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Problem 1: The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the:
Multiple Choice
A. Recognition principle.
B. Cost principle.
C. Cash basis of accounting.
D. Expense recognition (Matching) principle.
E. Time period principle.
Problem 2: The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:
A. Accrual basis accounting.
D. Operating cycle accounting.
C. Cash basis accounting.
E. Revenue recognition accounting.
F. Current basis accounting.
At that level Allen Company expects to sell 3,000 units next year. Illustrate what is Allen’s break-even point in units if it purchases the new equipment?
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