TRUE FALSE 1) T F The balance in a company's retained earnings account at the end of a year is equal to the balance of cash actually on hand and available for distribution to shareholders. 2) TF The issue of capital stock during the year has no direct effect on a firm's reported income for the year. 3) T F Assuming an adequate allowance for doubtful accounts, the writing off of an uncollectible account has no direct effect on the reported value of total assets. 4) TF 5) TF In the typical manufacturing firm, income is recognized at completion of the production process when finished products are transferred to the finished goods inventory. Monetary assets are cash and fixed claims to cash (i.e., receivables). If the balance of inventory at the end of the year is overstated (and the beginning balance and purchases for the year were correctly stated), the reported income for the year is also overstated. 6) TF 7) TF A publicly-held company coming under the jurisdiction of the Securities and Exchange Commission generally has the option of using either the accrual or cash basis of accounting in preparing (audited) financial statements for its shareholders. 8) F The value of net assets must always equal the value of stockholders' equity, 9) E Closing revenues, expenses, and dividends declared to retained earnings at the end of a year has no effect on the reported value of net assets, 10) TF Failure by a company to accrue interest on a loan payable at the end of a year results in an overstatement of income for the period