ACCT - Ch. 22 Test Review

If a company does not use reversing entries, the last step in its accounting cycle is to prepare a post-closing trial balance.

• True
• False

The adjusted trial balance is used to prepare financial statements.

• True
• False

The net income of a corporation increases retained earnings.

• True
• False

Receiving cash from the sale of equipment is an example of an investing activity.

• True
• False

If Merchandise Inventory decreases from the beginning to the end of the fiscal period, the adjusting entry includes a debit to Income Summary.

• True
• False

The purchase of store equipment for cash would be listed as a cash outflow in the Investing Activities section on a statement of cash flows.

• True
• False

Paying cash for office equipment is an example of a financing activity.

• True
• False

Retained Earnings represents previous years’ earnings that have been distributed to stockholders.

• True
• False

Paying cash for inventory is an example of an operating activity.

• True
• False

If Merchandise Inventory increases from the beginning to the end of the fiscal period, the adjusting entry includes a credit to Merchandise Inventory.

• True
• False