The Cash account is a temporary account.
A payment of an expense in advance is called a prepaid expense.
When a business collects cash, the Cash account is debited.
The rate of return on total assets is a ratio that measures a company’s success in using
its assets to earn income.
Installment payments for mortgages generally contain both an amount for principal
repayment and an amount for interest.
A general ledger is an accounting journal designed to record one specific type of
transaction.
Grace Paper Company has a debt ratio of 25%, which means that 75% of the assets are
financed by creditors.
Data from a trial balance is used to prepare the income statement, statement of retained
earnings, and the balance sheet.
An invoice is a request by the seller for payment from the purchaser.
A basic principle of internal control over cash receipts is that the deposit of the cash and
the recording of the receipts into the journal should be separated.
Valentine Corp. uses the indirect method to prepare the statement of cash flows. Refer
to the following section of the comparative balance sheet:Valentine Corp.
Comparative Balance Sheet
December 31, 2017 and 2016
How will the change in Merchandise Inventory be shown on the statement of cash
flows?
A) addition to net income under the operating activities section
B) subtraction from net income under the operating activities section
C) positive cash flow under the financing activities section
D) negative cash flow under the investing activities section
Which of the following statements is true of revenues?
A) Revenues decrease equity, so a revenue account’s normal balance is a credit balance.
B) Revenues decrease equity, so a revenue account’s normal balance is a debit balance.
C) Revenues increase equity, so a revenue account’s normal balance is a debit balance.
D) Revenues increase equity, so a revenue account’s normal balance is a credit balance.
Which of the following accounting elements does the matching principle help to match?
A) revenues and liabilities
B) expenses and assets
C) expenses and revenues
D) expenses and liabilities
Grabbe Enterprises uses the allowance method to account for uncollectible receivables.
When an uncollectible account is written off, ________.
A) the Bad Debt Expense account is debited
B) no entry is required because bad debt expense is estimated at the end of the
accounting period
C) the write off has no effect on net income
D) the Allowance for Bad Debts account is credited
Use the following sales journal to record the preceding transactions.
Which of the following actions determines when a corporation comes into existence?
A) The charter is obtained from the state.
B) The incorporators pay fees, sign the charter, and file required documents with the
state.
C) The first share of stock is issued.
D) The corporate bylaws are written.
Lack of mutual agency is best described as which of the following?
A) The liabilities of the corporation cannot be extended to the personal assets of the
stockholder.
B) Shares of stock can be readily purchased and sold by investors on an organized stock
exchange.
C) Stockholders are not authorized to sign contracts or make business commitments on
behalf of the corporation.
D) Corporations pay income tax on corporate earnings, and shareholders pay income
tax on corporate dividends.
The Salaries Payable account is a(n) ________.
A) liability account with a normal debit balance
B) asset account with a normal debit balance
C) liability account with a normal credit balance
D) asset account with a normal credit balance
The retained earnings of a corporation is ________.
A) internally generated equity that is earned by profitable operations that is not
distributed to stockholders
B) externally generated equity that is contributed by shareholders
C) externally generated equity that is acquired from banks and other creditors
D) internally generated equity that is received from employee stock purchases
A summary of significant accounting policies and explanations of specific items on the
financial statements are included in ________.
A) the balance sheet
B) the income statement
C) the notes to financial statements
D) the report of the independent registered public accounting firm
Glitter Services, Inc. pays $1,350,000 to acquire 35% of voting stock of Grey
Investments, Inc. on March 5, 2017. When this transaction is recorded, the ________.
A) total equity will increase
B) total assets will increase
C) total assets will decrease
D) total cash will decrease
Which of the following statements is true of the corporate form of business?
A) The board of directors sets policy for the corporation and appoints the officers.
B) Changes in the ownership of stock has a negative effect on the continuity of the
corporation.
C) Any stockholder may commit the corporation to a contract.
D) It is easy for stockholders to lodge an effective protest against management.
A coal mine cost $1,003,000 and is estimated to hold 50,000 tons of coal. There is no
residual value. During the first year of operations, 6,000 tons are extracted and sold.
Calculate depletion per unit. (Round your answer to the nearest cent.)
A) $10.03
B) $5.02
C) $20.06
D) $15.04
Which of the following is a source document that provides the evidence and data for
accounting transactions?
A) Journal
B) Sales invoice
C) Ledger
D) Trial balance