Ch. 19 Accounting T/F
A net loss has no direct effect on the Retained Earnings account
False
Capital Stock is the only general ledger account classified as stockholders' equity
False
Changes in the Cash in Bank account are reported in the statement of retained earnings
False
The amount of gross profit for the period is the difference between net sales and the cost of merchandise sold
True
The amount of profit earned before expenses are subtracted is the gross profit on sales.
True
The balance in the Capital Stock account never changes unless stock in the business is purchased or sold
True
The balances of all permanent accounts as of a specific date are reported on the balance sheet.
True
The cost of merchandise sold is determined by subtracting the ending inventory from the cost of merchandise available
True
The federal income tax amount is listed separately on the income statement so that the operating income can be easily identified
True
The financial statements prepared by a merchandising corporation are the income statement, the statement of retained earnings, the balance sheet, and the statement of cash flows
True
The income statement reports the balances of the contra revenue accounts Sales Discounts and Sales Returns and Allowances
True
The statement of retained earnings is prepared before the balance sheet
True
Transportation charges increase the cost of merchandise purchased during the period
True
The Retained Earnings account always increases at the end of the period
False
The account Transportation In reduces the amount of merchandise available for sale.
False
The balance of the Capital Stock account should change every period
False
The balance of the Retained Earnings account will always increase at the end of the period
False
The balance sheet is prepared from the information in the Balance Sheet section of the work sheet and from the income statement
False
The cost of merchandise sold is obtained by subtracting the beginning inventory from the cost of merchandise available for sale
False
The general ledger is the source of information for preparing the financial statements of a business.
False
The income statement reports the financial position of the business as of a specific date
False
The source of information for preparing the income statement is the general ledger
False
The statement of retained earnings consists of only the balance of the Retained Earnings account at the beginning of the period plus net income before taxes.
False
The statement of retained earnings is prepared before the income statement
False
The stockholders' equity section of the balance sheet lists the accounts Capital Stock and Cash in Bank.
False
The net sales amount of a merchandising business includes the cost of merchandise sold and the gross profit made from selling that merchandise
False, but is true for total sales
Corporate Federal Income Tax Expense is not included in the total operating expenses for the period
True
Federal Corporate Income Tax Expense is not an operating expense, because it represents cash paid out as a result of the revenue earned rather than cash spent to earn revenue.
True
Financial reports are prepared so that managers can evaluate past decisions and make future decisions
True
Net purchases is added to the beginning inventory to get the merchandise available for sale for the period
True
Purchases Discounts is a contra account of Purchases
True
Purchases Returns and Allowances and Purchases Discounts are both contra cost of merchandise account.
True