1) Book value per share reflects the value per share if a company is liquidated at
balance sheet amounts.
2) The high-low method of deriving an estimated cost line uses all the data points
available.
3) The LIFO method of inventory valuation can result in a company’s ending inventory
being valued at less than the inventory’s replacement cost because LIFO inventory
leaves the oldest costs in inventory.
4) The Sarbanes-Oxley Act (SOX) does not require public companies to apply both
accounting oversight and stringent internal controls.
5) The full disclosure principle requires that noncash investing and financing activities
be disclosed in the financial statements.
6) The declaration of cash dividends reduces retained earnings.
7) Departmental wage expenses are direct expenses of that department.
8) The matching principle requires that interest expense not be accrued on a note
payable until the note is paid, even if the end of an accounting period occurs between
the signing of a note payable and its maturity date.
9) Under a job order cost accounting system, individual jobs are always charged with
actual overhead costs when they are transferred to finished goods.
10) As a general rule, revenues should not be recognized in the accounting records until
it is received in cash.
11) The matching principle does not aim to record expenses in the same accounting
period as the revenue earned as a result of these expenses.
12) A special journal is used to record and post transactions of a similar type.
13) The _______________________ method uses both past and current receivables to
estimate the allowance amount, and assumes that the longer an amount is past due, the
more likely it is to be uncollectible.
14) Information for the Ace Manufacturing Company follows. Compute the cost of
goods manufactured for this company.
15) On April 1, Year 5 a company discarded a machine that had cost $10,000 and had
accumulated depreciation of $8,000 as of December 31, Year 4. The asset had a 5-year
life and $0 salvage value. Prepare the journal entries to record the updating of the
depreciation expense and discarding of this asset in Year 5.
16) The ___________________ account is used only in the closing process.
17) A company reported net income for Year 1 of $98,000 and $106,000 for Year 2. It
also reported net sales of $735,000 in Year 1 and $798,000 in Year 2. The company’s
average total assets in Year 1 were $1,850,000 and $1,720,000 in Year 2. Calculate the
company’s profit margin, total asset turnover and return on total assets for Year 1and
Year 2. Comment on the results.