1. The steps in the accounting cycle are different for a merchandising company than for a service company. a. True b. False

2. Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs. a. True b. False

3. Freight terms of FOB Destination means that the seller pays the freight costs. a. True b. False

4. The more inventory a company has in stock, the greater the company's profit. a. True b. False

5. Goods that have been purchased FOB destination but are in transit, should be excluded from a physical count of goods. a. True b. False

6. The first-in, first-out (FIFO) inventory method results in an ending inventory valued at the most recent cost. a. True b. False

7. The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items. a. True b. False

8. A highly automated computerized system of accounting eliminates the need for internal control. a. True b. False

9. Management is responsible for establishing a system of internal control. a. True b. False

10. The responsibility for keeping the records for an asset should be separate from the physical custody of that asset. a. True b. False

11. Other receivables include nontrade receivables such as loans to company officers. a. True b. False

12. Receivables are valued and reported in the balance sheet at their gross amount less any sales returns and allowances and less any cash discounts. a. True b. False

13. Accounts receivable are the result of cash and credit sales. a. True b. False

14. If a company uses the allowance method to account for uncollectible accounts, the entry to write off an uncollectible account only involves balance sheet accounts. a. True b. False

15. When purchasing land, the costs for clearing, draining, filling, and grading should be charged to a Land Improvements account. a. True b. False

16. The book value of a plant asset is always equal to its fair market value. a. True b. False

17. The Accumulated Depreciation account represents a cash fund available to replace plant assets. a. True b. False

18. Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer. a. True b. False

19. A company whose current liabilities exceed its current assets may have a liquidity problem. a. True b. False

20. A $30,000, 8%, 9-month note payable requires an interest payment of $1,800 at maturity. a. True b. False