True or False - Lectures

Question 1

Accrual revenue shows the value of performance (work) completed for the time period.

Answer 1

False.

Question 2

Calculating the amount of revenue to be recognized is a quick and easy process that requires no accounting skill.

Answer 2

False.

Question 3

The revenue recognition calculation is the same for all companies so that comparison can be made.

Answer 3

False.

Question 4

Service businesses are small so they have simple income statements.

Answer 4

False.

Question 5

Cost of goods sold accounts have a normal debit balance.

Answer 5

True.

Question 6

The ‘gross sales’ figure is important data for statement readers but is not published because it is considered confidential.

Answer 6

True.

Question 7

Sales discounts benefit the customer but not the seller.

Answer 7

False.

Question 8

Sales returns and allowances accounts are contra revenue accounts with a normal debit balance.

Answer 8

True.

Question 9

Total goods available for sale minus inventory on hand equals cost of goods sold.

Answer 9

False.

Question 10

The information provided in the multiple ‘bottom lines’ of an income statement is easily understood by the average reader.

Answer 10

False.

Question 11

Pro forma earnings reports are incomplete and potentially misleading.

Answer 11

True.

Question 12

To optimize the operating cycle a company tries to sell its inventory as quickly as possible.

Answer 12

True.

Question 13

Large, year after year increases in inventory may increase working capital but may indicate that the company is in trouble.

Answer 13

True.

Question 14

When a company uses J.I.T their costs decrease and those costs are offloaded to their suppliers.

Answer 14

True.

Question 15

Under the periodic inventory method, inventory losses due to theft are included in the cost of goods sold and are “invisible”.

Answer 15

True.

Question 16

Contra cost of goods sold accounts have a normal credit balance.

Answer 16

True.

Question 17

For merchandising business, the Purchases account is used to record everything that the company purchases.

Answer 17

False.

Question 18

All of the cost flow assumptions are concerned with the movement of costs through the accounting system and NOT the physical movement of goods through the business.

Answer 18

True.

Question 19

Any error in valuation of inventory will affect both the Income Statement and the Balance Sheet.

Answer 19

True.

Question 20

Terms of shipment will determine legal ownership of merchandise in transit from seller to buyer.

Answer 20

True.

Question 21

Companies that use the perpetual inventory method do not do a physical count of inventory.

Answer 21

False.

Question 22

Bar codes and product identification tags allow companies to track inventory but can also cost the company a great deal of money.

Answer 22

True.

Question 23

The journal entry to record the sale of merchandise in the perpetual inventory system will increase Cost of Goods Sold and decrease Merchandise Inventory.

Answer 23

True.

Question 24

Inventory shrinkage is the single largest category of larceny in the U.S, more than motor vehicle thefts, Bank robbery and household burglary combined.

Answer 24

True.

Question 25

All the sophisticated inventory control systems are costs that are paid for by all customers.

Answer 25

True.

Question 26

When gross profit is 45% of net sales, then cost of goods sold is 55% of net sales.

Answer 26

True.

Question 27

Ford Motor Co. made a very expensive management decision when they decided to hoard palladium.

Answer 27

True.

Question 28

Adjusting year-end inventory to LCM violate the Cost GAAP but follows the Conservatism GAAP.

Answer 28

True.

Question 29

Working capital is one way to measure the liquidity of a company.

Answer 29

True.

Question 30

Post-dated cheques cannot be recorded as cash.

Answer 30

True.

Question 31

It is possible for a company to have too much cash.

Answer 31

True.

Question 32

Corporate Audit Committees need to pay very careful attention to their cash control systems.

Answer 32

True.

Question 33

Every adjusting journal entry affects both the Income Statement and the Balance Sheet.

Answer 33

True.

Question 34

The Allowance for Doubtful Accounts is a contra asset account with a normal debit balance.

Answer 34

False.

Question 35

When a specific customer’s account is written off, net realizable Accounts Receivable are reduced.

Answer 35

False.

Question 36

Most of a non-profit’s business is cash-based so they do not use accrual accounting.

Answer 36

False.

Question 37

In Canada, individuals pay more total income tax than corporation.

Answer 37

True.

Question 38

The Ontario Government has to make very difficult intergenerational funding choices.

Answer 38

True.

Question 39

Remittances are an informal method of global income redistribution.

Answer 39

True.