Exam 2 AC 300
true
A company will earn more profit from a cash sale than from a credit card sale.
true
Goodwill is recognized only when it is purchased. This statement is
true
A high inventory turnover ratio produces a low number of days to sell inventory.
true
Accrued interest revenue will appear on the income statement but not on the statement of cash flows. This statement is
false
All costs associated with a machine after it is operational are expensed in the period they are incurred. This statement is
true
All other things being equal, a company using double-declining balance depreciation will show higher depreciation expense in the first year of an asset's useful life than a company using straight-line depreciation. This statement is
false
An aging schedule is used to improve the estimate used in the percent of revenue method of determining the uncollectible accounts expense. This statement is
true
An operating cycle is the length of time it takes to convert inventory to accounts receivable plus the time it takes to convert the account receivable back to cash. This statement is
true
Because of its size, cost of goods sold normally has a significant impact on the amount of net income that is reported on the income statement. Since the reported balance in the inventory account has a direct effect on the amount of cost of goods sold, inventory manipulation is a target for unscrupulous managers seeking to control the amount of reported earnings. These statements are
true
Cash revenue generated from notes receivable appears in the operating activities section of the statement of cash flows but as a non-operating item on the income statement.
false
GAAP requires that inventory be shown on the balance sheet at its cost (the price paid) regardless of its current value. This statement is
true
Goodwill is the mix of variables that are unique to a particular company that enables it to produce above average profits. This statement is
false
If a company has to change an estimate, such as the salvage value of an asset, the company is required to reissue prior year statements that were based on the estimate. This statement is
true
Many retail companies are motivated to incur credit costs because many customers are emotional buyers and offering credit generally leads to increases in sales revenue. This statement is
false
Most companies expect to collect the full balance of all of their accounts receivable. This statement is
true
The aging method of estimating uncollectible accounts method is based on the assumption that the longer an account receivable remains outstanding, the less likely it is to be collected. This statement is
true
The balance in the allowance for doubtful accounts provides an estimate of the amount of the accounts receivable that is expected to be uncollectible. This statement is
false
The book value of most intangible assets is normally greater than the market value. This statement is
true
The cash flow associated with buying and selling inventory is not affected by the inventory cost flow method. This statement is
true
The net realizable value of accounts receivable represents an estimate of the amount of the accounts receivable that a company realistically expects to collect. This statement is
true
The primary advantage of using the direct write-off method of recognizing the uncollectible accounts expense is simplicity.
true
Two companies that experience identical accounting events may still report different amounts of net income. This statement is
false
Uncollectible accounts expense would be recognized earlier under the direct write-off method than the percent of receivables method. This statement is
