1) Indicate whether each of the following statements is true or false for a company that
uses the allowance method to account for uncollectible accounts.
1>The entry to recognize uncollectible accounts expense does not affect the net
realizable value of accounts receivable
2>The write-off of an uncollectible account does not affect the net realizable value of
accounts receivable
3>The net realizable value of receivables is the difference between the balance of
Accounts Receivable and the balance in the Allowance for Doubtful Accounts
4>The write-off of an uncollectible account does not affect total equity
5>The Allowance for Doubtful Accounts is an expense account
2) How is earnings per share calculated, and what does the amount of earnings per
share tell you about a company?
3) Indicate how each event affects the elements of financial statements. Use the
following letters to record your answer in the box shown below each element. You do
not need to enter amounts. Assume use of a perpetual inventory system.
Youkilis Co. paid $800 cash for freight charges to obtain merchandise inventory from a
supplier. Show how the transaction would affect Youkilis’s financial statements.
4) How do information needs of employees change moving up the organization chart?
5) Indicate whether each of the following statements about the balance sheet is true or
false.
1>The amount of dividends that a business paid during the year would be reported on
its balance sheet
2>The balance sheet demonstrates that Assets = Claims to Assets
3>Assets are reported on the balance sheet in order of amount
4>The balance sheet shows revenues, expenses, and the calculation of net income
5>A business’s balance sheet reports amounts for its assets, liabilities, and equity
6) For a particular indirect cost, you are able to identify several cost drivers. How
would you decide which of these cost drivers to use in allocating the cost?
7) When is the present value index a useful tool in capital investment decisions?
8) Indicate whether each of the following statements is true or false.
1>The break-even point is the point where total revenues equal total fixed costs
2>The break even volume in units is calculated by dividing fixed costs by the
contribution margin per unit
3>If Company A has fixed costs of $720,000, a selling price of $50 per unit, and
contribution margin of $30 per unit, once it has covered its fixed costs, net income will
increase by $30 for each additional unit sold
4>If Company A has fixed costs of $720,000, a selling price of $50 per unit, and
contribution margin of $30 per unit, its variable expenses must be $24 per unit
5>If Company A has fixed costs of $720,000, a selling price of $50 per unit, and
contribution margin of $30 per unit, its break-even volume in units is 24,000 units
9) Explain how a choice of depreciation methods will have an impact on financial
performance measures. Give one example.