Multiple Choice Answers

The primary disadvantage of the cash basis of accounting is __________.
a. Expenses are not recorded
b. Revenues and expenses may not always be properly matched on the income statement
c. The amounts match the cash basis

Deferred expenses (prepaid expenses) are items initially recorded as assets but are expected to become __________ over time.

a. Liabilities
b. Assets
c. S/E
d. Expenses

If Liabilities have a balance of $10,000 and Stockholders’ Equity has a balance of $70,000, then Assets must have a balance of __________.

a. $80,000
b. $60,000
c. $70,000
d. $10,000

When merchandise that was sold on account is returned, which accounts are affected?

a. Cash, accounts receivable, cost of goods sold, and sales returns
b. Sales returns, accounts receivable, merchandise inventory, and cost of goods sold
c. Sales returns, accounts receivable, purchases, and cost of goods sold
d. Sales returns, accounts receivable, purchases, and merchandise inventory

Under a differentiation strategy, a business designs products that possess __________ for which customers are willing to pay a premium price.

a. Unique attributes
b. High costs
c. Competitive efficiencies
d. Longer warranties