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Dividends: Decrease owners' equity b. Decrease net income c. Are recorded by debiting the dividend expense account d. Are a business expense 2. For...

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1. Dividends: a. Decrease owners’ equity b. Decrease net income c. Are recorded by debiting the dividend expense account d. Are a business expense 2. For a publicly owned company, indicate which of the following accounting activities is unlikely to occur at or shortly after year end. a. Preparing of income tax returns b. Adjusting and closing the accounts c. Drafting disclosures that accompany the financial statements d. An audit of the financial statements by a firm of CPA’s e. Readjustment of balances in assets and revenue for the purpose of reducing taxes. 3. The CPA firm auditing Jason’s Recording Studios found that retained earnings was understated and liabilities were overstated. Which of the following errors could have been the cause? a. Making the adjustment entry for depreciation expense twice b. Failure to record interest accrued on a note payable c. Failure to make the adjusting entry to record revenue which had been earned but not yet billed to clients d. Failure to record the earned portion of fees received in advance 4. The retained earnings account had a beginning balance of $30,000 and an ending balance of $50,000. If $10,000 of dividends were paid during the period, net income must have been: a. $20,000 b. $40,000 c. $10,000 d. $30,000 5. Issuing new shares of common stock will: a. Increase retained earnings b. Decrease retained earnings c. Increase common stock d. Decrease common stock 6. Paying a cash dividend will: a. Increase retained earnings b. Decrease retained earnings c. Increase common stock d. Decrease common stock 7. Which of the following statements about stock dividends is true? a. Stock dividends are reported on the income statement b. Stock dividends increase total stockholders’ equity c. Stock dividends decrease total stockholders’ equity d. None of the above. 8. Which statement regarding dividends is false: a. Dividends represent a sharing of corporate profits with owners b. Both stock and cash dividends reduce retained earnings c. Cash dividends paid to stockholders reduce net income
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d. None of the above statements are false 9. When treasury stock is purchased with cash, what is the impact on the balance sheet equation? a. No change—the reduction of the asset Cash is offset with the additional of the asset Treasury Stock b. Assets decrease and stockholders’ equity increases c. Assets increase and stockholders’ equity decreases d. Assets decrease and stockholders’ equity decreases 10. Company A purchased 10 percent of Company X and intends to hold the stock for at least five years. At the end of the current year, how would Company A’s investment in Company X be reported on Company A’s December 31 (year-end) balance sheet? a. At original cost in the current assets section b. At the December 31 market value in the current assets section c. At original cost in the long term assets section d. At the December 31 market value in the long term assets section
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1. Dividends: a. Decrease owners' equity Correct b. Decrease net income c. Are recorded by debiting the dividend expense account d. Are a business expense 2. For a publicly owned company, indicate...

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