Accounting Part 2

True

A corporation having a net income before federal income tax of $190,000.00 will pay a higher rate of tax than a company having $40,000.00 of net income before federal income tax.

withholding allowance

A deduction from total earnings for each person legally supported by a taxpayer, including the employee.

Medicare Tax

A federal tax paid for hospital insurance.

subsidiary ledger

A ledger that is summarized in a single general ledger account.

Roth individual retirement account

A qualified retirement plan that allows tax-free withdrawal from the account is the. . .

quick ratio

A ratio that measures the relationship of quick assets to current liabilities.

supporting schedule

A report prepared to give details about an item on a principal financial statement.

Electronic Federal Tax Payment System (EFTPS)

A system provided by the federal government for making federal tax deposits is the. . .

True

A temporary account is closed by transferring its balance out of the account.

25%

Accounts receivable increased from $40,000 to $50,000 during the fiscal year. The horizontal analysis ratio for accounts receivable is. . .

asset, liability, capital stock, and retained earnings accounts

After closing entries have been posted, the accounts that remain open are the. . .

True

Alpha Company's benchmark total operating expense ratio is between 28.0% and 30.0%. A decline in its operating expense ratio from 32.1% to 30.8% is a favorable trend.

controlling account

An account in a general ledger that summarizes all accounts in a subsidiary ledger.

payroll register

An accounting form that summarizes the earnings, deductions, and net pay of all employees for one pay period.

True

Income stocks typically have a higher dividend yield than growth stocks.

True

Increasing operating revenue while keeping cost of merchandise sold the same will increase gross profit.

False

Interest income is recorded only if a note receivable is collected.

True

Investors are willing to pay a higher price-earnings ratio for growth stocks than for income stocks.

EFT

Some businesses deposit employee net pay directly to each employee's bank account by using. . .

adjusting and closing entries

The two types of journal entries needed to change general ledger account balances at the end of the fiscal period are. . .

federal unemployment tax owed

The withholding allowances of an employee affect the amount of. . .

debit Sales; credit Income Summary

To close the Sales account, . . .

solvency ratios

To rate the ability of a business to pay its current and long-term liabilities, investors use. . .

debt ratio

Total liabilities divided by total assets.

True

A corporation has the legal rights of a person.

Accounts Payable Ledger

The subsidiary ledger containing vendor accounts.

Accounts Receivable account balance in the general ledger

The total of the schedule of accounts receivable should equal. . .

credit Interest Income Income for $55.56

A business has an $8,000 note receivable outstanding. The 60-day, 10% note is dated December 6. On December 31, the business would record an adjusting entry to. . .

25%

A business has net income before federal income tax of $60,000. According to the tax rate schedule, the first $50,000 of taxable income is taxed at 15%. The next $25,000 of taxable income is taxed at 25%. The marginal tax rate that would be applied to an additional dollar of taxable in would be. . .

10.0%

A business with 10,000 shares of $2.00 par value common stock has earnings per share of $5.00, pays dividends of $1.00 per share, and has a market value of $10.00 per share. The dividend ratio is. . .

$4,300 debit to Uncollectible Accounts Expense

A company estimates that $4,000 of its $50,000 accounts receivable will become uncollectible. The current balance is Allowance for Uncollectible Accounts is a $300 debit (note: debit). The adjusting entry will include a. . .

20.0%

A company has revenue of $350,000, gross profit of $175,000, and expenses of $70,000. The vertical analysis ratio for net income is. . .

False

A company having earnings per share of $14.50 is always more profitable than a company having earnings per share of $3.25.

$800.00

A company purchases office equipment for $2,500.00 having a 3-year useful life and a $100.00 salvage value. Using the straight-line method of depreciation, depreciation expense in year 2 of the asset's useful life will be. . .

horizontal analysis

A comparison of one item on a financial statement with the same item on a previous period's financial statement.

purchase allowance

Credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease in the customer's account payable to the vendor.

False

Preparing the general ledger for the next fiscal period is ab application of the Business Entity accounting concept.

Matching Expenses and Revenue

Recording expenses in the fiscal period in which the expenses contribute to earning revenue is an application of the accounting concept. . .

False

The amount of dividends declared during the year is presented on the income statement.

an asset

The amount of prepaid insurance not expired during a fiscal period represents. . .

Working capital

The amount of total current assets less total current liabilities.

True

The book value of accounts receivable at year end is an estimate of the amount of accounts receivable the business expects to collect during the next fiscal year.

False

The closing entry for income statement accounts with debit balances closes only the expense accounts.

False

The column totals of an employee earnings record provide the debit and credit amounts needed to journalize a payroll.

Accumulated Depreciation--Office Equipment

The depreciation adjusting entry includes a debit to Depreciation Expense--Office Equipment and a credit to. . .

book value of accounts receivable

The difference between the balance of Accounts Receivable and its contra account, Allowance for Uncollectible Accounts.

gross profit

The operating revenue remaining after cost of merchandise sold has been deducted.

cost of merchandise sold

The original price of all merchandise sold during a fiscal period.

statement of stockholders' equity

The par value of common stock is reported on the. . .

True

The purpose of the post-closing trial balance is to prove the general ledger equality of debits and credits.