QUESTION 1

1. Which of the following statements is true?

   	1.	Sales are only reflected on a multi-step income statement.
   	2.	A single-step statement contains a subtotal for income from operations.
   	3.	Net income is only reflected on a single-step statement.
   	4.	A multi-step income statement allows companies to compute gross profit.

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QUESTION 2

1. If the seller is to pay the delivery expense of delivering merchandise, delivery terms are stated as

   	1.	FOB shipping point.
   	2.	FOB destination.
   	3.	FOB n/30.
   	4.	FOB buyer.

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QUESTION 3

1. If legal title to merchandise purchases passes to the buyer when the goods are shipped, then the terms are:

   	1.	Concealed
   	2.	FOB shipping point.
   	3.	FOB destination.
   	4.	Consigned.

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QUESTION 4

1. If a $50,000 sale is made with terms of 1/10, n/30, how much would the seller receive if payment is made within the discount period?

   	1.	$50,000
   	2.	$49,500
   	3.	$49,000
   	4.	$45,000

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QUESTION 5

1. Which of the following items is subtracted from net sales to arrive at gross profit?

   	1.	Desired profit
   	2.	operating expenses
   	3.	cost of goods sold
   	4.	land

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QUESTION 6

1. Galaxy, Inc. had the following transactions in October:

   Sales $80,000

   Cost of goods sold 50,000

   Selling expenses 1,200

   Administrative expenses 1,800

   Interest expense 200

   What is Galaxy's gross profit margin?

   	1.	37.5%
   	2.	33.5%
   	3.	33.75%
   	4.	35.25%

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QUESTION 7

1. Galaxy, Inc. had the following transactions in October:

   Sales $80,000

   Cost of goods sold 50,000

   Selling expenses 1,200

   Administrative expenses 1,800

   Interest expense 200

   What is Galaxy's operating income?

   	1.	$30,000
   	2.	$26,800
   	3.	$27,000
   	4.	$80,000

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QUESTION 8

1. Which of the following about the income statement is NOT true?

   		Dividends are included on the income statement
   		The income statement presents revenues and expenses
   		The income statement is presented as a period of time
   		The income statement can be presented as a multi step income statement or a single step income statement.

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QUESTION 9

1. A company sold merchandise on account for $30,000 that was purchased at a cost of $20,000. What is the effect of the sale on the accounting equation?

   	1.	Assets and stockholders' equity will both increase by $10,000.
   	2.	Assets and stockholders' equity will both decrease by $10,000.
   	3.	Assets will increase by $30,000 and stockholders' equity will increase by $10,000.
   	4.	Assets will increase by $30,000 and Liabilities will increase by $30,000

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QUESTION 10

1. Using a perpetual inventory system, what is the effect of the purchase of $30,000 of merchandise inventory on account if the terms are 2/10, n/30, and payment will be made within the discount period?

   	1.	increase in Merchandise Inventory and decrease in Cash of $29,400
   	2.	increase in Merchandise Inventory and increase in Accounts Payable by $30,000 each.
   	3.	increase in Merchandise Inventory and increase in Accounts Payable by $29,400 each.
   	4.	Increase in Merchandise Inventory of $30,000 and increase in Accounts Payable of $29,400.

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QUESTION 11

1. Which of the following is not an example of a selling expense?

   	1.	Salespersons' salaries
   	2.	Delivery expense
   	3.	Advertising
   	4.	Office salaries

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QUESTION 12

1. Which of the following statements is true regarding perpetual inventory systems?

   	1.	Each purchase and sale of merchandise is recorded so that the inventory records are continuously updated.
   	2.	A physical inventory is necessary to determine cost of goods sold at the end of the period.
   	3.	A listing of inventory on hand is prepared at the end of the accounting period.
   	4.	Perpetual inventory systems are not widely used by retailers.

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QUESTION 13

1. Estelle Inc. has beginning inventory of $40,000, purchases of $59,000 and cost of goods sold of $44,000. What is Estelle's ending inventory?

   	1.	$143,000
   	2.	$55,000
   	3.	$63,000
   	4.	Cannot be determined from the information given.

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QUESTION 14

1. What is the primary purpose of internal controls?

   	1.	To safeguard the company's assets
   	2.	Provide advertising
   	3.	report net income
   	4.	determine the profitability of a company

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QUESTION 15

1. Which of the following is true regarding the Sarbanes-Oxley Act?

   	1.	It applies to all companies, whether publicly-traded or privately-held.
   	2.	It emphasizes the importance of internal control.
   	3.	It was passed to reduce the likelihood and impact of financial fraud.
   	4.	All of the above are true statements.

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QUESTION 16

1. The control procedures that should be part of internal control include all but which of the following?

   	1.	rotating duties and requiring mandatory vacations
   	2.	separating responsbilities for related operations
   	3.	providing proofs and security measures
   	4.	always having one person handle assets and maintain the accounting records for that asset

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QUESTION 17

1. Internal control systems:

   	1.	can provide absolute assurance for safeguarding assets.
   	2.	cannot prevent human error or collusion.
   	3.	should have costs that exceed the associated benefits
   	4.	cannot be circumvented.

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QUESTION 18

1. A bank reconciliation:

   		should be prepared periodically to account for timing differences between the cash balance in a company's ledger and the bank's records.
   		is the same thing as a bank statement.
   		is not a component of internal control.
   		is rarely performed by most organizations.

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QUESTION 19

1. A company made an error in recording a check, the amount should have been recorded as an increase to cash of $1,000 but was recorded as an increase to cash of only $100 instead. How would a company account for that on the bank reconciliation?

   	1.	addition to the cash balance per books.
   	2.	addition to the cash balance per bank.
   	3.	deduction from the cash balance per bank.
   	4.	deduction from the cash balance per books.

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QUESTION 20

1. A company was not aware of a bank service charge until they noted it on the bank statement. This item would be included on the bank reconciliation as a(n):

   	1.	deduction from the cash balance per books.
   	2.	addition to the cash balance per bank.
   	3.	deduction from the cash balance per bank.
   	4.	addition to the cash balance per books.

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QUESTION 21

1. The bank made an error by debiting ABC Company's account for a withdrawal made by another customer. The difference should be recorded on ABC Company's bank reconciliation as a(an):

   	1.	deduction from the cash balance per books .
   	2.	deduction from the cash balance per bank.
   	3.	addition to the cash balance per bank.
   	4.	addition to the cash balance per books.

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QUESTION 22

1. High Corporation has an accounts receivable balance of $300,000. It has determined that $25,000 of these receivables may be uncollectible. After making this adjustment to bad debt expense and the allowance for doubtful accounts, what is the net realizable value of the receivables that would be reported on High Corporation's balance sheet?

   	1.	$300,000
   	2.	$325,000
   	3.	$275,000
   	4.	$25,000

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QUESTION 23

1. Based on analysis of the aging of accounts receivable, it has been determined that the balance in the allowance account should be a normal negative balance of $48,000. There is currently a normal negative balance in the account of $10,000. What is the amount of the adjustment to Bad Debts Expense and the Allowance for Doubtful Accounts?

   	1.	$48,000
   	2.	$10,000
   	3.	$0
   	4.	$38,000