1) A criticism of a single-step income statement is that net income is not available for
analysis.
2) Managerial accounting reports information primarily for stakeholders that are
external to the company.
3) The merchandise inventory account is found on the balance sheet.
4) The acquisition costs of property, plant, and equipment should include all costs
necessary to get the asset in place and ready for use.
5) When a notes payable account is paid in cash, the stockholders’ equity in the business
increases.
6) As product costs are incurred in the manufacturing process, they are accounted for as
assets and reported on the balance sheet as inventory.
7) A business receives $10,000 cash for a sale of merchandise and records this receipt
of cash as an increase in accounts receivable by mistake. The accounting equation is
still in balance.
8) The unit contribution margin is the dollars available from each unit of sales to cover
fixed cost and provide income from operations.
9) If the standard to produce a given amount of product is 500 direct labor hours at $15
and the actual was 600 hours at $17, the rate variance was $1,200 favorable.
10) A manufacturing business converts materials into finished products through the use
of machinery and labor.
11) The process of measuring and reporting operating data by areas of responsibility is
termed responsibility accounting.
12) The difference between the total receivables and the balance in Allowance for
Doubtful Accounts at the end of a period is referred to as the net realizable value of the
receivables.
13) Operating expenses incurred for the entire business as a unit that are not subject to
the control of individual department managers are called indirect expenses.
14) When deciding to make or buy a part needed for the manufacturing process,
management needs to consider whether the plant has excess production capacity
available to make the part or if current production will need to be interrupted to
manufacture the part.
15) FICA tax becomes a liability to the federal government at the time the employees
are paid.
16) A present value index can be used to rank competing capital investment proposals
when the net present value method is used.
17) The first budget to be prepared is usually the production budget.
18) Depositing all cash, checks, etc. in a bank and paying with checks is an internal
control procedure over cash.
19) A buyer who acquires merchandise under credit terms of 1/10, n/30 has 10 days
after the invoice date to take advantage of the cash discount.
20) In using the product cost concept of applying the cost-plus approach to product
pricing, selling expenses, administrative expenses, and profit are covered in the markup.