1. Gamestop Corp. said the following about its gift card sales in its most recent (2019) annual report:

"We establish a liability upon the issuance of merchandise credits and the sale of gift cards. Revenue is subsequently recognized when the credits and gift cards are redeemed."

When Gamestop sells a gift card to a customer, what is the impact on Gamestop's financial statements?

Cash increases and the Income Statement increases

Cash increases and Inventory decreases

Cash increases and Liabilities increase

Cash decreases and the Income Statement decreases

No effect because the customer has not yet used the gift card

2. Which of the following describes one of the relationships between Income Statement and Shareholders' Equity?

There is no direct relationship between Income Statement and Shareholders' Equity

If the sum of Income Statement results in a negative amount, this is added to Common Stock at the end of the firm's year

If the sum of Income Statement results in a positive amount, this is subtracted from Retained Earnings at the end of the firm's year

If the sum of Income Statement results in a negative amount, this is subtracted from Additional Paid-In Capital at the end of the firm's year

If the sum of Income Statement results in a positive amount, this is added to Retained Earnings at the end of the firm's year

3. Gamestop Corp. said the following about its gift card sales in its most recent (2019) annual report:

"We establish a liability upon the issuance of merchandise credits and the sale of gift cards. Revenue is subsequently recognized when the credits and gift cards are redeemed."

When Gamestop sells merchandise to a customer who is using a Gamestop gift card to purchase the merchandise, what is the impact on Gamestop's financial statements? (Ignore any inventory effects)

Liabilities decrease and cash decreases

Liabilities increase and the Income Statement decreases

Liabilities decrease and the Income Statement increases

Liabilities decrease and cash decreases

No effect because the transaction was already booked when the customer purchased the gift card

4. Common stock on the balance sheet is always valued at:

Paid-in Capital plus Retained Earnings

Paid-in Capital plus Retained Earnings minus Treasury Shares

Par value times shares issued

Par value times shares authorized

Par value times shares outstanding

5. What is the difference between dividends that are declared and dividends that are paid?

There is no difference

When they are declared they reduce Net Income and when they are paid they reduce cash

When they are declared they increase Net Income and when they are paid they reduce cash

When they are declared they reduce Common Stock and when they are paid they increase Dividends Payable

When they are declared they reduce Retained Earnings and when they are paid they reduce Dividends Payable

6. What does the term "net book value" mean?

The beginning balance that the firm uses when it disposes of an asset or liability

The ending balance of an asset or liability that is used for tax reporting purposes

The ending balance of an asset or liability after deducting the ending balance of its related contra account(s)

All of the above

None of the above

7. What is the difference between Bad Debt Expense and Receivable Write-off?

Bad Debt Expense reduces Accounts Receivable and Receivable Write-off reduces NI

Bad Debt Expense reduces NI and Receivable Write-off raises NI

Bad Debt Expense reduces the allowance account and Receivable Write-off does not change it

Bad Debt Expense raises the allowance account and Receivable Write-off reduces it

There is no difference

8. What is the difference between the Income Statement and the Cash Flow Statement?

There is no difference. They both show cash coming in and out of the firm.

The Income Statement is for a single point in time and the Cash Flow Statement covers a specific period of time

The Income Statement shows accrual basis Net Income and the Cash Flow Statement shows why the cash balance on the Balance Sheet changed between two Balance Sheet dates.

All of the above

None of the above