True/False Chapter 15

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A corporation's balance sheet reports assets, liabilities, and stockholder's equity on a specific date

True

A major difference between balance sheets of a corporation and a proprietorship is the owner's equity section.

True

A statement of stockholder's equity contains two major sections: retained earnings and capital stock

True

A supporting schedule is sometimes referred to as an exhibit.

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

Financial statements provide the primary source of information needed by owners and managers to make decisions on the future activity of a business.

True

Information from a completed work sheet is used to prepare the income statement.

True

Revenue remaining after cost to merchandise sold has been deducted is called gross profit on sales

True

Ruled double lines across both amount columns below the Assets section and below the Stockholder's Equity section show that the assets equal liabilities plus owner's equity.

True

Some income may be distributed as dividends to provide stockholders with a return on their investments.

True

The beginning balance of the capital stock account is the amount of capital stock issued at the beginning of the year.

True

The total amount of stockholder's equity is shown on the last line of a statement of stockholder's equity

True

A balance sheet must be prepare din account form only.

False

A business owning both current and plant assets usually lists them under one heading on a balance sheet

False

A corporation prepares only two financial statements: an income statement and a balance sheet.

False

A supporting schedule is always prepared for principal financial statments

False

A value assigned to a share of stock and printed on the stock certificate is called net value.

False

An income statement for a merchandising business has three main sections: revenue section, expenses section, and a merchandise inventory section.

False

For a merchandising business, every sales dollar reported on the income statement includes only two components: 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 percent, the current year's actual component percentage of 48.9 percent is unacceptable.

False

If a company has determined that the acceptable component percentage for gross profit on sales is not less than 45.0 percent, the current year's actual component percentage of 48.9 percent is unacceptable.

False

Increasing sales revenue while keeping cost of merchandise sold the same will decrease gross profit on sales

False

Individual amounts reported on an income statement have significant meaning without being compared to another amount.

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

Reporting financial information the same way from one fiscal period to the next is an application of the Adequate Disclosure accounting concept.

False

Total expenses on an income statement are added to the gross profit on sales to find net income before federal income tax

False

When a businesses expenses are less than the gross profit on sales, the difference is known as a net loss.

False


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