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When common stock with a par value is sold for a price that exceeds par value, the
Common Stock account is credited for the cash proceeds received from the sale of the
shares.
A positive free cash flow means that a company has funds available to reduce debt or
expand operations.
A primary purpose of vertical analysis is to observe trends over a five-year period.
Outsourcing production or operating activities will help in improving the cash flow by
reducing investment in physical assets.
The six steps of capital investment analysis are used exclusively for short-term planning
purposes.
The high-low method allows managers to differentiate between fixed and variable costs
when dealing with mixed costs.
Adjusting and closing entries regarding purchases and sales are recorded in the
purchases journal and the sales journal, respectively.
The principal difference between the indirect and the direct methods appears in the cash
flows from investing activities section of the statement of cash flows.
Improvements to real estate are never subject to depreciation.
The number of equivalent units for direct materials is the same as the number for
conversion costs.
The use of computer monitoring allows product costs to be traced directly to work cells.
CVP analysis can also be applied by a company selling multiple products.
Objectivity is the avoidance of all relationships that impair or appear to impair the
objectivity of the accountant.
If a company uses LIFO for tax purposes, it need not use LIFO for financial reporting
purposes.
In a job order costing system, indirect labor costs are recorded by increasing the Payroll
Payable account and increasing the Overhead account.
Revenue is produced when accounts receivable are collected.
