1) Partners in a partnership are taxed on the amounts they withdraw from the
partnership, not the partnership income.
2) When a job is finished, its job cost sheet is completed and moved from the file of
jobs in process to the file of finished jobs that are yet to be delivered to customers.
3) When a credit customer returns merchandise to the seller, under a perpetual
inventory system, the seller would debit Sales Returns and Allowances and credit
Accounts Receivable and also debit Merchandise Inventory and credit Cost of Goods
Sold.
4) LIFO is preferred when purchase costs are rising and managers have incentives to
report higher income for reasons such as bonus plans, job security, and reputation.
5) There are only two methods to derive an estimated line of cost behavior; the
high-low method and the scatter diagram.
6) The SAP enterprise-resource planning software is already being used to help direct
the operations of many of the world’s largest companies.
7) When a partner leaves a partnership, the present partnership ends.
8) Companies promoting continuous improvement strive to achieve practical standards
rather than ideal standards.
9) The advantage of the allowance method of accounting for bad debts is that it
identifies the specific customers who will not pay their bills.
10) The number of hours that a department uses equipment and machinery is a
reasonable basis for allocating depreciation.
11) The ______________________________ shows the budgeted costs for direct
materials, direct labor, and overhead, based on the budgeted production volume from
the production budget.
12) What is the purpose of a post-closing trial balance?
13) A _____________________________ provides information for managers to use to
evaluate the profitability or cost effectiveness of each department’s activities.
14) Describe ratio analysis including its purpose, application, and interpretation.
15) From the information given below, prepare a November income statement, a
November statement of owner’s equity, and a November 30 balance sheet. On
November 1 of the current year, Lois Bell began Lois Bell, Interior Design with an
initial investment of $50,000 cash. On November 30 her records showed the following
(alphabetically arranged) items and amounts.
16) ________________________ are checks written (or drawn) by the depositor,
deducted on the depositor’s records, and sent to the payee, but not yet recorded by the
bank for payment at the bank statement date.
17) A company is trying to decide which of two new product lines to introduce in the
coming year. The predicted revenue and cost data for each product line follows:
The company has a 30% tax rate, it uses the straight-line depreciation method, and it
predicts that cash flows will be spread evenly throughout each year. Calculate each
product’s payback period. If the company requires a payback period of three years or
less, which, if either, product should be chosen?
