1) Both the direct and indirect methods yield the identical net cash flow amount
provided or used by operating activities.
2) Technologically advanced accounting systems do not need monitoring for errors
because computers always process transactions correctly.
3) The management concept of customer orientation encourages a company to set up its
production system to produce large quantities of the same product for all customers.
4) In a process cost accounting system, the purchase of raw materials is credited to the
Raw Materials Inventory.
5) Debits increase asset and expense accounts.
6) A basic present value concept is that cash paid or received in the future is worth more
than the same amount of cash received today.
7) The chart of accounts is a list of all the accounts used by a company and includes an
identification number assigned to each account.
8) Sales of $350,000 and net sales of $323,000 could reflect sales discounts of $27,000.
9) The market value or issue price of a bond is equal to the present value of all future
cash payments provided by the bond.
10) A good financial report does not link interpretations and conclusions of analysis
with the underlying information.
11) Once equivalent units are calculated for materials, this number will also be used for
direct labor and factory overhead.
12) Under a periodic inventory system, purchases, purchases returns and allowances,
purchase discounts, and transportation in transactions are recorded in separate
temporary accounts
13) Stock that is retired is the same as authorized and unissued stock.
14) The work sheet is a required report.
15) A company has net income of $130,500. Its net sales were $1,740,000 and its
average total assets were $2,750,000. Its profit margin equals 7.5%.
16) The entry to record a cash receipt from a customer when the service to be provided
has not yet been performed involves a debit to an unearned revenue account.
17) Betterments are a type of capital expenditure.
18) A cost-volume-profit (CVP) chart is a graph that plots volume on the horizontal axis
and costs and sales on the vertical axis.
19) When preparing the operating activities section of the statement of cash flows using
the indirect method, expenses with no cash outflows are added back to net income.
20) Prichard Company has developed the following standard cost data based on 60,000
direct labor hours, which is 75% of capacity. Fixed overhead is $360,000 and variable
overhead is $180,000 at this level of activity.
During the current period, the company operated at 80% of capacity and produced
128,000 units. Actual costs were:
Calculate the variable overhead spending and efficiency variance and the fixed
overhead spending and volume variances. Indicate whether each is favorable or
unfavorable.
21) A company has 500,000 common shares authorized, 400,000 common shares
issued, and 15,000 common shares in treasury stock at the current year-end. It paid
$0.24 per share in cash dividends during the year. The year-end market price of the
stock is $15. Calculate (1) the total dividends paid and (2) the dividend yield.
22) The Adjusted Trial Balance of Bade Cleaning Service is entered on the partial work
sheet below. Complete the work sheet by extending the account balances into the
appropriate financial statement columns and by entering the amount of net income for
the reporting period:
23) ___________________ are promises of payment from customers to sellers.
24) A _____________________ is a seller’s obligation to replace or correct a product or
service that fails to perform as expected within a specified period.
25) The _____________ requires the managers and auditors of companies whose stock
is traded on an exchange (called public companies) to document and certify the system
of internal controls.
26) Explain debits and credits and their role in the accounting system.
27) __________________________ is the annual amount of cash dividends distributed
to common shareholders relative to the stock’s market price.
28) A company calls $150,000 par value of bonds with a carrying value of $147,950.
The company calls the bonds at $151,000. Prepare the journal entry to record the
retirement of the bonds.