Ch. 9 True/False Advanced Accounting Exam Review

Unlike a proprietorship, a corporation exists independent of its owners.

• True

• False

Answer explanation

A corporation is independent from its owners. If you share stock and are a party owner of the corp. and the corp. gets sued, YOU don't get sued.

The articles of incorporation typically include the name and address of the business, its purpose for operating, any limitations on its activities, and rules for dissolving the corporation.

• True

• False

Answer explanation

Dissolving the corporation means having it end.

A corporation can incur liabilities but cannot own property.

• True

• False

Answer explanation

It can own property.

The accounts payable ledger form contains the same columns as the general ledger except that it lacks a Credit Balance column.

• True

• False

Answer explanation

It still has a credit balance column.

The income statement of a merchandising business places Purchases in a section titled Cost of Goods Sold, separate from other expenses.

• True

• False

The total of accounts in the accounts payable ledger equals the balance of the controlling account, Accounts Payable.

• True

• False

The perpetual inventory method is easier to maintain than the periodic method. The perpetual method does not require records of the quantity and cost of individual goods.

• True

• False

Answer explanation

It still requires records.

When a perpetual inventory system is used, purchases of merchandise are accounted for directly to Merchandise Inventory.

• True

• False

A purchase invoice lists the quantity, the description, and the price of each item and shows the total amount of the purchase.

• True

• False

When a periodic inventory system is used, the cost of merchandise is recorded to Purchases.

• True

• False