True/False
Indicate whether the
statement is true or false.
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1.
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Each unit of ownership in a corporation is known as a stock dividend.
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2.
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A stockholder is an owner of one or more shares of a corporation.
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3.
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Owners' equity accounts for a corporation normally are listed under a major
chart of accounts division titled Operating Expenses.
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4.
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An amount earned by a corporation and not yet distributed to stockholders is
called retained earnings.
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5.
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Dividends are earnings retained by the corporation.
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6.
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The dividends account has a normal debit balance and is increased by a
debit.
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7.
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A corporation's board of directors is
elected by the stockholders.
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8.
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A board of directors distributes earnings of a corporation to its stockholders
by declaring a dividend.
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9.
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A declared dividend is classified as an expense.
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10.
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When a declared dividend is paid, Dividends Payable is credited.
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11.
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A work sheet is used to plan adjustments and summarize the information necessary
to prepare financial statements.
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12.
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The steps for preparing a work sheet are very different for proprietorships and
corporations.
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13.
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General ledger account balances are changed when adjustments are entered on the
work sheet.
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14.
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The adjustment for merchandise inventory is common for all businesses.
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15.
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The supplies--store account must be adjusted to show the expense of the supplies
that are purchased during the year.
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16.
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The prepaid insurance account is adjusted to show the value of insurance that
has been prepaid.
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17.
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During a fiscal period, the amount of merchandise on hand remains
unchanged.
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18.
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Most accounts needing adjustment at the end of a fiscal period have a related
temporary account.
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19.
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The risk of uncollectible accounts should be recorded as an expense in the same
accounting period that the revenue is earned.
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20.
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Accounts Receivable is a contra account to its related asset account, Allowance
for Uncollectible Accounts.
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21.
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Many businesses use a percentage of total sales to estimate uncollectible
accounts expense.
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22.
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Assets that will be used for a number of years in the operation of a business
are called plant assets.
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23.
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Accumulated depreciation is the depreciation expense that has been recorded
since the purchase of a current asset.
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24.
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Federal income tax is an expense of a corporation.
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25.
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When a corporation makes the quarterly payment of estimated federal income tax,
the cash account is debited.
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26.
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The amount of federal income tax expense a corporation must pay is calculated
using a tax rate table furnished by the Internal Revenue Service.
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27.
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Depreciation accumulates each year of a plant asset's useful life.
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28.
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The difference between an asset's account balance and its related contra
account balance is called par value.
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29.
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Merchandise Inventory is an asset account with a normal credit balance.
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30.
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In order to make adjustments to federal income tax, you must first determine the
net income before federal income tax expense.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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31.
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A business prepares a summary of financial information at least once each fiscal
period because financial information ____.
a. | is needed to make management decisions | b. | shows whether a profit is being made or a loss
is being incurred | c. | is needed to prepare tax
reports | d. | all of the above |
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32.
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The distribution of dividends only by formal action of a corporation's
board of directors is an application of the accounting concept ____.
a. | Accounting Period Cycle | c. | Business Entity | b. | Adequate
Disclosure | d. | Historical
Cost |
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33.
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The amount of goods on hand for sale to customers is ____.
a. | a merchandise inventory | c. | a schedule of goods on
hand | b. | an inventory | d. | a purchases inventory |
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34.
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The general ledger account in which merchandise inventory is recorded is titled
____.
a. | Merchandise Inventory | c. | Purchases | b. | Inventory | d. | Purchases
Inventory |
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35.
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The entry to journalize the adjustment for merchandise inventory at the end of a
fiscal period when ending merchandise inventory is smaller than the beginning is ____.
a. | debit Merchandise Inventory; credit Income Summary | b. | debit Income
Summary; credit Merchandise Inventory | c. | debit Merchandise Inventory; credit capital
account | d. | debit capital account; credit Merchandise Inventory |
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36.
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The entry to journalize the adjustment for merchandise inventory at the end of a
fiscal period when the ending merchandise inventory is larger than beginning merchandise inventory is
____.
a. | debit Merchandise Inventory; credit Income Summary | b. | debit Income
Summary; credit Merchandise Inventory | c. | debit Merchandise Inventory; credit capital
account | d. | debit capital account; credit Merchandise Inventory |
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37.
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The entry to journalize the adjustment for merchandise inventory when beginning
Merchandise Inventory is $125,000.00 and ending Merchandise Inventory is $115,000.00 is ____.
a. | debit Merchandise Inventory, $10,000.00; credit Income Summary,
$10,000.00 | b. | debit Income Summary, $10,000.00; credit Merchandise Inventory,
$10,000.00 | c. | debit Merchandise Inventory $115,000.00; credit Income Summary,
$115,000.00 | d. | debit Income Summary, $115,000.00; credit Merchandise Inventory,
$115,000.00 |
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38.
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The entry to journalize the adjustment for office supplies at the end of a
fiscal period is ____.
a. | debit Supplies--Office; credit Supplies Inventory | b. | debit Supplies
Inventory; credit Supplies--Office | c. | debit Supplies--Office; credit Supplies
Expense--Office | d. | debit Supplies Expense--Office; credit
Supplies--Office |
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39.
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The entry to journalize the adjustment for office supplies at the end of a
fiscal period when the balance of the office supplies account is $5,100.00 and the office supplies
inventory is $3,900.00 is ____.
a. | debit Supplies Expense--Office, $1,200.00; credit Supplies--Office,
$1,200.00 | b. | debit Supplies Expense--Office, $3,900.00; credit Supplies--Office,
$3,900.00 | c. | debit Supplies--Office, $1,200.00; credit Supplies Inventory,
$1,200.00 | d. | debit Supplies Expense--Office, $3,900.00; credit Supplies Inventory,
$3,900.00 |
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40.
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The entry to journalize the adjustment for prepaid insurance at the end of a
fiscal period is ____.
a. | debit Prepaid Insurance; credit Cash | b. | debit Cash; credit Prepaid
Insurance | c. | debit Insurance Expense; credit Prepaid Insurance | d. | debit Prepaid
Insurance; credit Insurance Expense |
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41.
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The entry to adjust prepaid insurance at the end of a fiscal period when the
balance of the prepaid insurance account is $3,600.00 and the value of the prepaid insurance is
$1,600.00 is ____.
a. | debit Insurance Expense, $1,600.00; credit Prepaid Insurance,
$1,600.00 | b. | debit Insurance Expense, $2,000.00; credit Prepaid Insurance,
$2,000.00 | c. | debit Prepaid Insurance, $1,600.00; credit Insurance Expense,
$1,600.00 | d. | debit Prepaid Insurance, $2,000.00; credit Insurance Expense,
$2,000.00 |
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42.
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A work sheet is used to ____.
a. | plan adjustments | b. | summarize information necessary to prepare
financial statements | c. | both A and B | d. | neither A nor
B |
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43.
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What is the formula for calculating book value?
a. | Original Cost - Accumulated Depreciation = Ending Book
Value | b. | Original Cost + Accumulated Depreciation = Ending Book
Value | c. | Original Cost ´ Accumulated Depreciation = Ending
Book Value | d. | Original Cost ¸ Accumulated Depreciation = Ending
Book Value |
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44.
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The Supplies--Office amount in a work sheet's Trial Balance Debit column
represents the value of supplies ____.
a. | bought during a fiscal period | b. | at the beginning of a fiscal
period | c. | used during a fiscal period | d. | at the beginning of a fiscal period plus office
supplies bought during the fiscal period |
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45.
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The portion of the insurance premiums that has expired during a fiscal period is
classified as ____.
a. | capital | c. | a liability | b. | an expense | d. | an asset |
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46.
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The Merchandise Inventory amount in a work sheet's Trial Balance Debit
column represents the merchandise inventory ____.
a. | at the beginning of a fiscal period | c. | purchased during a fiscal
period | b. | at the end of a fiscal period | d. | available during a fiscal
period |
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47.
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The two accounts used to record the adjustment for federal income tax are
____.
a. | Federal Income Tax Expense and Federal Income Tax Adjustments | b. | Federal Income Tax
Expense and Allowance for Federal Tax Expense | c. | Federal Income Tax Expense and Taxes
Payable | d. | Federal Income Tax Payable and Federal Income Tax
Expense |
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48.
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Recording expenses in the accounting period in which the expenses contribute to
earning revenue is an application of the accounting concept ____.
a. | Adequate Disclosure | c. | Matching Expenses with Revenue | b. | Historical
Cost | d. | Consistent
Reporting |
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49.
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The Income Summary amount in a work sheet's Adjustments Debit column
represents the ____.
a. | decrease in Merchandise Inventory | c. | beginning Merchandise
Inventory | b. | increase in Merchandise Inventory | d. | ending Merchandise
Inventory |
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50.
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The two accounts used to adjust the uncollectible accounts are ____.
a. | Accounts Receivable and Uncollectible Accounts Expense | b. | Accounts Receivable
and Allowance for Uncollectible Accounts | c. | Uncollectible Accounts Expense and Allowance
for Uncollectible Accounts | d. | Accounts Receivable and Accounts Receivable
Expense |
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51.
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In calculating the annual amount of depreciation expense for a plant asset, you
must consider ____.
a. | original cost | c. | estimated useful life | b. | estimated salvage
value | d. | all of the
above |
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52.
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The useful life of a plant asset is affected by ____.
a. | functional depreciation | c. | both A and B | b. | physical
depreciation | d. | neither A nor
B |
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53.
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Computers, sales display cases, furniture, and cash registers are examples of
____.
a. | current assets | c. | both A and B | b. | plant assets | d. | neither A nor B |
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54.
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Which account is used for the investment of all owners of a corporation?
a. | Owners' Equity | c. | Retained Earnings | b. | Dividends | d. | Capital Stock |
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55.
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Businesses may have three major types of plant assets: ____.
a. | equipment, buildings, and land | c. | equipment, cash, and
land | b. | cash, buildings, and land | d. | cash, buildings, and equipment |
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