Download Chapter 4 Objective Questions - Garnet Valley School District

Chapter 4 Objective Questions
True/False
Indicate whether the statement is true or false.
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1. A common length of time for a fiscal period is one month.
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2. A departmental statement of gross profit provides a manager with information about revenue and costs for
each department.
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3. Completing end-of-fiscal period work is an application of the Historical Cost accounting concept.
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4. A departmentalized business prepares a post-closing trial balance.
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5. Income Summary--General is used for adjusting the merchandise inventory account balances for a
departmentalized business.
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6. Component percentages in a departmentalized business are used to analyze the financial results for the
business as a whole.
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7. The Income Summary--General account balance is equal to the net income (or net loss) for a fiscal period.
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8. Allowance for Uncollectible Accounts is debited in the adjustment for uncollectible accounts expense.
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9. The Accounting Period Cycle concept states that changes in financial information are reported for a specific
period of time in the form of financial statements.
____ 10. Financial statements are prepared at least once a year.
____ 11. The revenue earned by a department less its cost of merchandise sold and less its direct expenses is called
departmental profit.
____ 12. In responsibility accounting, operating expenses are classified as either direct or indirect expenses.
____ 13. Two principal methods are used to determine actual amounts of merchandise by hand: periodic inventory and
perennial inventory.
____ 14. A periodic inventory is also known as a physical inventory.
____ 15. Gross profit is the amount of revenue from sales plus the cost of goods sold.
____ 16. A schedule of accounts receivable lists vendor accounts, account balances, and total amount due all vendors.
____ 17. The acceptable level of performance for the total operating expenses percentage of a business is determined to
be 35%. The actual performance shown on the departmental statement of gross profit is 37%. Therefore, the
actual performance is acceptable.
____ 18. Financial information that a business records is summarized in financial statements.
____ 19. Estimated uncollectible accounts expense for a period is $1,500. Since the percentage of sales on account that
are expected to become uncollectible is 1%, total sales on account must equal $15,000.
____ 20. A trial balance is a proof of the equality of debits and credits in a general journal.
____ 21. Plant assets increase in value over the passage of time.
____ 22. When closing entries are recorded, Dividends is closed to Income Summary–General.
____ 23. Responsibility statements report revenue, costs, and direct expenses under a specific department's control.
____ 24. Two sources of information used to determine acceptable levels of performance are a business' historical
records and nationwide business performance statistics published in newspapers and magazines.
____ 25. An income statement shows the revenue and expenses for a fiscal period.
____ 26. A journal entry should not be split between two pages because the debit and credit parts of the entry cannot be
seen together.
____ 27. A statement of stockholders' equity shows changes in a corporation's ownership for a fiscal period.
____ 28. Earnings distributed to stockholders are called retained earnings.
____ 29. Net income increases the capital stock of a corporation as shown on the statement of stockholders' equity.
____ 30. The two sections of a statement of stockholders' equity are capital stock and retained earnings.
____ 31. A departmental statement of gross profit provides a manager with information about revenue and costs for
each department.
____ 32. Allowance for Uncollectible Accounts is debited in the adjustment for uncollectible accounts expense.
____ 33. A balance sheet reports the financial condition of a business on a specific date.
____ 34. The information to journalize closing entries is obtained from the Departmental Margin Statements and the
Income Statement columns of the work sheet.
____ 35. The exact amount of depreciation expense is known when a piece of equipment is purchased.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 36. The length of time for which a business summarizes reports and financial information is a(n) ____.
a. month
c. fiscal period
b. year
d. accounting cycle
____ 37. A trial balance prepared after the closing entries are posted is a(n) ____.
a. closing trial balance
c. opening trial balance
b. post-closing trial balance
d. balance sheet trial balance
____ 38. A merchandise inventory determined by keeping a continuous record of increases, decreases, and balance on
hand is a(n) ____.
a. estimated inventory
c. periodic inventory
b. running inventory
d. perpetual inventory
____ 39. A financial statement that shows changes in a corporation's ownership for a fiscal period is the ____.
a. balance sheet
c. statement of stockholders' equity
b. income statement
d. trial balance
____ 40. A list of vendor accounts, account balances, and total amount due all vendors is a ____.
a. schedule of accounts receivable
c. customer ledger
b. schedule of accounts payable
d. vendor ledger
____ 41. Journal entries recorded to update general ledger accounts at the end of a fiscal period are ____.
a. adjusting entries
c. general journal entries
b. closing entries
d. updating entries
____ 42. A statement showing gross profit for each department for a portion of a fiscal period is a(n) ____.
a. departmental statement of gross profit
b. interim departmental statement of gross profit
c. income statement
____ 43.
____ 44.
____ 45.
____ 46.
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____ 48.
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____ 51.
____ 52.
____ 53.
____ 54.
____ 55.
d. balance sheet
A columnar accounting form used to summarize the general ledger information needed to prepare financial
statements is a(n) ____.
a. balance sheet
c. trial balance
b. ledger sheet
d. work sheet
An amount earned by a corporation and not yet distributed to stockholders is called ____.
a. capital stock
c. retained earnings
b. dividends
d. undivided earnings
The percentage relationship between one financial statement item and the total that includes that item is a(n)
____.
a. ratio
c. component percentage
b. constant percentage
d. declining percentage
The portion of a plant asset's cost that is transferred to an expense account in each fiscal period during a plant
asset's useful life is ____.
a. accumulated depreciation
c. plant asset expense
b. depreciation expense
d. salvage value
Estimating inventory by using the previous year's percentage of gross profit on operations is known as the
____.
a. gross profit method of estimating an inventory
b. retail method of estimating an inventory
c. percentage of gross profit inventory
d. historical method of estimating an inventory
Journal entries used to prepare temporary accounts for a new fiscal period are ____.
a. adjusting entries
c. general journal entries
b. closing entries
d. updating entries
A list of customer accounts, account balances, and total amount due from all customers is a ____.
a. schedule of accounts receivable
c. customer ledger
b. schedule of accounts payable
d. vendor ledger
Assets that will be used for a number of years in the operation of a business are called ____.
a. current assets
c. equity assets
b. depreciable assets
d. plant assets
Total shares of ownership in a corporation are called ____.
a. capital stock
c. ownership shares
b. common stock
d. equity
A statement prepared at the end of a fiscal period showing the gross profit for each department is a(n) ____.
a. departmental statement of gross profit
b. interim departmental statement of gross profit
c. income statement
d. balance sheet
The series of accounting activities included in recording financial information for a fiscal period is known as
the ____.
a. recording cycle
c. balancing cycle
b. fiscal period cycle
d. accounting cycle
A financial statement showing the revenue and expense for a fiscal period is the ____.
a. balance sheet
c. statement of stockholders' equity
b. income statement
d. trial balance
A proof of the equality of debits and credits in a general ledger is a ____.
a. balance sheet
c. trial balance
____ 56.
____ 57.
____ 58.
____ 59.
____ 60.
b. ledger balance
d. work sheet
Earnings distributed to stockholders are called ____.
a. capital stock
c. distributed earnings
b. dividends
d. retained earnings
A merchandise inventory determined by counting, weighing, or measuring items of merchandise on hand is
a(n) ____.
a. estimated inventory
c. perpetual inventory
b. periodic inventory
d. counted inventory
The adjusting entry for supplies involves a ____.
a. debit to Supplies and a credit to Supplies Expense
b. debit to Supplies Expense and a credit to Supplies
c. debit to Supplies and a credit to Income Summary
d. debit to Supplies Expense and a credit to Income Summary
An interim departmental statement of gross profit is usually prepared ____.
a. daily
c. monthly
b. weekly
d. yearly
Completing end-of-fiscal-period work is an application of which accounting concept?
a. Accounting Period Cycle
c. Materiality
b. Business Entity
d. Historical Cost
Chapter 4 Objective Questions
Answer Section
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36. ANS: C
37. ANS: B
38. ANS: D
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