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07 Cost of Sales and Expenses
This quiz focuses on accounting theory and principles related to recognizing revenues and expenses, adjusting entries, prepaid expenses, accrued expenses, and financial statements such as the Statement of Financial Position and Statement of Financial Performance. It covers topics like accrual basis accounting, matching theory, revenue recognition theory, prepaid expenses, and expense recognition.
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Accounting theory that focuses on recognizing revenues and expenses when they are incurred regardless of when cash is exchanged is known as:
A) Matching theory
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Add RecommendationAdd TagsView All Assigned TagsB) Accrual basis of accounting theory
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Add RecommendationAdd TagsView All Assigned TagsC) Cash basis accounting theory
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Add RecommendationAdd TagsView All Assigned TagsD) Revenue recognition theory
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A) liability will be overstated
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Add RecommendationAdd TagsView All Assigned TagsB) asset will be understated
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Add RecommendationAdd TagsView All Assigned TagsC) profit will be overstated
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Add RecommendationAdd TagsView All Assigned TagsD) profit will be understated
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A) Trial balance
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Add RecommendationAdd TagsView All Assigned TagsB) Income summary
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Add RecommendationAdd TagsView All Assigned TagsC) Statement of financial performance
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Add RecommendationAdd TagsView All Assigned TagsD) Statement of financial position
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A) each expense account will be debited
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Add RecommendationAdd TagsView All Assigned TagsB) each expense account will be credited.
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Add RecommendationAdd TagsView All Assigned TagsC) an income summary account will be credited
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Add RecommendationAdd TagsView All Assigned TagsD) the income summary account will be transferred to the capital account
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On 1 January 2022, a $14,000 cheque was paid for rental expenses of 14 months. The amount was recorded in the rental expense account. How much is the rental expense incurred for the year ended 31 December 2022?
A) $1,000
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Add RecommendationAdd TagsView All Assigned TagsB) $2,000
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Add RecommendationAdd TagsView All Assigned TagsC) $12,000
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Add RecommendationAdd TagsView All Assigned TagsD) $14,000
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Insurance expense prepaid of $120 was treated as an income in the statement of financial performance. Which effect did this have on the profit for the year?
A) overstated $120
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Add RecommendationAdd TagsView All Assigned TagsB) overstated $240
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Add RecommendationAdd TagsView All Assigned TagsC) understated $120
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Add RecommendationAdd TagsView All Assigned TagsD) understated $240
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Kate calculated her draft profit for the year at $28400. She later discovered that the rent prepaid to the landlord was understated by $1000. What was the correct profit for the year?
A) $25900
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Add RecommendationAdd TagsView All Assigned TagsB) $27400
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Add RecommendationAdd TagsView All Assigned TagsC) $28900
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Add RecommendationAdd TagsView All Assigned TagsD) $30900
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On 1 November 2021, five months of insurance amounting to $12 500 were paid for the period from 1 November 2021 to 31 March 2022. The amount was debited to the insurance expense account. How much was the insurance expense incurred for the year ended 31 December 2021 if there was no balance in the insurance expense account?
A) $2 500
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Add RecommendationAdd TagsView All Assigned TagsB) $5 000
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Add RecommendationAdd TagsView All Assigned TagsC) $7 500
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Add RecommendationAdd TagsView All Assigned TagsD) $12 500
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The financial year of Sunset Paradise is from 1 April to 31 March. On 1 June 2021, a cheque of $33,000 was issued to the landlord for 11 months’ rent from 1 June 2021 to 30 April 2022. What is the amount of prepaid or payable rental expense as at 31 March 2022?
A) $3 000 prepaid rental expense
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Add RecommendationAdd TagsView All Assigned TagsB) $3 000 rental expense payable
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Add RecommendationAdd TagsView All Assigned TagsC) $6 000 prepaid rental expense
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Add RecommendationAdd TagsView All Assigned TagsD) $6 000 rental expense payable
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On 31 January 2024, the balance in Aislers Inc.’s stationery account was $750. During February, Aislers purchased stationery of $900 and used stationery of $1125. At the end of February, the balance in the stationery account should be
A) $525 debit
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Add RecommendationAdd TagsView All Assigned TagsB) $975 debit
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Add RecommendationAdd TagsView All Assigned TagsC) $525 credit.
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Add RecommendationAdd TagsView All Assigned TagsD) $975 credit.
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An insurance account shows an amount paid for the year of $2000 and a prepayment at the end of the year of $400. Which entry appears in the insurance account to record the transfer to the statement of financial performance?
A) credit entry of $1600
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Add RecommendationAdd TagsView All Assigned TagsB) credit entry of $2400
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Add RecommendationAdd TagsView All Assigned TagsC) debit entry of $1600
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Add RecommendationAdd TagsView All Assigned TagsD) debit entry of $2400
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JM Trading paid rent of $10 000 by cheque and still owes $2 000 by its financial year end. The adjusting entry necessary to determine the rent expense incurred is:
A) Dr Rent expense 10 000; Cr Cash at bank 1 000
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Add RecommendationAdd TagsView All Assigned TagsB) Dr Rent expense 8 000; Cr Rent expense payable 8 000
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Add RecommendationAdd TagsView All Assigned TagsC) Dr Rent expense payable 10 000; Cr Cash at bank 10 000
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Add RecommendationAdd TagsView All Assigned TagsD) Dr Rent expense 2 000; Cr Rent expense payable 2 000
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A business paid $30,000 by cheque for insurance which covers 15 months since the start of the business’ financial year. At the end of the business’ financial year, the adjusting entry needed to determine insurance expense incurred is:
A) DR Prepaid insurance expense 2000; CR Insurance expense 2000
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Add RecommendationAdd TagsView All Assigned TagsB) DR Prepaid insurance expense 6000; CR Insurance expense 6000
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Add RecommendationAdd TagsView All Assigned TagsC) DR Insurance expense 2000; CR Prepaid insurance expense 2000
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Add RecommendationAdd TagsView All Assigned TagsD) DR Income summary 6000; CR Insurance expense 6000
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Jerry’s business pays all its insurance premiums in advance. The business books showed a prepayment in connection with insurance of $3 700 as at 1 January 2025 and a prepayment of $3 900 as at 31 December 2025. Jerry’s Statement of financial performance revealed an insurance expense for the year of $14 100. How much did Jerry’s business pay to its insurers during 20X8?
A) $13 900
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Add RecommendationAdd TagsView All Assigned TagsB) $14 000
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Add RecommendationAdd TagsView All Assigned TagsC) $14 200
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Add RecommendationAdd TagsView All Assigned TagsD) $14 300
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Julia’s business pays for its electricity in arrears. Her business’s books showed an expense payable in connection with electricity of $900 as at 1 October 2022 and an payable of $1100 as at 30 September 2023. Her Statement of financial performance revealed an electricity expense of $9 000 for the year ended 30 September 2023. How much did Julia’s business pay for electricity during her financial year ended 30 September 2023?
A) $9 000
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Add RecommendationAdd TagsView All Assigned TagsB) $9 200
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Add RecommendationAdd TagsView All Assigned TagsC) $8 800
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Add RecommendationAdd TagsView All Assigned TagsD) $8 600
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Ken’s business paid $6000 worth of utilities bills during the year. At the beginning of the year $700 was owing for utilities, and at the end of the year $900 was owing utilities. How much would be shown as the utilities expense in the Statement of Financial Performance of Ken McKenzie’s business for the year?
A) $6 000
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Add RecommendationAdd TagsView All Assigned TagsB) $6 200
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Add RecommendationAdd TagsView All Assigned TagsC) $5 800
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Add RecommendationAdd TagsView All Assigned TagsD) $7 600
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Ralph paid the following amounts in respect of rent for his business:
Paid on 1 May 2024: $28 800 for 12 months to 30 April 2025
Paid on 1 May 2025: $32 400 for 12 months to 30 April 2026
What is the correct charge for rent that should appear in Ralph’s Statement of Financial Performance for the year ended 31 December 2025?
Paid on 1 May 2024: $28 800 for 12 months to 30 April 2025
Paid on 1 May 2025: $32 400 for 12 months to 30 April 2026
What is the correct charge for rent that should appear in Ralph’s Statement of Financial Performance for the year ended 31 December 2025?
A) $29 700
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Add RecommendationAdd TagsView All Assigned TagsB) $30 000
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Add RecommendationAdd TagsView All Assigned TagsC) $31 200
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Add RecommendationAdd TagsView All Assigned TagsD) $31 500
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On 12 June 2023, Alice’s business paid $3,360 for rent covering the 24 months to 31 May 2025. What is the charge for rent in Alice’s Statement of Financial Performance for the year ended 31 December 2024 and the entry in her Statement of Financial Position as at that date?
A) Statement of Financial Performance: $2660 expense; Statement of Financial Position: $700 prepayment
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Add RecommendationAdd TagsView All Assigned TagsB) Statement of Financial Performance: $2660 expense; Statement of Financial Position: $980 prepayment
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Add RecommendationAdd TagsView All Assigned TagsC) Statement of Financial Performance: $1680 expense; Statement of Financial Position: $700 payable
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Add RecommendationAdd TagsView All Assigned TagsD) Statement of Financial Performance: $1680 expense; Statement of Financial Position: $700 prepayment
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Students who fail the quiz may have struggled with understanding accounting theory and principles related to recognizing revenues and expenses, adjusting entries, prepaid expenses, and accrued expenses.
Failing is a part of the learning process. Use this opportunity to identify areas of improvement and focus on understanding the core concepts better.
Suggestions for Improvement:
– Consider revisiting the fundamental accounting theories and principles covered in the quiz.
-Practice more questions to strengthen your understanding of recognizing revenues and expenses accurately.
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– Congratulations on passing the quiz! Continue building on this foundation to deepen your knowledge and skills in accounting principles.
– Suggestions for Improvement: Keep practicing and exploring more complex scenarios within accounting theory. Focus on applying the principles to real-world examples for a better grasp of the concepts.
– Congratulations on passing the quiz! Continue building on this foundation to deepen your knowledge and skills in accounting principles.
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