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