A furniture factory's employees work overtime to finish an order that is sold on January 31. The office sends a statement to the customer in early February and payment is received by mid-February. The overtime wages must be expensed in A. the period when the workers receive their checks. B. February. C. either January or February depending on when the pay period ends. D. January.
3) Why do generally accepted accounting principles require the application of the revenue recognition principle? A. Recording revenue when cash is received is an objective application of the revenue recognition principle. B. It is easy to apply the revenue recognition principle because revenue issues are always easy to identify and resolve. C. Accounting software has made the revenue recognition easy to apply. D. Failure to apply the revenue recognition principle may lead to an overstatement of revenue.
4) Which is NOT considered an internal user of accounting data for the XYZ Company? A. Merchandise inventory clerk B. Production manager C. President of the employees' labor union D. President of the company
5) The group of users of accounting information charged with achieving the goals of the business is its A. managers. B. investers. C. creditors. D. auditors.
6) Which group uses accounting information primarily to ensure the entity is operating within prescribed rules? A. Labor unions B. Regulatory agencies C. Management D. Taxing authorities
7) Which statement is correct? A. The cash basis of accounting is objective because no one may be certain of the amount of revenue until the cash is received. B. The use of the cash basis of accounting violates both the revenue recognition and matching principles. C. As long as a company consistently uses the cash basis of accounting, accepted accounting principles allow its use. D. As long as management is ethical, there are no problems with using the cash basis of accounting.
8) Which reflects the balances of prepayment accounts prior to adjustment? A. Balance sheet accounts are overstated and income statement accounts are understated. B. Balance sheet accounts are overstated and income statement accounts are overstated. C. Balance sheet accounts are understated and income statement accounts are understated. D. Balance sheet accounts are understated and income statement accounts are overstated.
9) Using accrual accounting, expenses are recorded and reported only A. if they are paid before they are incurred. B. when they are incurred and paid at the same time. C. when they are incurred, whether or not cash is paid. D. if they are paid after they are incurred.
10) Most business enterprises in the United States are A. corporations. B. partnerships. C. proprietorships and partnerships. D. government units.
11) An advantage of the corporate form of business is A. its ownership is easily transferable via the sale of shares of stock. B. its owner’s personal resources are at stake. C. it has limited life. D. it is simple to establish. 12) A business organized as a separate legal entity is a A. government unit. B. proprietorship. C. corporation. D. partnership.