Chapter 12 accounting

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

Matching Expenses with Revenue

The general ledger account in which merchandise inventory is recorded is titled ____.

Merchandise inventory

In order to make adjustments to federal income tax, you must first determine the net income before federal income tax expense.

True

Most accounts needing adjustment at the end of a fiscal period have a related temporary account.

True

The amount of federal income tax expense a corporation must pay is calculated using a tax rate table furnished by the Internal Revenue Service.

True

The dividends account has a normal debit balance and is increased by a debit.

True

The risk of uncollectible accounts should be recorded as an expense in the same accounting period that the revenue is earned.

True

The Merchandise Inventory amount in a work sheet's Trial Balance Debit column represents the merchandise inventory ____.

at the beginning of a fiscal period

The Supplies--Office amount in a work sheet's Trial Balance Debit column represents the value of supplies ____.

at the beginning of a fiscal period plus office supplies bought during the fiscal period

Which account is used for the investment of all owners of a corporation?

capital stock

Dividends are earnings retained by the corporation.

false

Computers, sales display cases, furniture, and cash registers are examples of ____.

plant assets

Federal income tax is an expense of a corporation.

True

The portion of the insurance premiums that has expired during a fiscal period is classified as ____.

an expense

A business prepares a summary of financial information at least once each fiscal period because financial information ____.

All of the above

A declared dividend is classified as an expense.

False

Accounts Receivable is a contra account to its related asset account, Allowance for Uncollectible Accounts.

False

Accumulated depreciation is the depreciation expense that has been recorded since the purchase of a current asset.

False

During a fiscal period, the amount of merchandise on hand remains unchanged.

False

Each unit of ownership in a corporation is known as a stock dividend.

False

General ledger account balances are changed when adjustments are entered on the work sheet.

False

Many businesses use a percentage of total sales to estimate uncollectible accounts expense.

False

Merchandise Inventory is an asset account with a normal credit balance.

False

Owners' equity accounts for a corporation normally are listed under a major chart of accounts division titled Operating Expenses.

False

The adjustment for merchandise inventory is common for all businesses.

False

The difference between an asset's account balance and its related contra account balance is called par value.

False

The steps for preparing a work sheet are very different for proprietorships and corporations.

False

The supplies--store account must be adjusted to show the expense of the supplies that are purchased during the year.

False

When a corporation makes the quarterly payment of estimated federal income tax, the cash account is debited.

False

When a declared dividend is paid, Dividends Payable is credited.

False

The two accounts used to record the adjustment for federal income tax are ____.

Federal Income Tax Payable and Federal Income Tax Expense

What is the formula for calculating book value?

Original Cost - Accumulated Depreciation = Ending Book Value

Depreciation accumulates each year of a plant asset's useful life.

True

A board of directors distributes earnings of a corporation to its stockholders by declaring a dividend.

True

A corporation's board of directors is elected by the stockholders.

True

A stockholder is an owner of one or more shares of a corporation.

True

A work sheet is used to plan adjustments and summarize the information necessary to prepare financial statements.

True

An amount earned by a corporation and not yet distributed to stockholders is called retained earnings.

True

Assets that will be used for a number of years in the operation of a business are called plant assets.

True

The two accounts used to adjust the uncollectible accounts are ____.

Uncollectible Accounts Expense and Allowance for Uncollectible Accounts

The amount of goods on hand for sale to customers is ____.

a merchandise inventory

In calculating the annual amount of depreciation expense for a plant asset, you must consider ____.

all of the above

A work sheet is used to ____.

both A and B

The useful life of a plant asset is affected by ____.

both A and B

The distribution of dividends only by formal action of a corporation's board of directors is an application of the accounting concept ____.

business entity

The entry to journalize the adjustment for merchandise inventory when beginning Merchandise Inventory is $125,000.00 and ending Merchandise Inventory is $115,000.00 is ____.

debit Income Summary, $10,000.00; credit Merchandise Inventory, $10,000.00

The entry to journalize the adjustment for merchandise inventory at the end of a fiscal period when ending merchandise inventory is smaller than the beginning is ____.

debit Income Summary; credit Merchandise Inventory

The entry to adjust prepaid insurance at the end of a fiscal period when the balance of the prepaid insurance account is $3,600.00 and the value of the prepaid insurance is $1,600.00 is ____.

debit Insurance Expense, $2,000.00; credit Prepaid Insurance, $2,000.00

The entry to journalize the adjustment for prepaid insurance at the end of a fiscal period is ____.

debit Insurance Expense; credit Prepaid Insurance

The entry to journalize the adjustment for merchandise inventory at the end of a fiscal period when the ending merchandise inventory is larger than beginning merchandise inventory is ____.

debit Merchandise Inventory; credit Income Summary

The entry to journalize the adjustment for office supplies at the end of a fiscal period when the balance of the office supplies account is $5,100.00 and the office supplies inventory is $3,900.00 is ____.

debit Supplies Expense--Office, $1,200.00; credit Supplies--Office, $1,200.00

The entry to journalize the adjustment for office supplies at the end of a fiscal period is ____.

debit Supplies Expense--Office; credit Supplies--Office

The Income Summary amount in a work sheet's Adjustments Debit column represents the ____.

decrease in Merchandise Inventory

Businesses may have three major types of plant assets: ____.

equipment, buildings, and land