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When the accrual basis of accounting is used, expenses are recognized only in the period during which they are paid. True False 2. The balance of the Merchandise Inventory account that appears in the Trial Balance section of the worksheet represents the stock of goods on hand at the beginning of the current period. True False 3. Merchandise inventory is adjusted in two steps because both the beginning and ending inventory figures are needed to prepare the income statement. True False 4. To take the beginning inventory off the books, the Income Summary account is credited for the amount of the beginning inventory. True False 5. Under the accrual basis of accounting, the expense for uncollectible accounts is estimated and recorded before specific accounts are actually written off. True False 6. The adjusting entry to allocate the cost of equipment to operations includes a debit to Accumulated Depreciation--Equipment and a credit to Depreciation Expense--Equipment. True False 7. Adjustments for accrued income always involve a credit to an income account. True False 8. Income that is received before it is earned is called unearned, or deferred, income. True False 9. The objective of matching revenues and expenses to specific fiscal periods is most nearly attained when revenues and expenses are recognized in the period during which cash related to the transactions is received or paid. True False 10. The debit and credit amounts for the Income Summary account are combined into one number in the Income Statement section of the worksheet. True False 11. The total of the operating expenses for the period is deducted from the gross profit on sales to determine the net income or net loss from operations. True False 12. The balance of the Sales Returns and Allowances account is reported as a selling expense in Operating Expenses section of a multiple-step income statement. True False 13. Interest on notes payable would be listed in the Other Income section of a classified income statement. True False 14. If a firm experiences a net loss, this amount is placed in parentheses on the income statement. True False 15. The statement of owner's equity is prepared before the balance sheet so that the beginning owner's equity balance is available for the balance sheet. True False 16. Current assets are usually listed on a balance sheet in order of liquidity. True False 17. If the Income Summary account has a credit balance after revenues, costs, and expenses are closed into it, the firm had a net income for the fiscal period. True False 18. When a firm experiences a net loss, the owner's capital is decreased. True False 19. At the end of the period, the balance of the Merchandise Inventory account is closed to the Income Summary account. true False 20. The adjusting entry to record depreciation should be reversed at the start of a new fiscal period to make subsequent financial record keeping easier. True False