Answers to the 30multiple choice questions | | 2 points each, 30questions, for 60 point total | | | |
| | | 60 points | | | | | | | | |
| < please record | 1) | From an internal control standpoint, the asset mostsusceptible to improper diversion and use is | | | | | |
| answer here | a. | prepaid insurance. | | | | | | | | |
| | b. | cash. | | | | | | | | |
| | c. | Equipment | | | | | | | | |
| | d. | Investments | | | | | | | | |
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| | 2) | Jolene is warehouse custodian and alsomaintains the accounting record of the inventory held at thewarehouse. An assessment of this situation indicates | | | | | | | | |
| | a. | documentation procedures are violated. | | | | | | | | |
| | b. | independent internal verification is violated. | | | | | | | | |
| | c. | segregation of duties is violated. | | | | | | | | |
| < please record | d. | establishment of responsibility is violated. | | | | | | | | |
| answer here | | | | | | | | | | |
| | 3) | Internal control is defined, in part, as a planthat safeguards | | | | | | | |
| | a. | all balance sheet accounts. | | | | | | | | |
| | b. | assets. | | | | | | | | |
| | c. | liabilities. | | | | | | | | |
| | d. | capital stock. | | | | | | | | |
| | | | | | | | | | | |
| | 4) | The control principle related to nothaving the same person authorize and pay for goods is known as | | | | | | | | |
| | a. | establishment of responsibility. | | | | | | | | |
| | b. | independent internal verification. | | | | | | | | |
| < please record | c. | segregation of duties. | | | | | | | | |
| answer here | d. | rotation of duties. | | | | | | | | |
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| | 5) | Two individuals at a retail store work thesame cash register. You evaluate this situation as | | | | | | | | |
| | a. | a violation of establishment of responsibility. | | | | | | | | |
| | b. | a violation of segregation of duties. | | | | | | | | |
| | c. | supporting the establishment of responsibility. | | | | | | | | |
| < please record | d. | supporting internal independent verification. | | | | | | | | |
| answer here | | | | | | | | | | |
| | 6) | Having different individuals receive cash,record cash receipts, and hold the cash is an example of | | | | | | | | |
| | a. | establishment of responsibility. | | | | | | | | |
| | b. | segregation of duties. | | | | | | | | |
| | c. | documentation procedures. | | | | | | | | |
| | d. | independent internal verification. | | | | | | | | |
| | | | | | | | | | | |
| | 7) | An adjusting entry is not required for | | | | | | | | |
| | a. | outstanding checks. | | | | | | | | |
| | b. | collection of a note by the bank. | | | | | | | | |
| | c. | NSF checks. | | | | | | | | |
| | d. | bank service charges. | | | | | | | | |
| | | | | | | | | | | |
| | 8) | If a check correctly written and paid bythe bank for $591 is incorrectly recorded on the company's booksfor $519, | | | | | | | | |
| | the appropriate treatment on the bankreconciliation would be to | | | | | | | |
| | a. | deduct $72 from the book's balance. | | | | | | | | |
| | b. | add $72 to the book's balance. | | | | | | | | |
| | c. | deduct $72 from the bank's balance. | | | | | | | | |
| | d. | deduct $591 from the book's balance. | | | | | | | | |
| | | | | | | | | | | |
| | 9) | During 2013, Parker Enterprises generatedrevenues of $60,000. The company's expenses were as follows: | | | | | | | | |
| | | cost of goods sold of $30,000, operatingexpenses of $12,000 and a loss on the sale of equipment of$2,000. | | | | | | | | |
| | Parker's gross profit is: | | | | | | | | |
| | a. | $16,000.00 | | | | | | | | |
| | b. | $18,000.00 | | | | | | | | |
| | c. | $30,000.00 | | | | | | | | |
| | d. | $60,000.00 | | | | | | | | |
| | | | | | | | | | | |
| | 10) | A primary difference between a periodicand perpetual inventory system is that a periodic system: | | | | | | | | |
| | a. | determines the inventory on hand only at the end ofthe accounting period. | | | | | | |
| | b. | provides better control over inventories. | | | | | | | | |
| | c. | records the cost of goods sold after each saletransaction. | | | | | | | |
| | d. | keeps a record showing the merchandise inventory onhand at all times. | | | | | | |
| | | | | | | | | | | |
| | 11) | A decline in a company's gross profitcould be caused by all of the following except: | | | | | | | | |
| | a. | selling products using a lower markup. | | | | | | | | |
| | b. | clearance of discontinued inventory. | | | | | | | | |
| | c. | paying lower prices to its suppliers. | | | | | | | | |
| | d. | increasing competition resulting in a lower sellingprice. | | | | | | | |
| | | | | | | | | | | |
| | 12) | South Company uses the perpetual inventorysystem. South's goods in transit at December 31 include: | | | | | | | | |
| | | Sales made by South | Purchases made by South | | | | | | |
| | | (1) FOB destination | (3) FOB destination | | | | | | |
| | | (2) FOB shipping point | (4) FOB shipping point | | | | | | |
| | | Which itemsshould be included in South's inventory at December 31? | | | | | | |
| | | a. (2) and (3) | | | | | | | | |
| | | b. (1) and (4) | | | | | | | | |
| | | c. (1) and (3) | | | | | | | | |
| | | d. (2) and (4) | | | | | | | | |
| | | | | | | | | | | |
| | 13) | In periods of rising prices, the inventorymethod which results in the greatest net income is the: | | | | | | | | |
| | a. | LIFO method. | | | | | | | | |
| | b. | FIFO method. | | | | | | | | |
| | c. | Weighted Average method. | | | | | | | | |
| | d. | Lower of Cost or Market method. | | | | | | | | |
| | | | | | | | | | | |
| | 14) | The following information was available for RawleyCompany at December 31, 2008: | | | | | |
| | | inventory (Jan .01) $80,000; inventory (Dec. 31)$120,000; cost of goods sold $600,000; | | | | | |
| | | accounts receivable $73,000; and sales$900,000. | | | | | | | | |
| | | Rawley's inventory turnover in 2008 was: | | | | | | | | |
| | a. | 9.00 times. | | | | | | | | |
| | b. | 7.50 times. | | | | | | | | |
| | c. | 6.00 times. | | | | | | | | |
| | d. | 5.00 times. | | | | | | | | |
| | | | | | | | | | | |
| | 15) | A petty cash fund of $200 is replenishedwhen the fund contains $5 in cash and receipts for $193. | | | | | | | | |
| | The entry to replenish the fund would: | | | | | | | | |
| | a. | credit Cash Over and Short for $2. | | | | | | | | |
| | b. | credit Miscellaneous Revenue for $2. | | | | | | | | |
| | c. | debit Cash Over and Short for $2. | | | | | | | | |
| | d. | debit Miscellaneous Expense for $2. | | | | | | | | |
| | | | | | | | | | | |
| | 16) | An item is considered material if | | | | | | | | |
| | a. | it doesn't costs a lot of money. | | | | | | | | |
| | b. | it is of a tangible good intended for re-sale. | | | | | | | | |
| | c. | it is likely to influence the decision of aninvestor or creditor. | | | | | | | |
| | d. | the cost of reporting the item is greater than itsbenefits. | | | | | | | |
| | | | | | | | | | | |
| | 17) | Receivables might be sold to | | | | | | | | |
| | | a. lengthen the cash-to-cash operating cycle. | | | | | | | | |
| | | b take advantage of deep discounts on the cashrealizable value of receivables. | | | | | | |
| | | c. generate cash quickly. | | | | | | | | |
| | | d. finance companies at an amount greater than cashrealizable value. | | | | | | |
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| | 18) | If the amount of uncollectible accountexpense is understated at year end: | | | | | | | | |
| | a. | net income will be understated. | | | | | | | | |
| | b. | stockholders' equity will be understated. | | | | | | | | |
| | c. | allowance for doubtful accounts will be overstated. | | | | | | | | |
| | d. | net accounts receivable will be overstated. | | | | | | | | |
| | | | | | | | | | | |
| | 19) | A debit balance in the Allowance for DoubtfulAccounts | | | | | | | |
| | a. | is the normal balance for that account. | | | | | | | | |
| | b. | indicates that actual bad debt write-offs haveexceeded previous provisions for bad debts. | | | | | |
| | c. | indicates that actual bad debt write-offs have beenless than what was estimated. | | | | | | |
| | d. | cannot occur if the percentage of sales method ofestimating bad debts is used. | | | | | | |
| | | | | | | | | | | |
| | 20) | Bad Debts Expense is considered | | | | | | | | |
| | a. | an avoidable cost in doing business on a credit basis. | | | | | | | | |
| | b. | an internal control weakness. | | | | | | | | |
| | c. | a necessary risk of doing business on a credit basis. | | | | | | | | |
| | d. | avoidable unless there is a recession. | | | | | | | | |
| | | | | | | | | | | |
| | 21) | The best managed companies will have | | | | | | | | |
| | a. | no uncollectible accounts. | | | | | | | | |
| | b. | a very strict credit policy. | | | | | | | | |
| | c. | a very lenient credit policy. | | | | | | | | |
| | d. | some accounts that will prove to be uncollectible. | | | | | | | | |
| | | | | | | | | | | |
| | 22) | Two methods of accounting for uncollectibleaccounts are the | | | | | | | |
| | a. | allowance method and the accrual method. | | | | | | | | |
| | b. | allowance method and the net realizable method. | | | | | | | | |
| | c. | direct write-off method and the accrual method. | | | | | | | | |
| | d. | direct write-off method and the allowance method. | | | | | | | | |
| | | | | | | | | | | |
| | 23) | When the allowance method of accountingfor uncollectible accounts is used, Bad Debts Expense isrecorded | | | | | | | | |
| | a. | in the year after the credit sale is made. | | | | | | | | |
| | b. | in the same year as the credit sale. | | | | | | | | |
| | c. | as each credit sale is made. | | | | | | | | |
| | d. | when an account is written off as uncollectible. | | | | | | | | |
| | | | | | | | | | | |
| | 24) | Allowance for Doubtful Accounts on the balancesheet | | | | | | | |
| | a. | is offset against total current assets. | | | | | | | | |
| | b. | increases the cash realizable value of accountsreceivable. | | | | | | | |
| | c. | appears under the heading "Other Assets." | | | | | | | | |
| | d. | is offset against accounts receivable. | | | | | | | | |
| | | | | | | | | | | |
| | 25) | In reviewing the accounts receivable, thecash realizable value is $14,000 before the write-off of a $1,500account. | | | | | | | | |
| | What is the cash realizable value after thewrite-off? | | | | | | | | |
| | a. | $1,500 | | | | | | | | |
| | b. | $12,500 | | | | | | | | |
| | c. | $14,000 | | | | | | | | |
| | d. | $15,500 | | | | | | | | |
| | | | | | | | | | | |
| | 26) | The maturity value of a $60,000, 10%, 60-day notereceivable dated July 3 is | | | | | | |
| | a. | $60,000 | | | | | | | | |
| | b. | $61,000 | | | | | | | | |
| | c. | $66,000 | | | | | | | | |
| | d. | $70,000 | | | | | | | | |
| | | | | | | | | | | |
| | 27) | The interest on a $10,000, 10%, 1-year notereceivable is | | | | | | | |
| | a. | $1,000 | | | | | | | | |
| | b. | $10,000 | | | | | | | | |
| | c. | $10,100 | | | | | | | | |
| | d. | $11,000 | | | | | | | | |
| | | | | | | | | | | |
| | 28) | The maturity value of a $60,000, 8%, 3-month notereceivable is | | | | | | | |
| | a. | $60,400 | | | | | | | | |
| | b. | $60,480 | | | | | | | | |
| | c. | $61,200 | | | | | | | | |
| | d. | $64,800 | | | | | | | | |
| | | | | | | | | | | |
| | 29) | Notes receivable are recorded in the accounts at | | | | | | | | |
| | a. | cash (net) realizable value. | | | | | | | | |
| | b. | face value. | | | | | | | | |
| | c. | gross realizable value. | | | | | | | | |
| | d. | maturity value. | | | | | | | | |
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| | 30) | Which of the following are also called tradereceivables? | | | | | | | |
| | a. | Accounts receivable | | | | | | | | |
| | b. | Other receivables | | | | | | | | |
| | c. | Advances to employees | | | | | | | | |
| | d. | Income taxes refundable | | | | | | | | |
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