1) 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.
2) One of the qualitative characteristics that influence capital investment analysis is
product quality.
3) A voucher is a written authorization to make a cash payment.
4) Preferred stockholders must receive their current-year dividends before the common
stockholders can receive any dividends.
5) Physical assets of a long-term nature are referred to as fixed assets.
6) Interest expense is an example of an expense classified under other expense.
7) A mixed cost has characteristics of both a variable cost and a fixed cost.
8) The ratio of income from operations to sales is termed the profit margin, a
component of the rate of return on investment.
9) Under the negotiated price approach, the transfer price is the price at which the
product or service transferred could be sold to outside buyers.
10) Conversion cost is the combination of direct labor cost and factory overhead cost.
11) In preparing a bank reconciliation, the amount of outstanding checks is added to the
cash balance per books.
12) The stockholders equity of a company should equal the sum of its total assets and
total liabilities.
13) The objective of transfer pricing is to encourage each divisions manager to transfer
goods and services in such a manner that will increase the overall company income.
14) The number of days’ sales in inventory is one means of expressing the relationship
between net sales and accounts receivable.
15) If sales total $5,000,000, fixed costs total $400,000, and variable costs are
2,750,000, the contribution margin ratio is 45%.
16) The net realizable value is used for purposes of valuing out of date merchandise in
inventory.