Question : 21. When the accountant transfers the balance in each temporary revenue : 1245888

 

 

21. When the accountant transfers the balance in each temporary revenue and expense account
to the Retained Earnings account, this procedure is known as the closing of accounts. 
 

22. Once revenue and expense accounts serve their purpose of accumulating specific revenue and expense items for an accounting period, they have no further purpose for that period. 
 

23. The income statement links the beginning and ending balance sheets. 
 

24. The equation that describes the relationship between the balance sheet and the income statement through the Retained Earnings account is as follows:

Retained Earnings (beginning) + Net Income – Dividends = Retained Earnings (ending) 
 

25. Recording revenues and expenses directly in the Retained Earnings account suppresses information about the causes of net income. 
 

26. A T-account is a device or convention for organizing and accumulating the accounting entries of transactions that affect an individual account.  Which of the following is/are true?  
A. Increases in assets appear on the left side, and decreases in assets appear on the right side of T-accounts.
B. Increases in liabilities appear on the right side, and decreases in liabilities appear on the left side of T-accounts.
C. Increases in shareholders’ equity appear on the right side, and decreases in shareholders’ equity appear on the left side of T-accounts.
D. All of the above are true.
E. None of the above are true.

 

27. To record the purchase of equipment that is fully financed by the seller, you would 
A. debit a liability and credit an asset.
B. debit an asset and credit cash.
C. debit an asset and credit a liability.
D. debit an asset and credit shareholders’ equity.
E. debit a liability and credit shareholders’ equity.

 

28. Many firms provide similar types of airline services with similar types of assets. They each received unqualified opinions from their independent auditors. Yet, Flash Airlines appears to apply its accounting principles more aggressively in income-enhancing ways relative to its competitors. The choices for Flash Airlines in applying generally accepted accounting principles under the accrual basis of accounting include(s): 
A. depreciable lives for buildings and equipment.
B. estimated uncollectibles for accounts receivable.
C. estimated warranty costs.
D. all of the above.
E. none of the above.

 

29. The accounting system uses a device called an account. An account 
A. is created each time a transaction takes place.
B. accumulates the increases and decreases that occur during the period for a single item. 
C. is created only for income statement items.
D. is created only for balance sheet items.
E. None of these answer choices is correct.

 

30. A seller of goods can easily associate (or match) the consumption of the benefits of the asset sold with revenues from its sale. At the time of sale and revenue recognition, the seller  
A. removes the asset (inventory) from the seller’s balance sheet.
B. recognizes revenue.
C. recognizes a reduction in an asset (inventory).
D. records the cost of goods sold expense in the same amount by which inventory decreases.
E. All of the answer choices are correct.

 

 

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