Question1

A petty cash fund is:

Select one:

a.

used to pay relatively small amounts.

b.

established by estimating the amount of cash needed for disbursements of relatively small amounts during a specified period.

c.

reimbursed when the amount of money in the fund is reduced to a predetermined minimum amount.

d.

All of the above.

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Internal control is enhanced by combining the control of a transaction with the record-keeping function.

Select one:

a.

true

b.

false

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When a firm uses internal auditors, it is adhering to which of the following internal control elements?

Select one:

a.

Risk assessment

b.

Proofs and security measures

c.

Monitoring

d.

Separating responsibilities for related operations

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The objectives of internal control are to

Select one:

a.

control the internal organization of the accounting department personnel and equipment.

b.

provide reasonable assurance that assets are safeguarded, information is processed accurately, and laws and regulations are complied with.

c.

prevent fraud and promote the social interest of the company.

d.

provide control over 'internal-use only' reports and employee internal conduct.

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Requiring employees to take annual vacations is part of which element of internal control?

Select one:

a.

The control environment

b.

Risk assessment

c.

Control procedures

d.

Monitoring

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The framework that has become widely accepted as the standard by which companies design, analyze, and evaluate internal controls is the

Select one:

a.

Internal Control Integrated Framework by the Committee of Sponsoring Organizations.

b.

Internal Control Integrated Framework by the Congress of Special Offerings.

c.

Internal Control Localized Structure by the Committee of Sponsoring Organizations.

d.

Internal Control Localized Structure by the Congress of Special Offerings.

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EFT

Select one:

a.

means Efficient Funds Transfer.

b.

can process certain cash transactions at less cost than by using the mail.

c.

makes it easier to document purchase and sale transactions.

d.

means Effective Funds Transfer.

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For efficiency of operations and better control over cash, a company should maintain only one bank account.

Select one:

a.

true

b.

false

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Which of the following would be added to the balance per books on a bank reconciliation?

Select one:

a.

Service charges

b.

Outstanding checks

c.

Deposits in transit

d.

Notes collected by the bank

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The bank reconciliation

Select one:

a.

should be prepared by an employee who records cash transactions.

b.

is part of the internal control system.

c.

is for information purposes only.

d.

is sent to the bank for verification.

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Which of the following elements of internal control focuses upon locating weaknesses and improving control effectiveness?

Select one:

a.

The control environment

b.

Risk assessment

c.

Control procedures

d.

Monitoring

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A minimum cash balance maintained in a bank account is called a line of credit.

Select one:

a.

true

b.

false

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Which of the following is NOT an element of internal control?

Select one:

a.

Control environment

b.

Monitoring

c.

Compliance with laws and regulations

d.

Control procedures

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Which of the following reflects a weak internal control system?

Select one:

a.

All employees are well supervised.

b.

A single employee is responsible for comparing a receiving report to an invoice.

c.

All employees must take their vacations.

d.

A single employee is responsible for the collecting and recording of cash.

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Employing internal auditors is part of which element of internal control?

Select one:

a.

Monitoring

b.

Control procedures

c.

Risk assessment

d.

The control environment

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An element of internal control is

Select one:

a.

risk assessment.

b.

journals.

c.

subsidiary ledgers.

d.

controlling accounts.

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In preparing a bank reconciliation, the amount of checks outstanding would be:

Select one:

a.

added to the cash balance according to the bank statement.

b.

deducted from the cash balance according to the bank statement.

c.

added to the cash balance according to the company's records.

d.

deducted from the cash balance according to the company's records.

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Which of the following would be deducted from the balance per books on a bank reconciliation?

Select one:

a.

Service charges

b.

Outstanding checks

c.

Deposits in transit

d.

Notes collected by the bank

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A voucher

Select one:

a.

is received from customers to explain the purpose of a payment.

b.

is normally prepared in the Accounting Department.

c.

system is used to control cash receipts.

d.

system is an internal control procedure to verify that the assets in the records are the ones the company owns.

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An element of internal control is

Select one:

a.

fidelity insurance.

b.

prepaid insurance.

c.

monitoring.

d.

insurance expense.

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A voucher system is an example of an internal control procedure over cash receipts.

Select one:

a.

true

b.

false

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Cash equivalents include

Select one:

a.

checks.

b.

coins and currency.

c.

money market accounts and commercial paper.

d.

stocks and short-term bonds.

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Money orders are considered cash.

Select one:

a.

true

b.

false

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A minimum cash balance required by a bank is called

Select one:

a.

cash in bank.

b.

cash equivalent.

c.

compensating balance.

d.

EFT.

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Internal control does NOT consist of policies and procedures that

Select one:

a.

guarantee the company will not go bankrupt.

b.

ensure that laws and regulations are being followed.

c.

protect assets from misuse.

d.

ensure that business information is accurate.

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The interest on a 6%, 60-day note for $5,000 is $50.

Select one:

a.

true

b.

false

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Allowance for Doubtful Accounts has an unadjusted balance of $500 at the end of the year, and an analysis of accounts in the customers ledger indicates doubtful accounts of $15,000. Which of the following records the proper provision for doubtful accounts?

Select one:

a.

Increase Uncollectible Accounts Expense, $14,500; increase Allowance for Doubtful Accounts, $14,500

b.

Increase Uncollectible Accounts Expense, $15,000; increase Allowance for Doubtful Accounts, $15,000

c.

Increase Uncollectible Accounts Expense, $14,000; increase Allowance for Doubtful Accounts, $14,000

d.

Increase Uncollectible Accounts Expense, $15,500; increase Allowance for Doubtful Accounts, $15,500

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Both accounts receivable and notes receivable represent claims that are expected to be collected in cash.

Select one:

a.

true

b.

false

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The process of a company selling its accounts receivable to another company is referred to as

Select one:

a.

discounting.

b.

adjusting.

c.

assignment.

d.

factoring.

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Question30

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The FIFO method of costing inventory is based on the assumption that costs should be charged against revenues in the reverse order in which they were incurred.

Select one:

a.

true

b.

false

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Allowance for Doubtful Accounts has an unadjusted balance of $400 at the end of the year, and uncollectible accounts expense is estimated at 1% of net sales. If net sales are $300,000, the amount of the adjustment to record the provision for doubtful accounts is

Select one:

a.

$400.

b.

$3,400.

c.

$3,000.

d.

$2,600.

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Question32

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The two most widely used methods for determining the cost of inventory are

Select one:

a.

FIFO and LIFO.

b.

FIFO and average cost.

c.

LIFO and average cost.

d.

gross profit and average cost.

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Question33

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Other receivables do NOT include

Select one:

a.

accounts receivable.

b.

interest receivable.

c.

taxes receivable.

d.

receivables from employees or officers.

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If merchandise inventory is being valued at cost and the purchase price is steadily falling, which method of costing will yield the largest gross profit?

Select one:

a.

Average cost

b.

LIFO

c.

FIFO

d.

All methods will generate the same gross profit.

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Allowance for Doubtful Accounts has an unadjusted balance of $500 at the end of the year, and uncollectible accounts expense is estimated at 1% of net sales. If net sales are $950,000, the amount of the adjustment to record the provision for doubtful accounts is

Select one:

a.

$9,500.

b.

$500.

c.

$8,500.

d.

$9,000.

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Use the following data to calculate the cost of ending inventory using the LIFO method.

September 1Beginning Inventory15 units @ $20September 10Purchases20 units @ $25September 20Purchases25 units @ $28September 30Ending Inventory30 units

Select one:

a.

$825

b.

$750

c.

$675

d.

$600

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Question37

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Calculate the cost of ending inventory using FIFO inventory cost method.

1/1Beginning inventory10 units @ $10 per unit2/28Purchases40 units @ $12 per unit5/10Purchases50 units @ $14 per unit9/20Purchases30 units @ $16 per unit12/31Ending inventory50 units

Select one:

a.

$800

b.

$760

c.

$580

d.

$500

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Question38

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A 60-day, 12% note for $15,000 dated May 1 is received from a customer on account. The maturity value of the note is

Select one:

a.

$15,300.

b.

$15,000.

c.

$14,700.

d.

$16,800.

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The amount of the promissory note plus the interest earned on the due date is called the

Select one:

a.

realizable value.

b.

maturity value.

c.

face value.

d.

net realizable value.

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The net realizable value is used for purposes of valuing out-of-date merchandise in inventory.

Select one:

a.

true

b.

false

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The inventory method that assigns the most recent costs to cost of good sold is

Select one:

a.

FIFO.

b.

LIFO.

c.

average cost.

d.

specific identification.

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Question42

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After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $430,000 and Allowance for Doubtful Accounts has a balance of $30,000. What is the net realizable value of the accounts receivable?

Select one:

a.

$30,000

b.

$460,000

c.

$430,000

d.

$400,000

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The inventory data for an item for November are:

Nov 1Inventory25 units at $20Nov 10Purchased30 units at $21Nov 30Purchased10 units at $22Nov 30Sold35 units

Using the first-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?

Select one:

a.

$640

b.

$605

c.

$623

d.

$660

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Under which method of inventory cost flows is the cost flow assumed to be in the reverse order in which the expenditures were made?

Select one:

a.

Average cost

b.

Last-in, first-out

c.

First-in, first-out

d.

Last-in, last-out

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A note receivable due in 90 days is listed on the balance sheet under

Select one:

a.

long-term liabilities.

b.

fixed assets.

c.

current liabilities.

d.

current assets.

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Generally accepted accounting principles do not normally allow the use of the allowance method of accounting for uncollectible accounts.

Select one:

a.

true

b.

false

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Use the following data to calculate the cost of ending inventory under the FIFO method.

September 1Beginning Inventory15 units @ $20September 10Purchases20 units @ $25September 20Purchases25 units @ $28September 30Ending Inventory30 units

Select one:

a.

$825

b.

$750

c.

$675

d.

$840

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If merchandise inventory is being valued at cost and the price level is consistently rising, which method of costing will yield the largest gross profit?

Select one:

a.

Average cost

b.

LIFO

c.

FIFO

d.

All methods will generate the same gross profit.

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During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of merchandise sold is

Select one:

a.

FIFO.

b.

average cost.

c.

LIFO.

d.

All methods will generate the same cost of merchandise sold.

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The due date of a 90-day note dated July 5 is

Select one:

a.

September 30.

b.

October 2.

c.

October 3.

d.

October 1.

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Question51

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Book value is defined as

Select one:

a.

current market value less residual value.

b.

cost less residual value.

c.

current market value less accumulated depreciation.

d.

cost less accumulated depreciation.

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Question52

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Intangible assets are used in operations but

Select one:

a.

cannot be specifically identified.

b.

cannot be sold.

c.

lack physical substance.

d.

cannot be long-lived.

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Salvage value has a similar meaning as

Select one:

a.

residual value.

b.

scrap value.

c.

book value.

d.

both residual value and scrap value.

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A machine with a useful life of 10 years and a residual value of $4,000 was purchased for $30,000. What is annual depreciation under the straight-line method?

Select one:

a.

$3,000

b.

$3,400

c.

$2,600

d.

$5,200

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A company sold office furniture costing $16,500 with accumulated depreciation of $14,000 for $1,800 cash. The entry to record the sale would include

Select one:

a.

a loss for $700.

b.

an increase in accumulated depreciation for $14,000.

c.

a decrease in office furniture for $2,500.

d.

a decrease in cash for $1,800.

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Accelerated depreciation is primarily used for

Select one:

a.

the financial statements of large companies.

b.

the financial statements of small companies.

c.

income tax purposes.

d.

both financial reporting and income taxes by most companies.

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A machine was purchased for $60,000. It has a useful life of 5 years and a residual value of $6,000. Under the straight-line method, what is annual depreciation expense?

Select one:

a.

$13,200

b.

$12,000

c.

$11,000

d.

$10,800

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All amounts paid to get an asset in place and ready for use are referred to as

Select one:

a.

capital expenditures.

b.

revenue expenditures.

c.

residual value.

d.

cost of an asset.

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Question59

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Depreciable cost equals

Select one:

a.

cost less accumulated depreciation.

b.

book value less residual value.

c.

cost less residual value.

d.

market value less residual value.

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If a fixed asset with an original cost of $18,000 and accumulated depreciation of $2,000 is sold for $15,000, the company must

Select one:

a.

recognize a loss on the income statement under other expenses.

b.

recognize a loss on the income statement under operating expenses.

c.

recognize a gain on the income statement under other revenues.

d.

Gains and losses are not to be recognized upon the sell of fixed assets.

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A company acquired some land for $80,000 to construct a new office complex. Legal fees paid were $2,300, delinquent taxes assumed were $3,400, and $5,850 was paid to remove an old building from which salvaged materials sold for $1,950. What is the cost basis for the land?

Select one:

a.

$93,500

b.

$91,550

c.

$85,700

d.

$89,600

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Goodwill is

Select one:

a.

amortized similar to other intangibles.

b.

only written down if an impairment in value occurs.

c.

charged to expense immediately.

d.

amortized over 40 years or its economic life, whichever is shorter.

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The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called

Select one:

a.

depletion.

b.

deferral.

c.

amortization.

d.

depreciation.

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The Drilling Company purchased a mining site for $500,000 on July 1, 2010. 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 2010 the company extracted 6,500 tons of ore. The depletion expense for 2010 is

Select one:

a.

$37,700.

b.

$42,000.

c.

$32,500.

d.

$27,300.

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Question65

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Which of the following is an example of a capital expenditure?

Select one:

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

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A fixed asset with a cost of $30,000 and accumulated depreciation of $25,000 is sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset?

Select one:

a.

$2,500 loss

b.

$1,500 loss

c.

$2,500 gain

d.

$1,500 gain

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Expenditures that add to the utility of fixed assets for more than one accounting period are

Select one:

a.

committed expenditures.

b.

revenue expenditures.

c.

current expenditures.

d.

capital expenditures.

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Question68

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A current asset account must be increased for revenue expenditures since they only benefit the current period.

Select one:

a.

true

b.

false

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Which of the following expenditures would NOT be included in the cost of an asset?

Select one:

a.

Freight costs

b.

Vandalism

c.

Sales tax

d.

Surveying fees

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If a company sells a fixed asset where the book value is less than the cash received, a gain must be recognized.

Select one:

a.

true

b.

false

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Expenditures for research and development are generally recorded as

Select one:

a.

current operating expenses.

b.

assets and amortized over their estimated useful life.

c.

assets and amortized over 40 years.

d.

current assets.

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Question72

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The Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.

Select one:

a.

true

b.

false

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Question73

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A company purchased an oil well for $25 million with a residual value of $500,000. It is estimated that 10 million barrels can be extracted from the well. Determine depletion expense assuming 3 million barrels are extracted and sold.

Select one:

a.

$7,350,000

b.

$7,500,000

c.

$5,000,000

d.

$7,650,000

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What type of depreciation occurs when an asset can no longer provide services at the level originally intended?

Select one:

a.

Physical depreciation

b.

Market depreciation

c.

Cost depreciation

d.

Functional depreciation

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The removal of an old building to make the land ready for its intended use is charged to

Select one:

a.

land.

b.

land improvements.

c.

buildings.

d.

operating expenses.

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A corporation has 50,000 shares of $100 par value stock outstanding that has a current market value of $180. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately

Select one:

a.

$30.

b.

$36.

c.

$45.

d.

$50.

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A company sold 200 shares of common stock with a par value of $5 at a price of $13 per share. What is the effect on the accounts of this transaction?

Select one:

a.

Increase cash $2,600; increase retained earnings $2,600

b.

Increase cash $1,000; increase common stock $1,000

c.

Increase cash $2,600; increase common stock $1,000 and increase paid-in capital $1,600

d.

Increase cash $2,600; increase common stock $1,600 and increase paid-in capital $1,000

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In order to record a contingent liability, the liability must be probable and reasonably estimated.

Select one:

a.

true

b.

false

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If $1,000,000 of 10% bonds are issued at 98 3/4, the amount of cash received from the sale is

Select one:

a.

$980,000.

b.

$975,000.

c.

$987,500.

d.

$1,000,000.

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Question80

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Current liabilities are

Select one:

a.

due and receivable within one year.

b.

due and to be paid out of current assets within one year.

c.

due but not payable for more than one year.

d.

payable if a possible subsequent event occurs.

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Question81

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The interest rate specified in the bond indenture is called the

Select one:

a.

discount rate.

b.

contract rate.

c.

market rate.

d.

effective rate.

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Question82

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Which of the following accounts is reported in the noncurrent liabilities section of the corporate balance sheet?

Select one:

a.

Bonds Payable

b.

Common Stock

c.

Dividends Payable

d.

Cash

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Question83

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A corporation has 50,000 shares of $100 par value stock outstanding. If the corporation issues a 4-for-1 stock split, the number of shares outstanding after the split will be

Select one:

a.

200,000 shares.

b.

50,000 shares.

c.

250,000 shares.

d.

12,500 shares.

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Question84

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Which of the following would most likely be classified as a current liability?

Select one:

a.

Two-year notes payable

b.

Bonds payable

c.

Mortgage payable

d.

Unearned rent

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Question85

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Before a stock dividend can be declared or paid, there must be sufficient cash.

Select one:

a.

true

b.

false

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Question86

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If a corporation issues only one type of stock, it is called

Select one:

a.

common stock.

b.

treasury stock.

c.

no-par stock.

d.

preferred stock.

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Question87

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Based on the following information, what is earnings per share?Common shares outstanding115,000

Preferred stock dividend declared and paid$40,000

Net income$350,000

Select one:

a.

$3.39

b.

$3.04

c.

$2.96

d.

$2.70

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Question88

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As interest is recorded on an interest-bearing note, the Interest Expense account is

Select one:

a.

decreased; the Interest Payable account is increased.

b.

increased; the Interest Payable account is increased.

c.

increased; the Notes Payable account is decreased.

d.

increased; the Notes Payable account is increased.

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Question89

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If the market rate of interest is greater than the contractual rate of interest, bonds will sell

Select one:

a.

at a premium.

b.

at face value.

c.

at a discount.

d.

only after the stated rate of interest is increased.

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Question90

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On June 5 Glover Co. issued a $60,000, 6%, 120-day note payable to Jones Co. How much will Glover Co. have to pay at maturity?

Select one:

a.

$63,600

b.

$58,800

c.

$60,000

d.

$61,200

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Question91

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The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is termed a

Select one:

a.

stock dividend.

b.

stock split.

c.

stock option.

d.

preferred dividend.

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Question92

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Most employers are levied a tax on payrolls for

Select one:

a.

sales tax.

b.

medical insurance premiums.

c.

federal unemployment compensation tax.

d.

union dues.

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Question93

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When the market rate of interest on bonds is equal to the contract rate, the bonds will sell at

Select one:

a.

a premium.

b.

their face value.

c.

adiscount.

d.

a discount or a premium.

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Question94

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The excess of issue price over par of common stock is termed a(n)

Select one:

a.

discount.

b.

income.

c.

deficit.

d.

premium.

Question95

Preferred stockholders must receive their current-year dividends before the common stockholders can receive any dividends.

Select one:

a.

true

b.

false

Question96

If $1,000,000 of 8% bonds are issued at 102, the amount of cash received from the sale is

Select one:

a.

$1,060,000.

b.

$1,020,000.

c.

$1,000,000.

d.

$1,030,000.

Question97

A company sold 200 shares of common stock with a par vale of $5 at a price of $12 per share. Which section of the statement of cash flows will contain this transaction?

Select one:

a.

Operating activities

b.

Investing activities

c.

Financing activities

d.

Sale of stock will not appear on the statement of cash flows.

Question98

If bonds are issued at a premium, the stated interest rate is

Select one:

a.

higher than the market rate of interest.

b.

lower than the market rate of interest.

c.

too low to attract investors.

d.

adjusted to a higher rate of interest.

Question99

When the contract rate of interest on bonds is higher than the market rate of interest, the bonds sell at

Select one:

a.

a premium.

b.

their face value.

c.

their maturity value.

d.

a discount.

Question100

Most employers are required to withhold from employees for

Select one:

a.

both federal and state unemployment compensation.

b.

only federal unemployment compensation tax.

c.

only federal income tax.

d.

only state unemployment compensation tax.