AC 211 Lecture 7: Adjustments, Financial Statements, and Financial Results (Chapter 4)
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1. Which of the following statements is true regardingdeclared dividends?
a) They are an expense of doing business. | ||
b) Companies are legally obligated to declaredividends. | ||
c) They are a way to distribute profits to a companyâsstockholders. | ||
d)They are reported on the balance sheet. |
2. Net income would be understated due to which of thefollowing errors?
a) Employee wages that have not yet been paid are notrecorded. | ||
b) Depreciation expense is not recorded. | ||
c) Collection of accounts receivable is notrecorded. | ||
d) Revenue that has been earned but not yet collectedhas not been recorded. |
3. Regarding the need for adjustments, which statementis not true?
a) Adjusting entries are intended to change operatingresults to reflect managementâs objectives for operatingperformance. | ||
b) Adjustments help the financial statements present thebest picture of whether the companyâs activities were profitablefor the period. | ||
c) Adjustments help the financial statements present theeconomic resources the company owns and owes at the end of theperiod. | ||
d) Without adjustments, financial statements present anincomplete and misleading picture of the company. |
4. A company purchased a certificate of deposit on June1 that will pay $120 interest three months from that date. On June31, which of the following adjusting entries would bemade?
a) Debit Interest Receivable for $120; credit InterestRevenue for $120 | ||
b) Debit Interest Revenue for $40; credit INterestReceivable for $40 | ||
c) Debit Interest Receivable for $40; credit InterestRevenue for $40 | ||
d) Debit Interest Revenue for $120; credit InterestReceivable for $120 |