If the amount assigned to ending inventory is incorrect ,
a. The balance sheet is affected, but the income statement is not.
b. The income statement is affected, but the balance sheet is not.
c. The balance sheet is affected, but cost of goods sold is not.
d. Both the balance sheet and the income statement are affected.
Tropical Co. declared a cash dividend of $30,000. The entry includes a(n)
a. decrease to Cash of $30,000.
b. increase to Retained Earnings of $30,000.
c. decrease to Retained Earnings of $30,000.
d. decrease to Cash Dividend Payable of $30,000.
The following information is reported in the operating activities section of Gateway’s
statement of cash flows for 2014:
Which one of the following conclusions can be assumed from the information
provided?
a. Gateway used the direct method to determine cash flows from operating activities.
b. Gateway purchased more merchandise than it sold in 2014.
c. Cash payments for merchandise purchases were less than the amount of merchandise
purchased on credit during 2014.
d. Cash payments for merchandise exceeded cost of goods sold by $200,000.
If a company hires honest employees, no internal control procedures are necessary.
a. True
b. False
Which of the following statements regarding partnerships is true?
a. Partnerships have two owners.
b. The partnership ends when a new partner is added.
c. The partnership is responsible for its own taxes.
d. The partnership is a separate legal entity from its owners.
The accrual-based income statement is considered to be a good indicator of current cash
inflows and outflows.
a. True
b. False
A company invests excess cash in a certificate of deposit. At the end of an accounting
period before the CD matures, the company will recognize interest expense.
a. True
b. False
A customer returned damaged goods for credit. Which of the seller’s accounts
decreases?
a. Purchase Returns
b. Accounts Receivable
c. Sales Returns
d. Sales Revenue
Choose the user group that is most likely to have the need listed below. (Select all that
apply.) The ability of the company to pay its debts as they become due.
a. Stockholder
b. Company management
c. Supplier
d. Banker
e. Internal Revenue Service
f. Securities and Exchange Commission
g. Labor union
Purchase returns and allowances is subtracted from cost of goods sold to determine net
purchases.
a. True
b. False