TEST 2 3A Practice

What would you rather get? 

• $0

• $99 Today

• $100 Today

• $100 Next Year

What do you debit when you purchase inventory using the periodic inventory method

• A/R

• Inventory

• Purchases

• A/P

Which factor below makes the effects of compounding interest more dramatic for a  young person than an older person? 

• Rate

• Market Conditions

• Time

One of the accounting concepts upon which adjustments for prepayments and accruals are based is 

• Economic Entity

• Monetary Unit

• Matching

• Cost

Which is not an application of revenue recognition? 

• Accepting cash from an established customer for services to be performed over the next three months.

• Receiving cash for services performed.

• Recording revenue as an adjusting entry

• Billing customers on June 30 for services completed during June. 

A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be earned?

• November 30

• December 5

• December 1

• December 10

When using the periodic system the physical inventory count is used to determine

• both the cost of the goods in ending inventory and the sales value of goods sold during the period.

• only the cost of merchandise sold during the period.

• only the sales value of goods in the ending inventory

• both the cost of the goods sold and the cost of ending inventory.

An accounting time period that is one year in length is called

• periodicity assumption

• interim period

• reporting period

• fiscal year

The revenue recognition principle dictates that revenue should be recognized in the accounting records

• at the end of the month

• in the period that income taxes are paid

• when it is earned

• when cash is received

A company spends $20 million dollars for an office building. Over what period should the cost be written off?

• Over the useful life of the building

• When the $20 million is expended in cash

• After $20 million in revenue is earned

• All in the first year