True/False Chapter 15
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
