Accounting Chapter 15
Beginning merchandise inventory less purchases made during the fiscal period plus ending inventory equals cost of merchandise sold.
False
Data needed to prepare the liabilities section of a balance sheet are obtained from a work sheet's Balance Sheet Debit column.
False
Dividends Payable is a long-term liability.
False
Every amount on a financial statement is accompanied by a related description.
False
For a merchandising business, every sales dollar reported on the income statement includes only three components: gross profit on sales, total expenses, and net income.
False
If a company has determined that the acceptable component percentage for cost of merchandise sold is not more than 51.1%, the current year's actual component percentage of 48.9% is unacceptable.
False
In the preparation of financial statements, accounting principles are applied differently from one fiscal period to the next.
False
Low price-earnings ratios are typically associated with high growth companies/
False
Most businesses correct an unacceptable component percentage for gross profit by simply increasing the markup on merchandise purchased for sale because an increased selling price will always increase profit.
False
Net income is shown on the last line of a statement of stockholders' equity.
False
On an income statement, component percentages are calculated by dividing the amount of each component by the amount of expenses.
False
Reporting financial information the same way from one fiscal period to the next is an application of the accounting concept Adequate Disclosure.
False
Reporting financial information the same way from one fiscal period to the next is an application of the accounting concept Adequate Discolsure
False
Revenue less cost of merchandise sold equals net income.
False
When a business's expenses are less than the gross profit on sales, the difference is known as a net loss.
False
A statement of stockholders' equity contains two major sections: (1) capital stock and (2) retained earnings.
True
A statement of stockholders' equity summarizes the changes in owners' equity during a fiscal period.
True
A value assigned to a share of stock and printed on a stock certificate is called par value.
True
An income statement for a merchandising business has three main sections: revenue section, cost of merchandise section, and expenses section.
True
An income statement is used to report a business's financial progress.
True
Calculating a ratio between gross profit on sales and net sales enables management to compare its performance to prior fiscal periods.
True
Cost of merchandise sold is also known as cost of goods sold.
True
Data needed to prepare the liabilities section of a balance sheet are obtained from a work sheet.
True
Earnings per share is calculated by dividing net income after federal income taxes by the number of shares outstanding.
True
Financial statements provide the primary source of information needed by owners and managers to make decisions on the future activity of a business.
True
Increasing sales revenue while keeping cost of merchandise sold the same will increase gross profit on sales.
True
Individual amounts reported on an income statement have little meaning without being compared to another amount.
True
One way a business determines acceptable component percentages is by making comparisons with prior fiscal periods.
True
Ruled double lines across both amount columns below the Assets section and below the Stockholders' Equity section show that the assets equal liabilities plus owners' equity.
True
Some income may be distributed as dividends to provide stockholders with a return on their investments.
True
Some management decisions can best be made after the amount of assets, liabilities, and stockholders' equity in the business is determined.
True
The amount in the capital stock section of the statement of stockholders' equity are obtained from the general ledger account, Capital Stock.
True
The beginning balance of the capital stock account is the amount of capital stock issued at the beginning of the year.
True
Total expenses on an income statement are deducted from the gross profit on sales to find net income before federal income tax.
True
Total expenses on an income statement are deducted from the gross profit on sales to find net income.
True
When more detailed information about an item on a financial statement is needed, a supporting schedule may be prepared.
True
Preparing financial statements that provide information about a business's financial condition, changes in this financial condition, and the progress of operations is an application of the accounting concept _____. a. Matching Expenses with Revenue b. Adequate Disclosure c. Consistent Reporting d. Historical Cost
b. Adequate Disclosure
A financial statement that reports the amount of dividends is _____. a. a balance sheet b. a statement of stockholders' equity c. an income statement d. none of the above
b. a statement of stockholders' equity
One way to improve an unacceptable component percentage for cost of merchandise sold is _____. a. to increase selling prices b. to purchase from different vendors who offer better prices c. to sell more merchandise d. none of these
b. to purchase from different vendors who offer better prices
One way to increase gross profit on sales is to _____. a. decrease sales revenue b. decrease expenses c. increase sales revenue d. increase cost of merchandise sold
c. increase sales revenue
The earnings per share of a corporation cannot be compared to _____. a. the market price of the stock b. management's estimate of earnings per share c. industry standards d. last year's earnings per share
c. industry standards
the original price of all merchandise sold during a fiscal period
cost of merchandise sold
liabilities due within a short time, usually within a year
current liabilities
The total original price of all merchandise sold during a fiscal period is called _____. a. the cost of merchandise sold b. the cost of sales c. the cost of goods sold d. all of these
d. all of these
The revenue remaining after cost of merchandise sold has been deducted is _____. a. cost of merchandise sold b. net sales c. total sales d. gross profit on sales
d. gross profit on sales
the amount of net income after federal income tax belonging to a single share of stock
earnings per share
a comparison between two items of financial information
financial ratio
the revenue remaining after cost of merchandise sold has been deducted
gross profit on sales
liabilities owed for more than a year
long-term liabilities
total sales less sales discount and sales returns and allownaces
net sales
a value assigned to a share of stock and printed on the stock certificate
par value
the relationship between the market value per share and earnings per share of a stock
price-earnings ratio
a financial statement that shows changes in a corporation's ownership for a fiscal period
statement of stockholders' equity
a report prepared to give more details about an item on a principal financial statement
supporting schedule