income not paid out as dividends Signup and view all the answers

When would a retail store using cash accounting record the sale of inventory sold for $30,000 in November?

December Signup and view all the answers

Under accrual accounting, cost of goods sold (COGS) is recorded in the month when __________.

goods are sold Signup and view all the answers

When does a software company recognize revenue of $1,200 for an annual subscription paid upfront using cash accounting?

January 1st Signup and view all the answers

Under accrual accounting, an inventory purchase worth $20,000 is recorded in December.

False Signup and view all the answers

In what month does a company using accrual accounting recognize the revenue from the sale of inventory worth $30,000?

November Signup and view all the answers

Match each accounting method with its recognition timing:

Cash Accounting = Recognizes revenue when cash is received Accrual Accounting = Recognizes revenue when earned Expense Recognition = Recorded when incurred Revenue Recognition = Recorded when cash is paid Signup and view all the answers

Under accrual accounting, how much revenue does the company recognize monthly from a total revenue of $1,200?

$100 Signup and view all the answers

A gym will recognize $10,000 in revenue in December using accrual accounting if they collect it for memberships starting in January.

False Signup and view all the answers

How much deferred revenue will the company record in January if they recognize $100 as earned revenue?

$1,100 Signup and view all the answers

Cash accounting recognizes the $4,000 revenue in _____ when the payment is received.

July Signup and view all the answers

Match the following scenarios with their respective accounting treatments:

Consulting firm completes service = Revenue recognized in June under accrual accounting Gym collects annual memberships = Deferred revenue of $10,000 in December Company pays for advertising = Expense recorded in October under cash accounting Equipment purchased for $15,000 = Annual depreciation expense of $3,000 Signup and view all the answers

How much annual depreciation expense does a company record for equipment costing $15,000?

$3,000 Signup and view all the answers

Under accrual accounting, the law firm records $12,000 as accounts receivable in September.

True Signup and view all the answers

In what month does a consulting firm recognize $4,000 in revenue under accrual accounting after completing a project?

June Signup and view all the answers

What is the ending retained earnings if a company starts with $40,000, earns $25,000 in net income, and pays $5,000 in dividends?

$60,000 Signup and view all the answers

A company recognizes revenue when services are provided, regardless of when payment is received.

True Signup and view all the answers

What is the net income if total revenues are $200,000, total expenses are $120,000, and taxes are $10,000?

$70,000 Signup and view all the answers

The net change in cash for a company with cash flows of $10,000 from operating activities, -$7,000 from investing activities, and $2,000 from financing activities is _____

$5,000 Signup and view all the answers

Match the following cash flow activities with their classifications:

Collecting cash from customers = Operating Activity Paying wages to employees = Operating Activity Buying equipment = Investing Activity Issuing stock = Financing Activity Signup and view all the answers

How much retained earnings will a company have at the end of the year if it starts with $100,000, earns $30,000 in profit, and pays out $10,000 in dividends?

$120,000 Signup and view all the answers

A company reports a $12,000 cash collection as a financing activity in its cash flow statement.

False Signup and view all the answers

What is classified as an investing activity in cash flow statements?

Buying equipment or assets Signup and view all the answers

What is the interest expense for a $50,000 loan with a 6% annual interest rate?

$3,000 Signup and view all the answers

The total assets of a company can change if it purchases equipment for cash.

False Signup and view all the answers

What is the total amount of current assets in the example given?

$180,000 Signup and view all the answers

After issuing common stock and purchasing inventory, the balance sheet shows a net cash of ______.

$0 Signup and view all the answers

Match the asset categories with their correct values:

Current Assets = $180,000 Non-Current Assets = $200,000 Signup and view all the answers

What is the updated current ratio after taking out a short-term loan of $20,000?

2.0 Signup and view all the answers

The journal entry for issuing stock includes a debit to Common Stock.

False Signup and view all the answers

How much common stock was issued in the example?

$10,000 Signup and view all the answers

Accounting Principles Quiz

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Questions and Answers

Under accrual accounting, when is revenue recognized?

Cash accounting recognizes revenue before payment is received.

What is the annual depreciation expense for a lawn mower bought for $10,000 with a useful life of 4 years?

Under cash accounting, the entire equipment cost is recorded as an expense in ______.

Using the basic accounting equation, what is the stockholders' equity if total assets are $500,000 and total liabilities are $300,000?

Net income is calculated by subtracting expenses from revenues.

Under cash accounting, when is revenue recognized for a service worth $5,000 provided in December with cash received in January?

Under accrual accounting, a company records utility expenses in December even if it pays the bill in January.

What is the annual depreciation expense for equipment costing $50,000 with a useful life of 5 years?

Match the financial terms with their definitions:

When would a retail store using cash accounting record the sale of inventory sold for $30,000 in November?

Under accrual accounting, cost of goods sold (COGS) is recorded in the month when __________.

When does a software company recognize revenue of $1,200 for an annual subscription paid upfront using cash accounting?

Under accrual accounting, an inventory purchase worth $20,000 is recorded in December.

In what month does a company using accrual accounting recognize the revenue from the sale of inventory worth $30,000?

Match each accounting method with its recognition timing:

Under accrual accounting, how much revenue does the company recognize monthly from a total revenue of $1,200?

A gym will recognize $10,000 in revenue in December using accrual accounting if they collect it for memberships starting in January.

How much deferred revenue will the company record in January if they recognize $100 as earned revenue?

Cash accounting recognizes the $4,000 revenue in _____ when the payment is received.

Match the following scenarios with their respective accounting treatments:

How much annual depreciation expense does a company record for equipment costing $15,000?

Under accrual accounting, the law firm records $12,000 as accounts receivable in September.

In what month does a consulting firm recognize $4,000 in revenue under accrual accounting after completing a project?

What is the ending retained earnings if a company starts with $40,000, earns $25,000 in net income, and pays $5,000 in dividends?

A company recognizes revenue when services are provided, regardless of when payment is received.

What is the net income if total revenues are $200,000, total expenses are $120,000, and taxes are $10,000?

The net change in cash for a company with cash flows of $10,000 from operating activities, -$7,000 from investing activities, and $2,000 from financing activities is _____

Match the following cash flow activities with their classifications:

How much retained earnings will a company have at the end of the year if it starts with $100,000, earns $30,000 in profit, and pays out $10,000 in dividends?

A company reports a $12,000 cash collection as a financing activity in its cash flow statement.

What is classified as an investing activity in cash flow statements?

What is the interest expense for a $50,000 loan with a 6% annual interest rate?

The total assets of a company can change if it purchases equipment for cash.

What is the total amount of current assets in the example given?

After issuing common stock and purchasing inventory, the balance sheet shows a net cash of ______.

Match the asset categories with their correct values:

What is the updated current ratio after taking out a short-term loan of $20,000?

The journal entry for issuing stock includes a debit to Common Stock.

How much common stock was issued in the example?

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