1) When accounting for uncollectible receivables and using the percentage of sales
method, the matching principle is violated.
2) The double declining balance depreciation method calculates depreciation each year
by taking twice the straight line rate times the book value of the asset at the beginning
of each year.
3) Capital Stock and Dividends are reported in the stockholders equity section of the
balance sheet.
4) Sarbanes-Oxley requires companies to maintain strong and effective internal controls
and thus prevent fraud and misleading financial statements.
5) A staff department or unit is one that provides services, assistance, and advice to the
departments with line or other staff responsibilities.
6) In establishing a petty cash fund, a check is written for the amount of the fund and is
recorded as a debit to Accounts Payable and a credit to Petty Cash.
7) Net sales is equal to sales minus cost of merchandise sold.
8) In preparing the cash flows from operating activities section of the statement of cash
flows by the indirect method, the amortization of bond discount for the period is
deducted from the net income for the period.
9) Accrued expenses are ordinarily listed on the balance sheet as current assets.
10) There is no difference between the recording of cash sales and the recording of
MasterCard or VISA sales.
11) Job order cost systems can be used to compare unit costs of similar jobs to
determine if costs are staying within expected ranges.
12) A company is planning to purchase a machine that will cost $24,000, have a
six-year life, and have no salvage value. The company expects to sell the machines
output of 3,000 units evenly throughout each year. Total income over the life of the
machine is estimated to be $12,000. The machine will generate cash flows per year of
$6,000. The payback period for the machine is 4 years.
13) When no-par common stock with a stated value is issued for cash, the common
stock account is credited for an amount equal to the cash proceeds.
14) The dividends account is a temporary account.