True/False
1. ) Internal users of accounting information include lenders, shareholders, brokers, and managers.
2. ) Every business transaction should leave the accounting equation in balance.
3. ) FastForward paid $6,000 in dividends. This amount should be included as an expense on the income statement.
4. ) A compound journal entry affects no more than two accounts.
5. If a company provides services to a customer on credit, the service provider company should credit Accounts Receivable.
6. As prepaid expenses arc used up, the costs of these assets become expenses.
7. On the work sheet, net income is entered in the Income Statement Credit column as well as the Balance Sheet Debit column.
8. ) The revenue recognition principle is the basis for making adjusting entries that pertain to unearned and accrued revenues.
9. ) Failure to record depreciation expense will overstate the asset and understate the expense.
10. ) For a corporation, the equity section is divided into two main accounts: Common Stock and Retained Earnings.
11. ) When a credit customer returns merchandise, a seller that uses the perpetual system would debit Sales Returns and Allowances and credit Accounts Receivable and also debit Merchandise Inventory and credit Cost of Goods Sold.
12. ) A company had a gross profit of $300,000 based on sales of $400,000, which means its cost of goods sold is equal to $700,000.
13. ) Cost of goods sold represents the value of merchandise sold to customers.
14. ) The Merchandise Inventory account balance at the end of one period is equal to the amount of beginning merchandise inventory for the next period.
15. ) Purchase allowances refer to merchandise a buyer acquires but then returns to the seller.