1. The basic purpose of Generally Accepted Accounting Principles (GAAPs) is to: a. Minimize the possibility of the business becoming insolvent b. Ensure the financial statements include the type of information that is best suited to every type of business decision c. Provide a framework for financial reporting that is understood by both the preparers and the users of financial statements d. Eliminate the need for professional judgment in preparing financial statements 2. The accounting principle of matching is best demonstrated by a. not recognizing any expense unless some revenue is realized. b. associating effort (expense) with accomplishment (revenue). c. recognizing prepaid rent received as revenue. d. establishing an Appropriation for…show more content… Half of the goods had been mislabeled and were returned immediately to the supplier. If All Night pays the invoice within the discount period, the amount paid should be: a. $960 b. $980. c. $1,960 d. $2,000
19. For Garret Wolfe Company, the following information is available: Cost of goods sold Rental Revenue Income tax expense Operating expenses Sales
$ 60,000 2,500 6,000 23,000 100,000
In Garret Wolfe’s multiple-step income statement, gross profit a. should not be reported b. should be reported at $13,500. c. should be reported at $40,000. d. should be reported at $42,500. -5-
20. Gross billings for merchandise sold by Otto Company to its customers last year amounted to $15,720,000; sales returns and allowances were $370,000, and sales discounts were $175,000. Net sales last year for Otto Company were a. $15,720,000. b. $15,350,000. c. $15,175,000. d. $15,035,000.
21. When a customer purchases merchandise inventory from a business organization, she may be given a discount which is designed to induce prompt payment. Such a discount is called a(n) a. trade discount. b. nominal discount. c. enhancement discount. d. cash discount.
22. A Cash Over and Short account a. is not generally accepted. b. is debited when the petty cash fund proves out over. c. is debited when the petty cash fund proves out short. d. is a contra account to Cash.
