Chapter 3 Questions
1. If Oxbow Corporation does not record a sale made on account in December until a month later when
the customer pays its invoice, how will Oxbow’s December financial statements be impacted?
a. Assets will be overstated on the balance sheet, while revenues will be overstated on the
income statement.
b. Assets will be overstated on the balance sheet, while revenues will be understated on the
income statement.
c. Assets will be understated on the balance sheet, while revenues will be overstated on the
income statement.
d. Assets will be understated on the balance sheet, while revenues will be understated on the
income statement.
2. Which of the following transactions would be recorded if using the accrual basis of accounting
but not if using the cash basis of accounting?
a. Purchasing inventory on account
b. Borrowing money
c. Paying off loans
d. Collecting customer payments
3. A dentist performs dental services for a patient on April 20; the total bill for the dental services was
$200. The patient makes a co-pay of $20 on April 20, and the insurance company pays the remaining
balance of $180 on May 19. On what date(s) will the dentist record the revenue for those dental
services provided on April 20?
a. $200 of revenue on April 20
b. $20 of revenue on April 20 and $180 of revenue on May 19
c. $200 of revenue on May 19
d. $180 of revenue on April 20 and the remaining $20 on May 19
4. The Golden Harbor Zoo gift shop sells stuffed animal toys. Its stuffed dolphin has a suggested retail
price of $19.95. The zoo initially priced it at $17.99, but it is now marked down to $13.50. At other
zoos, this same stuffed dolphin is priced at $15.99. A Golden Harbor Zoo customer purchases the
dolphin for $13.50 from the gift shop. At what price should Golden Harbor record the sale?
a. $13.50
b. $15.99
c. $17.99
d. $19.95
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