1. An internal control system consists of all the following policies and procedures except:

a. Those necessary to ensure the safeguarding of an entitys assets.

b. Those necessary to ensure that cash on hand and on deposit in checking accounts is beyond the minimal amount for ongoing operations.

c. Those necessary to ensure the reliability of its accounting records.

d. Those necessary to ensure the accomplishment of its overall objectives.

2. If a company uses the direct write-off method of accounting for bad debts,

a. It is applying the matching principle.

b. It will record bad debt expense only when an account is determined to be uncollectible.

c. It will reduce the accounts receivable account at the end of the accounting period for estimated uncollectible accounts.

d. It will report accounts receivable in the balance sheet at their net realizable value.

3. Why is depreciation added to net income in the Operating Activities category of the statement of cash flows when the indirect method is used?

A. Depreciation expense is a negative amount in the Investing Activities section and therefore is a positive amount in the Operating Activities section.

B. Depreciation provides cash and therefore must be added to net income.

C. Depreciation was deducted in arriving at net income on the accrual basis of accounting; however, it did not require the use of cash.

D. Depreciation reduced the book value of plant assets and, therefore, must be reported as an investing activity.

4. Using different depreciation methods for book purposes versus tax purposes for the same asset is

A. not allowed since the amount can only be calculated one way or the other, not both.

B. the direct result of the differing goals of financial and tax accounting.

C. contrary to GAAP.

D. against the Internal Revenue Code, and as such, against the law.