1) When a corporation owns less than 20% of the stock of another company, dividends
received are not treated as income.
2) When using the FIFO inventory costing method, the most recent costs are assigned to
the cost of goods sold.
3) Because variable costs are assumed to change in direct proportion to changes in the
activity level, the graph of the variable costs when plotted against the activity level
appears as a circle.
4) The face value of bonds is quoted as a percentage of the bonds’ market value.
5) Retained earnings account increases with debits.
6) Cost systems using detailed estimates of each element of manufacturing cost entering
into the finished product are called budgeted cost systems.
7) When the voucher system is used, the amount due on each voucher represents the
credit balance of an account payable if the voucher is in full payment to a creditor.
8) When the seller offers a sales discount, even if borrowing has to be done, it is
generally advantageous for the buyer to pay within the discount period.
9) Obligations that depend on past events and that are based on future possible events
are contingent liabilities.
10) If income from operations for a division is $6,000, invested assets are $25,000, and
sales are $30,000, the investment turnover is 1.2.
11) If the perpetual inventory system is used, an account entitled Cost of Merchandise
Sold is included in the general ledger.
12) The principal financial statements for a corporation are the income statement, the
retained earnings statement, the balance sheet, and the budget.
13) The capital expenditures budget is part of the planned investing activities of a
company.
14) The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years
and no residual value, is expected to yield total net income of $300,000 for the 5 years.
The expected average rate of return is 30%.
15) A just-in-time non-manufacturing process can be accomplished by consolidating, in
one area, all of the services provided to a customer.
16) Methods that ignore present value in capital investment analysis include the cash
payback method.