1) The FIFO method separates work done on beginning inventory in the previous period
from work done on it in the current period.
2) When a business receives a bill from the utility company, no entry should be made
until the invoice is paid.
3) If the net income of a partnership is less than the total of the allowances provided by
the partnership agreement, the difference must be divided among the partners in the
income-sharing ratio.
4) When merchandise is sold for $600 plus 6% sales tax, the Sales account should be
credited for $636.
5) Posting from a revenue journal to the customer account is normally done only at the
end of the month.
6) The declaration and issuance of a stock dividend does not affect the total amount of a
corporation’s assets, liabilities, or stockholders’ equity.
7) A transaction that is recorded in the journal is called a journal entry.
8) In calculating the present value of an investment in equipment, the present value of
the terminal residual value should be added to the cash inflows.
9) Interim financial statements for a manufacturing business would report overapplied
factory overhead as a deferred item on the balance sheet.
10) Budgetary slack can be avoided if lower and mid-level managers are requested to
support all of their spending requirements with specific operational plans.
11) If the market rate of interest is 8% and a corporation’s bonds bear interest at 7%, the
bonds will sell at a premium.
12) The DuPont formula uses financial information to measure the performance of a
business.
13) The times interest earned ratio is calculated by dividing Bonds Payable by Interest
Expense.
14) As with other assets, the cost of a bond investment includes all costs related to the
purchase.
15) Oak Company produces a chair that requires 6 yds. of material per unit. The
standard price of one yard of material is $7.50. During the month, 8,500 chairs were
manufactured, using 48,875 yards. Journalize the entry to record the standard direct
materials used in production.
16) Stephanie Roe utilizes the direct write-off method of accounting for uncollectible
receivables. On September 15th she is notified by the attorneys for Jacob Marley that
Jacob Marley is bankrupt and no cash is expected in the liquidation of Jacob Marley.
Write off the $675 of accounts receivable due Jacob Marley.
17) Prior to liquidating their partnership, Craig and Jenny had capital accounts of
$70,000 and $110,000, respectively. The partnership assets were sold for $285,000. The
partnership had $25,000 of liabilities. Craig and Jenny share income and losses equally.
Determine the amount received by Jenny as a final distribution from liquidation of the
partnership.
18) The materials used by the Hibiscus Company Division A are currently purchased
from outside supplier at $55 per unit. Division B is able to supply Division A with
20,000 units at a variable cost of $42 per unit. The two divisions have recently
negotiated a transfer price of $48 per unit for the 20,000 units. By how much will each
divisions income increase as a result of this transfer?
19) The Cash and Accounts Receivable for a company are provided below:
Based on this information, what is the amount and percentage of increase or decrease
that would be shown in a balance sheet with horizontal analysis?
20) What is a cash budget? How does management use a cash budget?