write TRUE AND FALSE 1. FIFO method always yields a higher net income for corpor

Question

write TRUE AND FALSE

1. FIFO method always yields a higher net income for corporations shareholder's equity 3. Accounts payable is typically classified as an expense, not a liability 4. The payment of a liability will decrease the shareholder's equity. 5. The going-concern assumption means that the business owner and the company are separate accounting entities. 6. The balance sheet reports on the financial condition of the company of the whole year 7. To record the amortization process of a patent, accumulated amortization account should be credited. 8. Debit simply means lending the money and credit means borrowing the : money 9. The normal balance of accounts payable is a debit. 18

Explanation / Answer

1. True

Explanation- FIFO gives us better indication of the value of ending inventory ( on the balance sheet), but it also increases NET INCOME because inventory that might be several years old is used to value the cost of goods sold.

2.False

Explanation- Balance sheet is based on the fact that Assets will equal to Liabilities and Equity every time.

3.False

Explanation- Accounts payable is a Liability, not an expense. In Financial accounting , accounts payable is a current liability that shows the amount a company ownes for items or services purchased on credit.

4.True

Explanation- When corporations pay Dividends on stock, the payout activity decreases Stockholder's equity.

5.False

Explanation- The going-concern assumption means that a business entity will continue to operate indefinitely.   

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