ACCT 101 Exam 2A Name: Date: 1. Closing entries do not affect the cash account.

Question

ACCT 101 Exam 2A Name: Date: 1. Closing entries do not affect the cash account. A) True B) False 2. Dividends declared are not an expense and do not reduce net income. A) True B) False 3. At year end all accounts must be closed A) True B) False 4. Today, most large merchandising companies use a periodic inventory system. A) True B) False 5. The operating cycle for a merchandising company consists of purchasing inventory selling inventory and the collection of receivables A) True B) False 6. Inventory is purchased for resale. A) True B) False 7. An advantage to the FIFO method of accounting for inventory is that it values the halance sheet inventory at current replacement costs A) True B) False 8. A perpetual inventory system eliminates the noed for periodically taking a phy sical

Explanation / Answer

1-

TRUE

cash is a permanent account so it is not affected bt closing entries

2-

TRUE

it is a distributable profit not an expense

3-

FALSE

permanent accounts are not closed

4-

FALSE

they use perpetual inventory system

5-

TRUE

it consists of the three purchasing, selling and collection

6-

FALSE

it may also be used for further processing or production

7-

FALSE

8-

TRUE

9-

FALSE

10-

FALSE

Double taxation is the levying of tax by two or more jurisdictions on the same declared income

11-

outstanding

12-

B

shareholder equity/no of shares outstanding

13-

D

management is separated from ownership

14-

C

1-

TRUE

cash is a permanent account so it is not affected bt closing entries

2-

TRUE

it is a distributable profit not an expense

3-

FALSE

permanent accounts are not closed

4-

FALSE

they use perpetual inventory system

5-

TRUE

it consists of the three purchasing, selling and collection

6-

FALSE

it may also be used for further processing or production

7-

FALSE

8-

TRUE

9-

FALSE

10-

FALSE

Double taxation is the levying of tax by two or more jurisdictions on the same declared income

11-

outstanding

12-

B

shareholder equity/no of shares outstanding

13-

D

management is separated from ownership

14-

C

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