1) A deficit in Retained Earnings is reported in the stockholders’ equity section of the
balance sheet.
2) The process of transferring the debits and credits from the journal entries to the
accounts is known as updating the accounts.
3) Under the periodic inventory system, the cost of merchandise sold is equal to the
beginning merchandise inventory plus the cost of merchandise purchased plus the
ending merchandise inventory.
4) In valuing damaged merchandise for inventory purposes, net realizable value is the
estimated selling price less any direct costs of disposal.
5) Callable bonds are redeemable by the issuing corporation within the period of time
and at the price stated in the bond indenture.
6) Standards are performance goals used to evaluate and control operations.
7) The issuance of common stock affects both paid-in capital and retained earnings.
8) Consuming goods and services in the process of generating revenues results in
expenses.
9) Reporting unusual items separately on the income statement allows investors to
isolate the effects of these items on income and cash flows.
10) The balance of the Allowance for Doubtful Accounts is added to Accounts
Receivable on the balance sheet.
11) When depreciation estimates are revised, all years of the assets life are affected.
12) The ratio of sales to investment is termed the rate of return on investment.
13) Closing journal entries are recorded in the general journal.
14) If the accounts receivable turnover for the current year has decreased when
compared with the ratio for the preceding year, there has been an acceleration in the
collection of receivables.
15) In deciding whether to accept business at a special price, the short-run price should
be set high enough to cover all variable costs and expenses.
16) Once an accounting system has been implemented, feedback will be used to
continuously analyze and improve the system.