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1) For income tax purposes most companies use an accelerated deprecation method
called double declining balance.
2) For a period during which the quantity of product manufactured equals the quantity
sold, income from operations reported under absorption costing will be smaller than the
income from operations reported under variable costing.
3) To record a bond investment between interest payment periods, Investment in Bonds
would be debited and Cash and Interest Revenue would be credited.
4) The minimum amount of desired divisional income from operations is set by top
management by establishing a maximum rate of return considered acceptable for
invested assets.
5) A building with a cost of $153,000 and accumulated depreciation of $42,000 was
sold for a $11,000 gain. When using the indirect method, the cash generated from this
investing activity was $121,000.
6) Controllable expenses are those that can be influenced by the decisions of the profit
center management.
7) While separation of duties may play a strong role in the internal control of inventory,
it is not significant in controlling payroll.
8) The totals at the bottom of the trial balance and the totals at the bottom of the balance
sheet both show equality and balancing, and therefore should be equal.
9) Office salaries expense for a department store is an indirect expense.
10) An example of an external user of accounting information is the federal
government.
11) A fixed assets market value is reflected in the Balance Sheet.
12) The present value of an annuity is the sum of the present values of each cash flow.
13) A debit is abbreviated as Db and a credit is abbreviated as Cr.
14) A financial statement showing each item on the statement as a percentage of one
key item on the statement is called common-sized financial statements.
15) If the straight-line method of amortization is used, the amount of unamortized
premium on bonds payable will decrease as the bonds approach maturity.
16) In preparing a bank reconciliation, the amount of outstanding checks is added to the
balance per bank statement.
17) If $500,000 of 10-year bonds, with interest payable semiannually, are sold for
$494,040 based on (1) the present value of $500,000 due in 20 periods at 5% plus (2)
the present value of twenty, $25,000 payments at 5%, the nominal or contract rate and
the market rate of interest for the bonds are both 10%.
18) Capital expenditures are costs of acquiring, constructing, adding, or replacing
property, plant and equipment.
19) Variable costs are costs that vary on a per-unit basis with changes in the activity
level.
