True/False
Indicate whether the sentence or statement is true
or false.
|
|
|
1.
|
Financial statements are used to report a business's financial progress and condition
as well as changes in the owners' equity.
|
|
|
2.
|
A
corporation reports changes in owners' equity the same way as a proprietorship.
|
|
|
3.
|
Preparing an income statement that reports financial progress of a business during a
fiscal period is an application of the accounting concept Historical Cost.
|
|
|
4.
|
Net
sales is calculated by subtracting Purchases Discount and Purchases Returns and Allowances from
Sales.
|
|
|
5.
|
All
types of businesses must pay federal income tax on their net income.
|
|
|
6.
|
For a
business to determine whether it is progressing satisfactorily, results of operations are compared
with industry standards and/or previous fiscal periods.
|
|
|
7.
|
To
help management improve future fiscal periods, items contributing to net income should be
analyzed.
|
|
|
8.
|
The
cost of merchandise sold component percentage is calculated by dividing net sales by cost of
merchandise sold.
|
|
|
9.
|
A
company generally bases its acceptable component percentages on comparisons with industry standards
as well as previous accounting periods.
|
|
|
10.
|
A
statement of stockholders' equity is similar to the owners' equity statement for a
partnership.
|
|
|
11.
|
Retained Earnings represents previous years' earnings that have been distributed to
stockholders.
|
|
|
12.
|
Net
income increases a corporation's capital stock.
|
|
|
13.
|
Capital stock plus retained earnings equals total stockholders' equity.
|
|
|
14.
|
A
corporation balance sheet reports assets, liabilities, and stockholders' equity during a fiscal
period.
|
|
|
15.
|
Prepaid Insurance is classified as a current liability.
|
|
|
16.
|
Book
value of a plant asset is calculated by subtracting the accumulated depreciation balance from the
plant asset account balance.
|
|
|
17.
|
Working capital is the same as cash.
|
|
|
18.
|
Current ratio is a measure of a company's ability to earn a profit.
|
|
|
19.
|
A
declared dividend is reported on the income statement as an expense.
|
|
|
20.
|
Reporting net income before and after federal income tax is unique to corporation
income statements.
|
|
|
21.
|
A
corporation's preparation of financial statements at the end of each year is an application of the
Accounting Period Cycle concept.
|
|
|
22.
|
Net
purchases is reported in the Operating Expenses section of an income statement.
|
|
|
23.
|
Net
sales is reported in the Operating Revenue section of an income statement.
|
|
|
24.
|
A
statement of stockholders' equity contains two major sections: capital stock and retained
earnings.
|
|
|
25.
|
An
example of a long-term liability is Mortgage Payable.
|
|
|
26.
|
The
stockholders' equity section of a balance sheet contains accounts related to capital stock and
earnings kept in the business.
|
|
|
27.
|
A
corporation's capital stock plus retained earnings always equals total assets.
|
|
|
28.
|
Dividends decrease the earnings retained by a corporation.
|
|
|
29.
|
A
reversing entry is desirable if an adjusting entry creates a balance in an asset or liability
account.
|
|
|
30.
|
Generally, the only reversing entries a corporation would need to make are for accrued
interest revenue and accrued interest expense.
|
Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
|
|
|
31.
|
Preparing financial statements annually is an application of the accounting concept
____. a. | Adequate
Disclosure | c. | Accounting
Period Cycle | b. | Consistent Reporting | d. | none of the above | | | | |
|
|
|
32.
|
A
corporation reports owners' equity on a balance sheet in ____. a. | an account for
each owner | b. | retained earnings | c. | two categories:
earnings retained in the business and capital stock | d. | a capital stock
account and a dividends account | | |
|
|
|
33.
|
Total
sales less sales discount and sales returns and allowances is ____. a. | cost of
merchandise sold | c. | net
sales | b. | book value | d. | net purchases | | | | |
|
|
|
34.
|
Total
purchases less purchases discount and purchases returns and allowances is ____. a. | net
sales | c. | net
purchases | b. | book value | d. | retained earnings | | | | |
|
|
|
35.
|
Net
purchases is reported on the income statement in the section ____. a. | operating
revenue | c. | operating
expenses | b. | cost of merchandise sold | d. | other expenses | | | | |
|
|
|
36.
|
Items
reported on a corporation income statement that are not reported on a partnership income statement
include ____. a. | federal income
tax expense and cash short and over | b. | net sales, net purchases, and federal income
tax | c. | other revenue,
other expense, and federal income tax | d. | federal income tax | | |
|
|
|
37.
|
If
net sales is $100,000.00 and total operating expenses are $20,000.00, the component percentage for
total operating expenses is ____. a. | 20.0% | c. | 50.0% | b. | 80.0% | d. | 500.0% | | | | |
|
|
|
38.
|
A
business can determine whether it is progressing satisfactorily by comparing operating results with
____. a. | industry
standards | c. | acceptable
component percentages | b. | results of previous fiscal
periods | d. | all of the
above | | | | |
|
|
|
39.
|
If
the cost of merchandise sold component percentage for the current year is63.4% and the acceptable
component percentage is62.0%, a comparison indicates that ____. a. | cost of
merchandise sold component percentage is at an acceptable level | b. | cost of
merchandise sold component percentage is at an unacceptable level | c. | more information
is needed to determine if current cost of merchandise sold is at an acceptable
level | d. | net income earned is63.4% of sales | | |
|
|
|
40.
|
One
of the major sections of a statement of stockholders' equity is ____. a. | assets | c. | dividends | b. | liabilities | d. | capital stock | | | | |
|
|
|
41.
|
Issuance of capital stock during the current year is reported on the
____. a. | income
statement | c. | statement of
stockholders' equity | b. | balance sheet | d. | retained earnings statement | | | | |
|
|
|
42.
|
Dividends declared during a year are reported on the ____. a. | income
statement | c. | statement of
stockholders' equity | b. | balance sheet | d. | working capital statement | | | | |
|
|
|
43.
|
The
amount of capital stock issued at the beginning of the year is obtained from ____. a. | the Balance
Sheet Debit column of the work sheet | b. | the Balance Sheet Credit column of the work
sheet | c. | the general ledger account for capital
stock | d. | none of the above | | |
|
|
|
44.
|
A
corporation balance sheet reports ____. a. | assets, liabilities, and stockholders equity over a given
period of time | b. | the income earned and expenses incurred by a business over a
given period of time | c. | the income and expenses incurred by a business on a specific
date | d. | assets,
liabilities, and stockholders' equity on a specific date | | |
|
|
|
45.
|
Current assets include such items as ____. a. | accounts
receivable, accounts payable, and supplies | b. | accounts receivable, merchandise inventory, and prepaid
insurance | c. | cash, supplies, and retained earnings | d. | cash,
merchandise inventory, and purchases | | |
|
|
|
46.
|
If
Accumulated Depreciation is $1,000.00 and Equipment is $4,000.00, the book value reported for
equipment is ____. a. | $4,000.00 | c. | $3,000.00 | b. | $5,000.00 | d. | l.0 to
4.0 | | | | |
|
|
|
47.
|
An
example of a long-term liability is ____. a. | Accounts Payable | c. | a60-day promissory note | b. | Mortgage
Payable | d. | Interest
Payable | | | | |
|
|
|