Question :
48. The balance in Income Summary: A. Should equal retained earnings.B. Will always be : 1229727
48. The balance in Income Summary:
A. Should equal retained earnings.
B. Will always be equal to the increase in retained earnings.
C. Will equal net income less dividends.
D. Will equal net income or net loss.
49. After preparing the financial statements for the current year, the accountant for Exquisite Gems closed the Dividends account at year-end by debiting Income Summary and crediting the Dividends account. What is the effect of this entry on current-year net income and the balance in the Retained Earnings account at year-end?
A. Net income is overstated and the balance in the Retained Earnings account is correct.
B. Net income is correct and the balance in the Retained Earnings account is overstated.
C. Net income is understated and the balance in the Retained Earnings account is understated.
D. Net income is understated and the balance in the Retained Earnings account is overstated.
50. The concept of adequate disclosure:
A. Does not apply to information which is immaterial.
B. Grants users of the financial statements access to a company’s accounting records.
C. Does not apply to events occurring after the balance sheet date.
D. Specifies which accounting methods must be used in a company’s financial statements.
51. The concept of adequate disclosure requires a company to inform financial statement users of each of the following, except:
A. The accounting methods in use.
B. The due dates of major liabilities.
C. Destruction of a large portion of the company’s inventory on January 20, three weeks after the balance sheet date, but prior to issuance of the financial statements.
D. Income projections for the next five years based upon anticipated market share of a new product; the new product was introduced a few days before the balance sheet date.
52. Income Summary appears on which financial statement:
A. Income statement.
B. Balance sheet.
C. Retained Earnings statement.
D. Income summary does not appear on any financial statement.
53. Retained Earnings at the end of a period:
A. Is equal to the balance in the Retained Earnings account in the adjusted trial balance at the end of a period.
B. Is determined in the statement of Retained Earnings.
C. Is equal to Retained Earnings at the beginning of the period, minus net income (or plus net loss) for the period.
D. Appears in the income statement for the period.
54. A statement of retained earnings shows:
A. The changes in the Cash account occurring during the accounting period.
B. The revenue, expense, and dividends of the period.
C. The types of assets which have been purchased with the earnings retained during the accounting period.
D. The changes in the Retained Earnings account occurring during the accounting period.
55. The normal order in which the financial statements are prepared is:
A. Balance sheet, income statement, statement of retained earnings.
B. Income statement, statement of retained earnings, balance sheet.
C. Income tax return, income statement, balance sheet.
D. Income statement, statement of cash flows, balance sheet.
56. The purpose of making closing entries is to:
A. Prepare revenue and expense accounts for the recording of the next period’s revenue and expenses.
B. Enable the accountant to prepare financial statements at the end of the accounting period.
C. Establish new balances in the balance sheet accounts.
D. Reduce the number of expense accounts.
57. When closing the accounts at the end of the period, which of the following is closed directly into the Retained Earnings account?
A. Depreciation Expense.
B. Accumulated Depreciation.
C. Revenue and liability accounts.
D. The Income Summary account.
