1.Which of the following below is NOT an element of internal control?
a. risk assesment
b. monitoring
c. information and communication
d. behavior analysis
ANSWER:D
2. Which of the following below is NOT a factor that influences a business's control environment?
a. management's philosophy
b. organizational structure
c. proofs and security measures
d. personnel policies
ANSWER:C
3. A firm's internal control environment is NOT influenced by
a. management's operating style
b. organizational structure
c. personnel policies
d. monitoring policies
ANSWER:D
4. An element of internal control is
a. risk assesment
b. journals
c. subsidiary ledgers
d. controlling accounts
ANSWER:A
5. The cash account in the company's ledger is a(n)
a. asset with a debit balance
b. asset with a credit balance
c. liability with a debit balance
d. liability with a credit balance
ANSWER:A
6. The notification accompanying a check that indicates the specific invoice being paid is called a
a. remittance advice
b. voucher
c. debit memo
d. credit memo
ANSWER:A
7. The debit balance in Cash Short and Over at the end of an accounting period is reported as
a. an expense on the income statement
b. income on the income statement
c. an asset on the balance sheet
d. a liability on the balance sheet
ANSWER:A
8. EFT
a. means Efficient Funds Transfer
b. can process certain cash transactions at less cost than by using mail
c. makes it easier to document purchase and sale transactions
d. means Effective Funds Transfer
ANSWER:B
9. Under the voucher system, every transaction is recorded at the time of
a. requisitioning
b. ordering
c. incurring
d. paying
ANSWER:D
10. The reconciliation of the cash register tape with the cash in the register is an example of
a. other controls
b. independent internal verification
c. establishment of responsibilty
d. segregation of duties
ANSWER:B
11. On the bank's accounting records, customers' accounts are normally shown as
a. debit balances
b. expenses
c. an asset
d. a liability
ANSWER:D
12. Credit memos from the bank
a. decrease a bank customer's account
b. are used to show a bank service charge
c. show that a company has deposited a customer's NSF check
d. show the bank has collected a note receivable for the customer
ANSWER:D
13. There are three parties to a check. The drawer is
a. a written document signed by the company
b. is the one who signs the check ordering payment by the bank
c. the bank on which the check is drawn
d. the party to whom payment is to be made
ANSWER:B
14. A debit or credit memo describing entries in the company's bank account may be enclosed with the bank statement. An example of a credit memo is
a. deposited checks returned for insufficient funds
b. a promissory note left for collection
c. a service charge
d. notification that a customer's check for $375 was recorded by the company as $735 on the deposit ticket
ANSWER:B
15. Following the completion of the bank reconciliation, an adjusting entry was made that debited cash and credited Interest Revenue. Therefore the bank reconciliation must have included an item that was
a. deducted from the balance per company's records
b. deducted from the balance per bank statement
c. added to the balance per bank statement
d. added to the balance per company's records
ANSWER:C
16.Journal Entries based on the bank reconciliation are required in the company's accounts for
a. outstanding checks
b. deposits in transit
c. bank errors
d. book errors
ANSWER:D
17. Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the item is
a. a deduction from the balance per company's records
b. an addition to the balance per bank statement
c. a deduction from the balance per bank statement
d. an addition to the balance per company's records
18. Accompanying the bank statement was a debit memo for bank service charges. What entry is required in the company's accounts?
a. debit Miscellaneous Administrative Expense; credit Cash
b. debit Cash; credit Other Income
c. debit Cash; credit Accounts Payable
d. debit Accounts Payable; credit Cash
19. A check drawn by a company in payment of a voucher for $635 was recorded in the journal as $365. What entry is required in the company's accounts?
a. debit Accounts Payable; credit Cash
b. debit Cash; credit Accounts Receivable
c. debit Cash; credit Accounts Payable
d. debit Accounts Receivable; credit Cash
20. Receipts from cash sales of $7,500 were recorded incorrectly in the cash receipts journal as $5,700. This item would be included on the bank reconciliation as a(n)
a. deduction from the balance per the company's records
b. addition to the balance per bank statement
c. deduction from the balance per bank statement
d. addition to the balance per company's records
21. The amount of deposits in transit is included on the bank statement as a(n)
a. deduction form the balance per the company's books
b. deduction from the balance per the bank statement
c. addition to the balance per bank statement
d. addition to the balance per company books
22. The amount of the outstanding checks is included on the bank reconciliation as a(n)
a. deduction from the balance per the company's records
b. addition to the balance per the bank statement
c. deduction from the balance per the bank statement
d. addition to the balance per company's records
23. Which of the following items that appeared on the bank reconciliation did NOT require an adjusting entry?
a. bank services charge
b. deposits in transit
c. NSF checks
d. A check for $630, recorded in the check register for $360
24. During the month, a company was informed that a check they had issued was accidentally destroyed. On the bank reconciliation, the company would
a. deduct the amount from the balance per the company's records
b. deduct the amount from the balance per the bank statement
d. Add the amount to the balance per the bank statement
d. Add the amount to the balance per the company's records
25. The amount of cash to be reported on the balance sheet at June 30 is the
a. total of the cash column in the cash receipts journal as of June 30
b. adjusted balance appearing in the bank reconciliation for June 30
c. total of the cash column in the cash payments journal as of June 30
d. balance as of June 30 on the bank statement
26. Which of the following would be deducted from the balance per the books on a bank reconciliation?
a. service charges
b. outstanding checks
c. deposits in transit
d. notes collected by the bank
27. Which of the following would be subtracted from the balance per bank on a bank reconciliation?
a. outstanding checks
b. deposits in transit
c. notes collected by the bank
d. service charges
28. A bank reconciliation should be prepared
a. whenever the bank refuses to lend the company money
b. to explain any difference between the company's balance per books with the balance per bank
c. when an employee is suspected of fraud
d. by the person who is authorized to sign checks
29. Thompson Company developed the following reconciling information in preparing its October bank reconciliation:
Cash balance per bank, 10/31 $17,000
Note receivable collected by bank outstanding checks $ 4,800
Outstanding checks $ 6,500
Deposits-in-transit $ 3,000
Bank service charge $ 50
NSF check $ 2,300
Using the above information, determine the cash balance per books (before adjustments) for the Thompson Company.
a. $11,050
b. $19,450
c. $15,950
d. $11,150
30. A $140 petty cash fund has cash of $18 and receipts of $120. The journal entry to replenish the account would include a credit to
a. Cash for $120
b. Cash Over and Short for $2
c. Petty Cash for $122
d. Cash for $122
31. A minimum cash balance required by a bank is called
a. cash in bank
b. cash equivalent
c. compensating balance
d. EFT
32. A note receivable due in 18 months is listed on the balance sheet under the caption
a. long-term liabilities
b. fixed assets
c. current assets
d. investments
33. Which of the following receivables would NOT be classified as an "other receivable"?
a. advance to an employee
b. interest receivable
c. refundable income tax
d. notes receivable
34. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited
a. at the end of each accounting period
b. when a credit sale is past due
c. whenever a pre-determined amount of credit sales have been made
d. when an account is determined to be worthless
35. An alternative name for Bad Debts Expense is
a. collection expense
b. credit loss expense
c. uncollectible accounts expense
d. deadbeat expense
36. Allowance of doubtful accounts has a debit balance of $500 at the end of the year (before adjustment), and uncollectible accounts expense is estimated at 4% of net sales. If net sales are $600,000, the amount of the adjusting entry to record the provision for doubtful accounts is
a. $24,500
b. $23,500
c. $24,000
d. none of the above
37. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $460,000 and allowance for doubtful accounts has a balance of $30,000. What is the net realizable value of the accounts receivable?
a. $30,000
b. $430,000
c. $460,000
d. $490,000
38. Allowance for Doubtful Accounts is listed on the balance sheet under the caption
a. owner's equity
b. investments
c. fixed assets
d. current assets
39. Using the estimate based on sales method of accounting for uncollectible accounts, the entry to reinstate a specific receivable previously written off would include a
a. credit to bad debt expense
b. credit to accounts receivable
c. debit to allowance for doubtful accounts
d. debit to accounts receivable
40. An aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a
a. debit to Bad Debt Expense for $5,200
b. debit to Bad Debt Expense for $4,000
c. debit to Bad Debt Expense for $ 2,800
d. credit to Allowance for Doubtful Accounts for $5,000
41. An aging of a company's accounts receivable indicates that $2,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $200 credit balance, the adjustment to record bad debts for the period will require a
a. debit to bad debts expense for $2,000
b. debit to bad debts expense for $2,000
c. debit to bad debts expense for $1,800
d. credit to allowance for doubtful accounts for $3,000
42. The balance in allowance for doubtful accounts must be considered prior to end of period adjustment when using which of the following methods?
a. allowance method
b. direct write-off method
c. accrual method
d. net realizable method
43. Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts
a. liabilities decrease
b. net income is unchanged
c. total assets are unchanged
d. total assets decrease
44. The amount of the promissory note plus the interest earned on the due date is called the
a. realizable value
b. maturity value
c. face value
d. net realizable value
45. A 60-day, 10% note for $9,000, dated April 15, is received from a customer on account. The face value of the note is
a. $9,850
b. $7,200
c. $9,900
d. $9,000
46. The journal entry to record a note received from a customer to apply on account is
a. debit notes receivable; credit accounts receivable
b. debit accounts receivable; credit notes receivable
c. debit cash; credit notes receivable
d. debit notes receivable; credit to notes payable
47. A note receivable or promissory note
a. has the party to whom the money is due as the maker
b. is not a formal credit instrument
c. cannot be factored to another party
d. may be used to settle an accounts receivable
48. The maturity value of a $40,000, 9% 40-day note receivable dated July 3 is
a. $40,000
b. $40,400
c. $43,600
d. $44,000
49. Receivables are usually listed on the balance sheet after Cash in what order?
a. accounts receivable, notes receivable, interest receivable
b. interest receivable, notes receivable, accounts receivable
c. notes receivable, interest receivable, accounts receivable
d. notes receivable, accounts receivable, interest receivable
50. Receivables are usually listed in order
a. of the due date
b. of the size
c. alphabetically
d. of liquidity
ANSWER:D
51. Accounts receivable turnover measures
a. how frequently during the year the accounts receivable are converted to cash
b. the number of days outstanding
c. the fair market value of accounts receivable
d. the efficiency of the accounts payable function
52. A 60-day, 12% note for $10,000, dated May 1, is recieved from a customer on account. If the note is discounted on May 21, at 15%, the proceeds are
a. $170
b. $9,830
c. $10,000
d. $10,030
53. A 90-day, 12% note for $20,000, dated April 10, is received from a customer on account. If the note is discounted at 15% on May 20, the days in the discount period are
a. 50
b. 90
c. 120
d. 40
54. A characteristic of a fixed asset is that it is
a. intangible
b. used in the operations of a business
c. held for sale in the ordinary course of the business
d. a long term investment
ANSWER:B
55. Which of the following should be included in the acquisition cost of a piece of equipment?
a. transportation costs
b. installation costs
c. testing costs prior to placing the equipment into production
d. all are correct
56. Which of the following is included in the cost of constructing a building?
a. insurance costs during construction
b. cost of paving parking lot
c. cost of repairing vandalism damage during construction
d. cost of removing the demolished building existing on the land when it was purchased
ANSWER:A
57. Which of the following is included in the cost of land?
a. cost of paving a parking lot
b. brokerage commission
c. outdoor parking lot lighting attached to the land
d. fences on the land
ANSWER:B
58. Expenditures that add to the utility of fixed assets for more than one accounting period are
a. committed expenditures
b. revenue expenditures
c. current expenditures
d. capital expenditures
59. Which of the following below is an example of a capital expenditure?
a. cleaning the carpet in the front room
b. tune-up for a company truck
c. replacing an engine in a company car
d. replacing all burned out light bulbs in the factory
ANSWER:C
60. All leases are classified as either
a. capital leases or long-term leases
b. capital leases or operating leases
c. operating leases or current leases
d. long-term leases or current leases
ANSWER:B
61. When determining whether to record an asset as a fixed asset, what two criteria must be met?
a. must be an investment and must be long lived
b. must be long lived and must use the asset in a productive manner
c. must be long lived and must be a tangible asset
d. must be a tangible asset and must be an investment
62. Factors contributing to a decline in the usefulness of a fixed asset may be divided into the following two categories
a. salvage and funtional
b. physical and functional
c. residual and salvage
d. functional and residual
63. All of the following below are needed for the calculation of a straight-line depreciation EXCEPT
a.cost
b. residual value
c. estimated life
d. units produced
ANSWER:D
64. The method of determining depreciation that yields successive reductions in the periodic depreciation charge over the estimated life of the asset is
a. units-of-production
b. declining balance
c. straight-line
d. time-valuation
65. A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the second full year, using the double declining-balance method?
a. $17,500
b. $37,500
c. $18,750
d. $16, 667
66. The calculation for annual depreciation using the units-of-production method is
a. (initial/estimated output) *the actual yearly output
b. (depreciable cost/yearly output) *estimated output
c. (depreciable cost/yearly output)
d. (depreciable cost/estimated output) *the actual yearly output
ANSWER:D
67. A fixed asset with a cost of $52,000 and accumulated depreciation of $47,500 is traded for a similar asset priced at $60,000. Assuming a trade-in allowance of $5,000, the cost basis of the new asset is
a. $54,000
b. $59,500
c. $60,000
d. $60,500
68. A fixed asset with a cost of $30,000 and accumulated depreciation of $28,500 is sold for $3,500. WHat is the amount of the gain or loss on disposal of the fixed asset?
a. $2,000 loss
b. $1,500 loss
c. $3,500 gain
d. $2,000 gain
69. When a company sells machinery at a price equal to its book value, this transaction would be recorded with an entry that would include the following:
a. debit Cash and Accumulated Depreciation; credit Machinery
b. debit Machinery;credit Cash and Accumulated Depreciation
c. debit Cash and Machinery; credit Accumulated Depreciation
d. debit Cash and Depreciation Expense; credit Accumulated Depreciation
70. When a company exchanges machinery and receives a trade-in allowance less than the book value, this transaction would be recorded with the following entry:
a. debit Machinery and Accumulated Depreciation; credit Machinery and Cash
b. debit Cash and Machinery; credit Accumulated Depreciation
c. debit Cash and Machinery; credit Accumulated Depreciation and Machinery
d. debit Machinery, Accumulated Depreciation, and Loss on Disposal; credit Machinery and Cash
71. On December 31, Strike Company has decided to sell one of its batting cages. The initial cost of the equipment was $215,000 with an accumulated depreciation of $185,000. Depreciation has been taken up to the end of the year. The company found a company that is willing to buy the equipment for $55,000. What is the amount of the gain or loss on this transaction?
a. Cannot be determined
b. No gain or loss
c. Gain of $25,000
d. Gain of $55,000
72. The Weber Company purchased a mining site for $500,000 on July 1, 2009. The company expects to mine ore for the next 10 years and anticipates that a total of 100,000 tons will be recovered. The estimated residual value of the property is $80,000. During 2009 the company extracted 4,000 tons of ore. The depletion expense for 2009 is
a. $10,500
b. $43,200
c. $16,800
d. $20,000
73. Expenditures for research and development are generally recorded as
a. current operating expenses
b. assets and amortized over their estimated useful life
c. assets and amortized over 40 years
d. current assets
74. Fixed assets are ordinarily presented in the balance sheet
a. at current market values
b. at replacement costs
c. at cost less accumulated depreciation
d. in a separate section along with intangible assets
75. Machinery was purchased on January 1,2009 for $51,000. The machinery has an estimated life of 7 years and an estimated salvage value of $9,000. Sum-of-the-years'-digits depreciation for 2010 would be
a. $10,929
b. $6,000
c. $10,500
d. $9,000