Acct 301

1741 Words Jun 16th, 2012 7 Pages
Test 1 Chapters 1-4
Student: ___________________________________________________________________________
1. A cause-and-effect relationship is implicit in the:
A. Realization principle.
B. Historical cost principle.
C. Matching principle.
D. Going concern assumption. 2. Accounting standard setting has been characterized as:
A. A political process.
B. Using the scientific method.
C. Pure deductive reasoning.
D. Pure inductive reasoning. 3. The FASB 's conceptual framework 's qualitative characteristics of accounting information include:
A. Historical cost.
B. Realization.
C. Faithful representation.
D. Full disclosure. 4. Fundamental qualitative characteristics of accounting information are:
A. Relevance and
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$18,000.
B. $34,000.
C. $23,000.
D. $29,000.
The reported income on the cash basis and we have to adjust to accrual.
Cash Basis income = $42,000 - $14,000 = $28,000
To Adjust to Accrual $28,000
Subtract Depreciation Expense (2000)
Add Increase in Acct. Rec. 1500
Add Supplies Not Used 4000
Subtract Accrued Liab. (2500) ______
Accrual Basis Income $29,000 12. On June 1, Royal Corp. began operating a service company with an initial cash investment by shareholders of $2,000,000. The company provided $6,400,000 of services in June and received full payment in July. Royal also incurred expenses of $3,000,000 in June that were paid in August. During June, Royal paid its shareholders cash dividends of $1,000,000. What was the company 's income before income taxes for the two months ended July 31 under the following methods of accounting? A. Option A
B. Option B
C. Option C
D. Option D 13. When Castle Corporation pays insurance premiums, the transaction is recorded as a debit to prepaid insurance. Additional information for the year ended December 31 is as follows: What was the total amount cash paid by Castle for insurance premiums during the year?
A. $218,750
B. $166,250
C. $210,000
D. $227,500
Add: Insurance Expense: $218,750 to the Increase in Prepaid Insurance (61250-52500) $8,750=
$227,500

14. Red Onion Restaurant classifies a six-month prepaid insurance policy as a current

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