Questions

1. Signify TRUE or FALSE as applicable for each of the following items as they pertain to assigning costs to merchandise inventory units.

1.1 FIFO generates a higher net income than LIFO when costs are rising.

a) True b) False

1.2 LIFO generates a higher net income than FIFO when costs are falling.

a) True b) False

1.3 LIFO always generates the lowest net income of all possible costing alternatives.

a) True b) False

1.4 FIFO better reflects current replacement costs on the balance sheet as compared to LIFO.

a) True b) False

1.5 LIFO better reflects current replacement costs on the income statement as compared to FIFO.

a) True b) False

1.6 A business MUST choose the method that most closely reflects its physical flow of inventory.

a) True b) False

1.7 If costs do not change over time, all methods will yield the same results.

a) True b) False

2. Signify TRUE or FALSE as applicable for each of the following items as they pertain to special journals and subsidiary ledgers.

2.1 An example of a subsidiary ledger is a cash receipts ledger

a) False b) True

2.2 The accounts receivable controlling account displays the supporting detail of the individual customer balances

1. False b) True
   3. Journal entries from special journals must be transferred to the general journal in order

for accounting records to be complete

1. False b) True
   4. Journal entries from the general journal must be transferred to the special journals in

order for accounting records to be complete

1. False b) True

2.5 Journal entries do not need to be posted to controlling accounts

a) False b) True

2.6 Adjusting journal entries and closing entries should be recorded in the general journal

a) False b) True

3. Signify TRUE or FALSE as applicable for each of the following items as they pertain to an ideal internal control system.

3.1 An ideal internal control system cannot be undermined by collusion among

individuals.

1. True b) False

3.2 Accounting department personnel should not perform any other operational functions.

a) True b) False

3.3 The employee who signs checks should not reconcile the bank account.

a) True b) False

3.4 The employee who prepares checks should not reconcile the bank account.

a) True b) False

3.5 The employee who prepares checks should not sign checks.

a) True b) False

3.6 The employee who physically handles inventory should not authorize payment for it.

a) True b) False

3.7 The employee who physically handles inventory should not place orders with

vendors.

1. True b) False

3.8 The employee who places orders with vendors should not authorize payment for

them.

1. True b) False

4. Signify YES or NO as applicable for each of the following bank reconciliation reconciling items to indicate whether a business would need to record an adjusting entry for the item.

4.1 Outstanding checks

a) Yes b) No

4.2 NSF checks

a) Yes b) No

4.3 Bank service charges

a) Yes b) No

4.4 Bank interest

a) Yes b) No

4.5 Bank collections on behalf of the business

a) Yes b) No

4.6 Deposits in transit

a) Yes b) No

4.7 Bank errors on the bank statement

a) Yes b) No

4.8 Business errors in the cash general ledger account

a) Yes b) No