1) It is possible for a transaction to change the makeup of assets, but to not affect assets
in total.
2) A corporation has 10,000 shares outstanding of $25 par value and a current market
value of $100 per share. If the corporation issues a 5-for-1 stock split, the market value
of the stock will fall to approximately $20.
3) If land costing $75,000 was sold for $135,000, the amount reported in the investing
activities section of the statement of cash flows would be $135,000.
4) The Sarbanes-Oxley Act requires companies and their independent accountants to
report on the effectiveness of the companys internal controls.
5) When standard costs are used in applying the cost-plus approach to product pricing,
the standards should be based upon ideal levels of performance.
6) If income from operations for a division is $6,000, invested assets are $25,000, and
sales are $30,000, the investment turnover would be 5.0 .
7) The graph of the variable costs when plotted against the activity level appears as a
line parallel to horizontal axis.
8) Direct labor cost is an example of a product cost.
9) The direct labor and overhead costs of providing services to clients are accumulated
in a Work-in-Process account.
10) Amortization refers to systematic periodic transfer of the cost of a fixed asset to an
expense account.
11) If direct materials cost per unit decreases, the break-even point will increase.
12) An adjusting entry would adjust an expense account so that the expense is reported
when incurred.
13) The party promising to pay a note at maturity is the payee.