Hospitality Managerial Accounting Practice Quiz 1
Hospitality Managerial Accounting Practice Quiz 1 HRMA 3341
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This 6 page Class Notes was uploaded by Sarah Brucker on Tuesday August 30, 2016. The Class Notes belongs to HRMA 3341 at University of Houston taught by Arlene Ramirez in Summer 2015. Since its upload, it has received 8 views. For similar materials see Hospitality Managerial Accounting in Hotel and Restaurant Management at University of Houston.
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Date Created: 08/30/16
Managerial Accounting Practice Quiz 1 1. The principle stating that all expenses incurred while earning revenues should be identified with the revenues when they are earned, and reported for the same time period is the: a. Cost principle b. Full disclosure principle c. Consistency principle d. Matching principle 2. Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments? a. Unit of measurement b. Business entity c. Continuity of the Business Unit (Going Concern) d. Materiality 3. Which of the following business formats has a limited number of owners? a. Limited liability corporation (LLC) b. Limited partnership c. S Corporation d. C Corporation 4. Which of the following accounts would not be closed at the end of an accounting period (year end)? a. Revenue b. Dividends c. Common Stock d. Expenses 5. An entry to increase the accumulated depreciation account is recorded with a _______________ entry. a. Debit b. Credit c. Either debit or credit d. Neither debit or credit 6. The principle of consistency means that: a. The accounting methods used by an entity never change. b. The same accounting methods are used by all firms in an industry. c. The effect of any change in an accounting method will be disclosed in the financial statements or notes attached. d. The effect of any change in an accounting method will be disclosed in the financial statements or notes thereto. 7. The branch of accounting involved with reviewing and evaluating documents, records, and control systems is: a. Cost b. Managerial c. Auditing d. Accounting systems 8. The Revenue Recognition principle also addresses how much revenue should be recognized by the business. Which of the following is not an indicator that revenue should be recorded net of expenses? a. The supplier of the service (not the hotel) is responsible for the fulfillment of the ordered good or service. b. The amount that the hotel earns is fixed. c. The hotel adds meaningful value to the goods or provides a significant portion of the services ordered by the guest. d. The credit/collection risk resides with the supplier. 9. The TripleZ Ranch purchased a threeyear insurance policy on June 1, 20X1, for $36,000. The coverage was for the period of July 1, 20X1, through June 30, 20X4. The amount of prepaid insurance that should be shown on the ranch's balance sheet as a current asset as of December 31, 20X1 is: a. $36,000 b. $6,000 c. $12,000 d. $30,000 10. Food inventory is reduced on the books to its market value when it is lower than cost due to the ____________ principle. a. Cost b. Going Concern c. Business entity d. None of the above Answers: 1. D The matching principle requires recording expenses in the same period as the revenues to which they relate. 2. C In preparing the accounting records and reports, it is assumed that the business will continue indefinitely and that liquidation is not in prospectin other words the business is a going concern. 3. C The major limitation of an S corporation is that it may not have more than 100shareholders. The other formats may have unlimited owners. 4. C Common Stock is a balance sheet account and is not closed. Temporary accounts (like Expenses, Dividends, and Revenue) are closed “to” retained earnings. 5. B The entry to record an increase in accumulated depreciation is: i. Debit: Depreciation Expense (to record use of the asset) ii. Credit: Accumulated Depreciation (to increase the contra asset account) 6. C The consistency principle requires that once an accounting method has been adopted, it should be followed from period to period in the future unless a change in accounting methods is warranted and disclosed. 7. Nothing 8. C Indicators of Net Revenue Reporting are: i. The supplier of the service (not the hotel is responsible for the fulfillment of the ordered good or service ii. The amount that the hotel earns is fixed. iii. The credit/collection risk resides with the supplier. 9. D Each month that the insurance is used 1/36th must be expensed (3 years x 12 months= 36 months). On December 31, 20X1, only 6 months of insurance had been used (July December), so $1,000 per month or $6,000 dollars. The prepaid would have been reduced by the$6,000 dollars leaving $30,000 in the prepaid account, reflecting the amount of insurance not yet consumed. ($36,000 / 36 months = $1,000 per month). 10. D The cost principle states that assets are recorded at the original cost. When the value of current assets is clearly less than the cost recorded on the books, this decline in value must be recognized. Thus, the conservatism principle overrides the cost principle. Material taken from BlackBoard quiz – Professor Ramirez
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