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1. a corporation can incur liabilities but cannot own property. (p. 244…

Question

  1. a corporation can incur liabilities but cannot own property. (p. 244)
  2. 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. (p. 244)
  3. unlike a proprietorship, a corporation exists independent of its owners. (p. 245)
  4. the total of accounts in the accounts payable ledger equals the balance of the controlling account, accounts payable. (p. 246)
  5. the accounts payable ledger form contains the same columns as the general ledger except that it lacks a credit balance column. (p. 247)
  6. when a perpetual inventory system is used, purchases of merchandise are accounted for directly to merchandise inventory. (p. 249)
  7. 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. (p. 249)
  8. when a periodic inventory system is used, the cost of merchandise is recorded to purchases. (p. 250)
  9. the income statement of a merchandising business places purchases in a section titled cost of goods sold, separate from other expenses. (p. 250)
  10. a purchase invoice lists the quantity, the description, and the price of each item and shows the total amount of the purchase. (p. 253)
  11. a transaction to record merchandise purchased with a trade discount would include a credit to merchandise discount. (p. 260)
  12. when journalizing a cash payment for advertising, the vendor’s name is written in the account title column of the cash payments journal. (p. 261)
  13. when supplies are purchased for use in the business, the amount is recorded as a debit to purchases. (p. 262)
  14. the terms of sale 2/15, n/30 mean that 2% of the invoice amount may be deducted if paid within 15 days of the invoice date or the total invoice amount must be paid within 30 days. (p. 263)
  15. the contra account purchases discount has a normal credit balance. (p. 263)
  16. the petty cash account cash short and over is a permanent account. (p. 265)
  17. exceeding a vendor’s credit limit can cause a disruption in the company’s ability to purchase merchandise. (p. 267)
  18. a journal is proved and ruled whenever a journal page is filled, and always at the end of a month. (p. 269)
  19. the totals of the general amount columns of a cash payments journal are posted to the general ledger. (p. 270)

Explanation:

Response

To solve these true - false questions, we analyze each one based on corporate and accounting principles:

Question 1

A corporation is a legal entity that can own property and incur liabilities. So the statement "A corporation can incur liabilities but cannot own property" is false.

Question 2

The articles of incorporation do include the name, address, purpose, activity limitations, and dissolution rules of the business. So this statement is true.

Question 3

A corporation has a separate legal existence from its owners, while a proprietorship does not. So the statement "Unlike a proprietorship, a corporation exists independent of its owners" is true.

Question 4

In an accounts payable ledger system, the sum of the individual accounts in the accounts payable ledger should equal the balance of the controlling Accounts Payable account. So this statement is true.

Question 5

The accounts payable ledger form has a Credit Balance column (since accounts payable have a normal credit balance). So the statement "The accounts payable ledger form contains the same columns as the general ledger except that it lacks a Credit Balance column" is false.

Question 6

In a perpetual inventory system, merchandise purchases are directly debited to Merchandise Inventory. So this statement is true.

Question 7

The perpetual inventory method requires detailed records of the quantity and cost of individual goods, and it is generally more complex to maintain than the periodic method. So the statement "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" is false.

Question 8

When using a periodic inventory system, the cost of merchandise is recorded in the Purchases account. So this statement is true.

Question 9

In a merchandising business's income statement, Purchases are included in the Cost of Goods Sold section, separate from other expenses. So this statement is true.

Question 10

A purchase invoice does list the quantity, description, price of each item, and the total purchase amount. So this statement is true.

Question 11

Trade discounts are not recorded in separate accounts. We record the purchase at the net amount after the trade discount. So the statement "A transaction to record merchandise purchased with a trade discount would include a credit to Merchandise Discount" is false.

Question 12

When journalizing a cash payment for advertising, the account title (Advertising Expense) is written in the Account Title column, not the vendor's name. So this statement is false.

Question 13

Supplies purchased for business use are debited to Supplies (not Purchases, as Purchases is for merchandise intended for resale). So the statement "When supplies are purchased for use in the business, the amount is recorded as a debit to Purchases" is false.

Question 14

The terms 2/15, n/30 mean a 2% discount if paid within 15 days, otherwise the full amount is due in 30 days. So this statement is true.

Question 15

Purchases Discount is a contra - purchase account, and contra - accounts to expense - type accounts (Purchases is an expense - like account for periodic inventory) have a normal credit balance. So this statement is true.

Question 16

Cash Short and Over is a temporary (nominal) account, not a permanent (real) account. So the statement "The petty cash account Cash Short and Over is a permanent account" is false.

Question 17

Exceeding a vendor's credit limit can lead to proble…

Answer:

s:

  1. False
  2. True
  3. True
  4. True
  5. False
  6. True
  7. False
  8. True
  9. True
  10. True
  11. False
  12. False
  13. False
  14. True
  15. True
  16. False
  17. True
  18. True
  19. True