CHAPTER 2
UNDERSTANDING FINANCIAL STATEMENTS
TRUE OR FALSE QUESTIONS
(Correct answer indicated by T for True answers and F for False answers)
individual establishment are the same as national average figures.
in time.
head concerned.
either cost centers or production centers.
been deducted.
departmental sales revenue to total sales revenue basis.
revenue, yield more net income to the overall establishment, than would a department
with a lower contributory income percentage having the same sales revenue increase.
form and the T form.
contra accounts shown on the balance sheet.
asset.
as a reduction of accounts receivable.
exceeds its original purchase price.
21. The only type of stock issued by hotel companies is common stock.
dividends, since a company started.
23. Retained earnings are part of the income statement.
24. Retained earnings are the link between the income statement and the balance sheet.
are currently financed.
26. Ownership withdraws and dividends to stockholders’ are contra accounts.
27. A trial balance that is not in balance always indicates an error exists.
MULTIPLE CHOICE QUESTIONS
(Correct answer indicated by asterisk)
1. A direct expense is:
2. Contributory incomes are:
3. Net cost of sales food is calculated by adjusting cost of sales food by:
4. Gross margin is:
5. Which of the following is not an inventory valuation method?
6. A decentralized departmental operation where managers are made accountable for their
performance and the performance of employees in their department is known as:
7. indirect expenses:
8. departmental sales revenue mix refers to the:
9. Which of the following is not normally considered a current asset in a hotel?
10. A deferred expense is one that is:
11. Deposits sent in by hotel room guests to hold rooms for some future period are shown on the
balance sheet as a (an):
12. paid in capital, excess of par or stated value (capital surplus) is:
13. retained earnings are:
14. Beginning retained earnings were $86,300. During the year, the company had a net loss of
$10,200 and paid dividends of $16,800. Ending retained earnings are:
15. The two basic formats of balance sheet presentation are the:
16. Catering equipment was purchased at a cost of $24,400 that has an estimated life of 10 years
and a residual value of $1,400. Using double-declining balance, calculate the depreciation
expense for its second full year of use.