Final Accounting
The account title used for recording the payment of rent in advance for an office building is ________.
Prepaid rent
Which of the following statements is true of an income statement?
There is net income when total revenues are greater than total expenses.
A corporation originally issued $13 par value common stock for $15 per share. Which of the following is included in the entry to record the purchase of 300 shares of treasury stock for $11 per share?
Treasury Stocklong dash—Common is debited for $3,300.
The sum of all the depreciation expense recorded to date for a depreciable asset is called ________.
accumulated depreciation
Which one of the following account groups normally has a debit balance?
assets and expenses
Which of the following users would rely on managerial accounting information for decision-making purposes?
company managers
Which of the following line items will appear on the income statement of a merchandiser but not of a service company?
cost of goods sold
The revenue recognition principle guides accountants in ________.
ensuring only revenues received in cash are recorded
The owners' claims to the assets of the business are called ________.
equity
A corporation issues 16,000 shares of its $3 stated value common shares. The issue price is $9 per share. The credit to the Common Stock account is $144,000.
false
A liability account is increased by a debit.
false
A purchase discount is the amount offered to the purchaser for delaying the payment to the seller.
false
Adjusting entries record revenues in the period in which cash is received and expenses in the period when cash is paid.
false
Asset and liability accounts may be closed to the Income Summary account.
false
Both common and preferred stock carry the same degree of investment risk for the stockholder.
false
Freight out is an addition to the Merchandise Inventory account if the seller uses the perpetual inventory system.
false
Preferred Stock is included in the stockholders' equity section of the balance sheet and is often listed after Common Stock.
false
Stock issued at amounts in excess of par value results in a gain that is reported on the income statement.
false
The Accounts Payable account is a temporary account.
false
The Common Stock account is increased by a debit.
false
The purchase discount amount is calculated on the amount of the invoice minus the returns and allowances.
false
Treasury stock has voting rights and receives cash or stock dividends.
false
Under the perpetual inventory system, purchase returns or allowances are debited to the Merchandise Inventory account by the purchaser.
false
When a company issues stock at an amount greater than the par value, a gain is recorded for the difference between the issue price and the par value.
false
A company may purchase treasury stock to support the company's stock price.
true
A contra account's normal balance (debit or credit) is the opposite of the normal balance of the related account.
true
Accounting is the information system that measures business activities, processes the information into reports, and communicates the results to decision makers.
true
An account is a detailed record of all increases and decreases that have occurred in an individual asset, liability, or equity during a specific period.
true
An audit is an examination of a company's financial statements and records.
true
Double taxation occurs when corporations make dividend payments to stockholders.
true
Freight in is recorded in the Merchandise Inventory account if the purchaser uses the perpetual inventory system.
true
Gross profit is the extra amount the company receives from the customer for merchandise sold over what the company paid to the vendor.
true
If treasury stock is resold for more than cost, the difference is debited to the account Paid-In Capital from Treasury Stock Transactions.
true
In a perpetual inventory system, the Cost of Goods Sold account is debited at the time of each sale.
true
In the closing process, the Dividends account is closed to the Retained Earnings account.
true
On the income statement, a merchandising company reports the cost of merchandise inventory that has been sold to customers.
true
Par value is an arbitrary amount that is assigned by the state when the corporate charter is issued.
true
Prepaid Insurance is an asset account that appears on the balance sheet.
true
Stated value stock is no-par stock that has been assigned an amount similar to par value.
true
Stockholders of a corporation are not personally liable for the corporation's debt.
true
The Depreciation Expense account is a temporary account.
true
The Office Supplies account is a temporary account.
true
The balance sheet section of the worksheet includes the asset and liability accounts and all equity accounts except revenues and expenses.
true
The balances in the liability and revenue accounts are increased with a credit.
true
The depreciation method that allocates an equal amount of depreciation to each year is called the straight
true
The journal entry for the purchase of treasury stock includes a credit to Cash.
true
The par value of a stock has no relation to the market value.
true
The permanent acccounts—assets, liabilities, and stockholders' equity—are closed to the Common Stock account.
true
The three types of events that affect retained earnings are dividends, revenues, and expenses.
true
Unearned Revenue is a liability account.
true
When a company uses a perpetual inventory system, all merchandise transactions are updated as they occur. However, the inventory account may not show the correct balance at all times.
true
When a corporation issues no-par stock, it debits the asset received and credits the stock account.
true
When stock is issued for assets other than cash, the transaction is recorded at the market value of the stock issued or the market value of the assets received, whichever is more clearly determinable.
true
Which of the following is not a type of adjusting entry?
unearned revenue
If a company is using accrual basis accounting, when should it record revenue?
when services are performed, even though cash may be received at a later date
Which of the following statements regarding the accounting equation is incorrect?
Each category of the accounting equation contains accounts.
Revenues and expenses may be transferred to the ________ account before their final transfer into the Retained Earnings account.
Income summary
________ is the equity earned by profitable operations that is not distributed to stockholders.
Retained earnings
________ represents a debt owed for renting a building.
rent payable
The expected value of a depreciable asset at the end of its useful life is called ________.
residual value
Which of the following is a liability account?
salaries expense
FOB destination refers to a situation where title to goods while in transit belongs to the ________.
seller
