1. Which of the following statements is true regarding declared dividends?

		a) They are an expense of doing business.
		b) Companies are legally obligated to declare dividends.
		c) They are a way to distribute profits to a companys stockholders.
		d)They are reported on the balance sheet.

2. Net income would be understated due to which of the following errors?

		a) Employee wages that have not yet been paid are not recorded.
		b) Depreciation expense is not recorded.
		c) Collection of accounts receivable is not recorded.
		d) Revenue that has been earned but not yet collected has not been recorded.

3. Regarding the need for adjustments, which statement is not true?

		a) Adjusting entries are intended to change operating results to reflect managements objectives for operating performance.
		b) Adjustments help the financial statements present the best picture of whether the companys activities were profitable for the period.
		c) Adjustments help the financial statements present the economic resources the company owns and owes at the end of the period.
		d) Without adjustments, financial statements present an incomplete and misleading picture of the company.

4. A company purchased a certificate of deposit on June 1 that will pay $120 interest three months from that date. On June 31, which of the following adjusting entries would be made?

		a) Debit Interest Receivable for $120; credit Interest Revenue for $120
		b) Debit Interest Revenue for $40; credit INterest Receivable for $40
		c) Debit Interest Receivable for $40; credit Interest Revenue for $40
		d) Debit Interest Revenue for $120; credit Interest Receivable for $120