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1) The unamortized Discount on Bonds Payable account is a contra-liability account.
2) Land acquired as a speculation is reported under Investments on the balance sheet.
3) Dividends decrease retained earnings and are listed on the income statement as a
deduction from revenue.
4) Functional depreciation occurs when a fixed asset is no longer able to provide
services at the level for which it was intended.
5) The direct materials costs and direct labor costs incurred by a production department
are referred to as conversion costs.
6) The sum of the money on hand and petty cash receipts in a petty cash fund will
always be equal to the balance in the Petty Cash account.
7) The methods of evaluating capital investment proposals can be grouped into two
general categories that can be referred to as (1) average rate of return and (2) cash
payback methods.
8) Journalizing is the process of entering amounts in the ledger.
9) An adjusting entry to accrue an incurred expense will affect total liabilities.
10) The balance in Retained Earnings at the end of the period is created by closing
entries.
11) A company is considering the purchase of a new machine for $48,000. Management
expects that the machine can produce sales of $16,000 each year for the next 10 years.
Expenses are expected to include direct materials, direct labor, and factory overhead
totaling $8,000 per year plus depreciation of $4,000 per year. All revenues and expenses
except depreciation are on a cash basis. The payback period for the machine is 12 years.
12) The chart of accounts for a merchandise business would include an account called
Delivery Expense.
13) If 20,000 shares are authorized, 15,000 shares are issued, and 500 shares are held as
treasury stock, a cash dividend of $1 per share would amount to $15,000.
14) Equivalent units of production are always the same as the total number of physical
units finished during the period.
15) Developing and retaining quality managers is an advantage of decentralization.
16) Variable costing is also known as direct costing.
17) The normal balance of the accumulated depreciation account is debit.
18) Process manufacturing usually reflects a manufacturer that produces small
quantities of unique items.
