Accounting Chapter 16 True or False
A mortgage payable is an example of a current liability.
false
All the information required to prepare a statement of stockholders' equity is obtained from the income statement and the adjusted trial balance.
false
Closing a contra revenue account results in a credit to Income Summary.
false
Federal income tax expense is an example of an operating expense.
false
Interest earned on notes receivable is reported in the Operating Expenses section of an income statement.
false
Net income is shown on the last line of a statement of stockholders' equity.
false
Operating revenue less cost of merchandise sold equals net income.
false
Reporting financial information the same way from one fiscal period to the next is an application of the accounting concept Adequate Disclosure.
false
The Income Summary account has a normal credit balance.
false
The amount of dividends paid during the year is presented on the balance sheet.
false
The amount of sales, less sales discounts, returns, and allowances, is called gross profit.
false
The amounts reported on the balance sheet in the Stockholders' Equity section are obtained directly from general ledger accounts.
false
A closing entry that results in credit to Income Summary would close sales, contra purchase, and other revenue accounts.
true
A corporation with net income would post a closing entry that credits Retained Earnings.
true
A statement of stockholders' equity contains two major sections: (1) Capital Stock and (2) Retained Earnings.
true
Amounts needed for the closing entries are obtained from the adjusted trial balance and from the statement of stockholders' equity.
true
An income statement for a merchandising business has four main sections: operating revenue, cost of merchandise sold, operating expenses, and other revenue.
true
Calculating a ratio between gross profit 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 an adjusted trial balance.
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
In the accounting cycle, adjusting entries are posted to the general ledger prior to the preparation of the financial statements.
true
The Dividends account is closed by recording a debit to Retained Earnings.
true
The amount of dividends reported on a statement of stockholders' equity is obtained from the adjusted trial balance
true
The amount owed to a certain vendor would appear on a supporting schedule.
true
The amounts 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 as of the beginning of the year.
true
The difference between an asset's account balance and its related contra account balance is known as its book value.
true
To calculate vertical analysis percentages on an income statement, each amount is divided by net sales.
true
Total operating expenses on an income statement are deducted from gross profit to determine income from operations.
true
