Accounting Final Review T/F

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A consolidated income statement is a summary statement of all the departmental income statements of a property

True

A debit balance in the Retained Earnings account is identified as a deficit

True

Common size analysis expresses each item within a financial statement in terms of a percent of a base amount

True

Dividends may be declared and paid in cash or stock

True

In a partnership each partner is personally and individually liable for all partnership liabilities

True

In a partnership the same basis of division usually applies to both net income and net loss

True

In a vertical analysis of an income statement, each item on the income statement is expressed as a percentage of sales

True

Intracompany comparisons of the same financial statement items can often detect changes in financial relationships and significant trends

True

Inventory turnover measures the number of times on the average the inventory was sold during the period

True

Liquidity ratios compare current assets to current liabilities because it is assumed that current liabilities will be paid out of current assets

True

Merchandise inventory is classified as a current asset on a classified balance sheet

True

Organization costs are expenses immediately, even thought they conceptually benefit the corporation over its entire life

True

Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness

True

The payment of interest on bonds payable is classified as a cash outflow from operating activities

True

The preparation of a statement of cash flows involves three major steps: determine net increase or decrease in cash, determine net cash provided by operating activities, and determine next cash flows provided by investing and financing activities.

True

When preferred stock is cumulative, preferred dividends not declared in a given period are called dividends in arrears

True

Diversification in American industry enhances the usefulness of financial analysis

False

Each partner's initial investment in a partnership should be recorded at the book value of the asset at the date of their transfer to the partnership

False

For external reporting, a company must prepare either an income statement or a statement of cash flows, but not both

False

Gross profit is a measure of the overall profitability of a company

False

Horizontal, vertical, and circular analyses are the most common tools of financial statement analysis

False

If a corporation pays taxes on its income, then stockholders will not have to pay taxes on the dividends received from the corporation

False

In preparing a statement of cash flows, cash equivalents are subtracted from cash in order to compute the net change in cash during a period.

False

In the horizontal analysis of the income statement, each item is generally stated as a percentage of net income

False

Measures of a company's liquidity are concerned with the company's ability to service long-term debt

False

Selling expenses related to general operating activities such as personnel management

False

The amount of a cash dividend liability is recorded on the date of record because it is on that date that the persons or entities who will receive the dividend are identified

False

The statement of cash flows classifies cash receipts and payments as operating, nonoperating, financial, and extraordinary activities

False

Treasury stock purchased for $25 per share that is reissued at $20 per share, results in a Loss on Sale of Treasury Stock being recognized on the income statement

False

Using the indirect method, an increase in accounts payable during a period is deducted from net income in calculating cash provided by operations.

False


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