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TRUE OR FALSE 1. External auditors prepare the financial statements for corporations. 2. The balance in the accounts receivable account in the general ledger should be equal to the total of the balances in the subsidiary accounts receivable ledger. 3. A corporation must pay a dividend every quarter when it makes a profit. 4. Net assets = Liabilities - Shareholders' Equity 5. Cost of Goods Sold = Gross margin + Purchases 6. GAAP does not include amortization of trucks. 7. Segregation of duties is not necessary in charitable organizations. 8. \"Supplies\" is a temporary account. 9. All companies use the periodic system of inventory control. 10. The allowance for uncollectible accounts is shown as a liability on the balance sheet. MULTIPLE CHOICE 11. A credit to a prepaid expense account will: (a) decrease assets (b) increase revenue (c) increase shareholders' equity (d) increase assets (e) increase accounts payable. 12. A debit to a prepaid expense account will: (a) decrease assets (b) increase expenses (c) decrease net income (d) increase liabilities (e) increase assets. 13. A debit to an unearned revenue account will: (a) increase assets (b) increase revenue (c) increase shareholders' equity (d) all of the above (e) none of the above. 14. Which of the following statements is correct? (a) Large corporations usually use perpetual inventory control systems. (b) Periodic inventory control systems are not reliable. (c) Companies using the perpetual inventory control systems have higher profits. (d) Physical counts of inventory are not required for a company using a perpetual inventory system. (e) GAAP states that companies must use a perpetual inventory control system. 15. Which of the following statements is correct? (a) At year-end all accounts must be closed. (b) Only expense accounts must be closed. (c) Only balance sheet accounts must be closed. (d) The balance in the dividend account is carried forward. (e) All temporary accounts must be closed. 16. Which of the following statements suggest a company is using a periodic inventory control system? (a) low volume of sales transactions (b) merchandise stored in warehouses across the country (c) high volume of sales transactions and manual accounting system (d) large company with professional management (e) items in inventory have a high unit cost 17. Which of the following practices suggest a weakness in internal control? (a) all cash receipts are deposited daily (b) bills must be approved before being processed by the accounting department (c) all supporting documents are stamped paid when processed by accounting (d) the accounting department issues invoices to customers and records all cash received from them (e) the bank reconciliation is prepared by the finance department and approved by the controller 18. The following information was taken from the records of Hong Kong Trading Company: Assets $200,000; Current liabilities $40,000; Long term liabilities $100,000;Owner's equity $60,000. The current liabilities include unearned legal fees of $12,000 but the records show that 50% of the litigation service has been completed. The adjustment to the financial statements would be: (a) increase in current liabilities of $6,000 (b) an increase in assets of $6,000 (c) a decrease in expenses of $6,000 (d) an increase in revenue of $6,000 (e) a decrease in retained earnings of $6,000. 19. Which one of the following is not a part of an internal control system? (a) documentation (b) hiring reliable and competent personnel (c) assignment of responsibilities (d) declaring quarterly dividends (e) depositing all cash receipts daily 20. When preparing a balance sheet the assets are arranged in liquidity order. Which one of the accounts is in the wrong sequence? (a) cash (b) accounts receivable (c) notes receivable (d) land (e) inventory TRUE OR FALSE 1. External auditors prepare the financial statements for corporations. - False 2. The balance in the accounts receivable account in the general ledger should be equal to the total of the balances in the subsidiary accounts receivable ledger. - True 3. A corporation must pay a dividend every quarter when it makes a profit. - False 4. Net assets = Liabilities - Shareholders' Equity - False 5. Cost of Goods Sold = Gross margin + Purchases - False 6. GAAP does not include amortization of trucks - True. 7. Segregation of duties is not necessary in charitable organizations. - False 8. \"Supplies\" is a temporary account. - False 9. All companies use the periodic system of inventory control. - False 10. The allowance for uncollectible accounts is shown as a liability on the balance sheet. - False MULTIPLE CHOICE FIRST DOC 11. A credit to a prepaid expense account will: (a) decrease assets (b) increase revenue (c) increase shareholders' equity (d) increase assets (e) increase accounts payable. 12. A debit to a prepaid expense account will: (a) decrease assets (b) increase expenses (c) decrease net income (d) increase liabilities (e) increase assets. 13. A debit to an unearned revenue account will: (a) increase assets (b) increase revenue (c) increase shareholders' equity (d) all of the above (e) none of the above. 14. Which of the following statements is correct? (a) Large corporations usually use perpetual inventory control systems. (b) Periodic inventory control systems are not reliable. (c) Companies using the perpetual inventory control systems have higher profits. (d) Physical counts of inventory are not required for a company using a perpetual inventory system. (e) GAAP states that companies must use a perpetual inventory control system . 15. Which of the following statements is correct? (a) At year-end all accounts must be closed. (b) Only expense accounts must be closed. (c) Only balance sheet accounts must be closed. (d) The balance in the dividend account is carried forward. (e) All temporary accounts must be closed. 16. Which of the following statements suggest a company is using a periodic inventory control system? (a) low volume of sales transactions (b) merchandise stored in warehouses across the country (c) high volume of sales transactions and manual accounting system (d) large company with professional management (e) items in inventory have a high unit cost 17. Which of the following practices suggest a weakness in internal control? (a) all cash receipts are deposited daily (b) bills must be approved before being processed by the accounting department (c) all supporting documents are stamped paid when processed by accounting (d) the accounting department issues invoices to customers and records all cash received from them (e) the bank reconciliation is prepared by the finance department and approved by the controller 18. The following information was taken from the records of Hong Kong Trading Company: Assets $200,000; Current liabilities $40,000; Long term liabilities $100,000;Owner's equity $60,000. The current liabilities include unearned legal fees of $12,000 but the records show that 50% of the litigation service has been completed. The adjustment to the financial statements would be: (a) increase in current liabilities of $6,000 (b) an increase in assets of $6,000 (c) a decrease in expenses of $6,000 (d) an increase in revenue of $6,000 (e) a decrease in retained earnings of $6,000. 19. Which one of the following is not a part of an internal control system? (a) documentation (b) hiring reliable and competent personnel (c) assignment of responsibilities (d) declaring quarterly dividends (e) depositing all cash receipts daily 20. When preparing a balance sheet the assets are arranged in liquidity order. Which one of the accounts is in the wrong sequence? (a) cash (b) accounts receivable (c) notes receivable (d) land (e) inventory SECOND DOC 11. A credit to a prepaid expense account will: (a) decrease assets (b) increase revenue (c) increase shareholders' equity (d) increase assets (e) increase accounts payable. 12. A debit to a prepaid expense account will: (a) decrease assets (b) increase expenses (c) decrease net income (d) increase liabilities (e) increase assets. 13. A debit to an unearned revenue account will: (a) increase assets (b) increase revenue (c) increase shareholders' equity (d) all of the above (e) none of the above. 14. Which of the following statements is correct? (a) Large corporations usually use perpetual inventory control systems. (b) Periodic inventory control systems are not reliable. (c) Companies using the perpetual inventory control systems have higher profits . (d) Physical counts of inventory are not required for a company using a perpetual inventory system. (e) GAAP states that companies must use a perpetual inventory control system. 15. Which of the following statements is correct? (a) At year-end all accounts must be closed. (b) Only expense accounts must be closed. (c) Only balance sheet accounts must be closed. (d) The balance in the dividend account is carried forward. (e) All temporary accounts must be closed. 16. Which of the following statements suggest a company is using a periodic inventory control system? (a) low volume of sales transactions (b) merchandise stored in warehouses across the country (c) high volume of sales transactions and manual accounting system (d) large company with professional management (e) items in inventory have a high unit cost 17. Which of the following practices suggest a weakness in internal control? (a) all cash receipts are deposited daily (b) bills must be approved before being processed by the accounting department (c) all supporting documents are stamped paid when processed by accounting (d) the accounting department issues invoices to customers and records all cash received from them (e) the bank reconciliation is prepared by the finance department and approved by the controller 18. The following information was taken from the records of Hong Kong Trading Company: Assets $200,000; Current liabilities $40,000; Long term liabilities $100,000;Owner's equity $60,000. The current liabilities include unearned legal fees of $12,000 but the records show that 50% of the litigation service has been completed. The adjustment to the financial statements would be: (a) increase in current liabilities of $6,000 (b) an increase in assets of $6,000 (c) a decrease in expenses of $6,000 (d) an increase in revenue of $6,000 (e) a decrease in retained earnings of $6,000. 19. Which one of the following is not a part of an internal control system? (a) documentation (b) hiring reliable and competent personnel (c) assignment of responsibilities (d) declaring quarterly dividends (e) depositing all cash receipts daily 20. When preparing a balance sheet the assets are arranged in liquidity order. Which one of the accounts is in the wrong sequence? (a) cash (b) accounts receivable (c) notes receivable (d) land (e) inventory TRUE OR FALSE 1. External auditors prepare the financial statements for corporations. - False 2. The balance in the accounts receivable account in the general ledger should be equal to the total of the balances in the subsidiary accounts receivable ledger. - True 3. A corporation must pay a dividend every quarter when it makes a profit. - False 4. Net assets = Liabilities - Shareholders' Equity - False 5. Cost of Goods Sold = Gross margin + Purchases - False 6. GAAP does not include amortization of trucks - True. 7. Segregation of duties is not necessary in charitable organizations. - False 8. \"Supplies\" is a temporary account. - False 9. All companies use the periodic system of inventory control. - False 10. The allowance for uncollectible accounts is shown as a liability on the balance sheet. - False MULTIPLE CHOICE FIRST DOC 11. A credit to a prepaid expense account will: (a) decrease assets (b) increase revenue (c) increase shareholders' equity (d) increase assets (e) increase accounts payable. 12. A debit to a prepaid expense account will: (a) decrease assets (b) increase expenses (c) decrease net income (d) increase liabilities (e) increase assets. 13. A debit to an unearned revenue account will: (a) increase assets (b) increase revenue (c) increase shareholders' equity (d) all of the above (e) none of the above. 14. Which of the following statements is correct? (a) Large corporations usually use perpetual inventory control systems. (b) Periodic inventory control systems are not reliable. (c) Companies using the perpetual inventory control systems have higher profits. (d) Physical counts of inventory are not required for a company using a perpetual inventory system. (e) GAAP states that companies must use a perpetual inventory control system . 15. Which of the following statements is correct? (a) At year-end all accounts must be closed. (b) Only expense accounts must be closed. (c) Only balance sheet accounts must be closed. (d) The balance in the dividend account is carried forward. (e) All temporary accounts must be closed. 16. Which of the following statements suggest a company is using a periodic inventory control system? (a) low volume of sales transactions (b) merchandise stored in warehouses across the country (c) high volume of sales transactions and manual accounting system (d) large company with professional management (e) items in inventory have a high unit cost 17. Which of the following practices suggest a weakness in internal control? (a) all cash receipts are deposited daily (b) bills must be approved before being processed by the accounting department (c) all supporting documents are stamped paid when processed by accounting (d) the accounting department issues invoices to customers and records all cash received from them (e) the bank reconciliation is prepared by the finance department and approved by the controller 18. The following information was taken from the records of Hong Kong Trading Company: Assets $200,000; Current liabilities $40,000; Long term liabilities $100,000;Owner's equity $60,000. The current liabilities include unearned legal fees of $12,000 but the records show that 50% of the litigation service has been completed. The adjustment to the financial statements would be: (a) increase in current liabilities of $6,000 (b) an increase in assets of $6,000 (c) a decrease in expenses of $6,000 (d) an increase in revenue of $6,000 (e) a decrease in retained earnings of $6,000. 19. Which one of the following is not a part of an internal control system? (a) documentation (b) hiring reliable and competent personnel (c) assignment of responsibilities (d) declaring quarterly dividends (e) depositing all cash receipts daily 20. When preparing a balance sheet the assets are arranged in liquidity order. Which one of the accounts is in the wrong sequence? (a) cash (b) accounts receivable (c) notes receivable (d) land (e) inventory SECOND DOC 11. A credit to a prepaid expense account will: (a) decrease assets (b) increase revenue (c) increase shareholders' equity (d) increase assets (e) increase accounts payable. 12. A debit to a prepaid expense account will: (a) decrease assets (b) increase expenses (c) decrease net income (d) increase liabilities (e) increase assets. 13. A debit to an unearned revenue account will: (a) increase assets (b) increase revenue (c) increase shareholders' equity (d) all of the above (e) none of the above. 14. Which of the following statements is correct? (a) Large corporations usually use perpetual inventory control systems. (b) Periodic inventory control systems are not reliable. (c) Companies using the perpetual inventory control systems have higher profits . (d) Physical counts of inventory are not required for a company using a perpetual inventory system. (e) GAAP states that companies must use a perpetual inventory control system. 15. Which of the following statements is correct? (a) At year-end all accounts must be closed. (b) Only expense accounts must be closed. (c) Only balance sheet accounts must be closed. (d) The balance in the dividend account is carried forward. (e) All temporary accounts must be closed. 16. Which of the following statements suggest a company is using a periodic inventory control system? (a) low volume of sales transactions (b) merchandise stored in warehouses across the country (c) high volume of sales transactions and manual accounting system (d) large company with professional management (e) items in inventory have a high unit cost 17. Which of the following practices suggest a weakness in internal control? (a) all cash receipts are deposited daily (b) bills must be approved before being processed by the accounting department (c) all supporting documents are stamped paid when processed by accounting (d) the accounting department issues invoices to customers and records all cash received from them (e) the bank reconciliation is prepared by the finance department and approved by the controller 18. The following information was taken from the records of Hong Kong Trading Company: Assets $200,000; Current liabilities $40,000; Long term liabilities $100,000;Owner's equity $60,000. The current liabilities include unearned legal fees of $12,000 but the records show that 50% of the litigation service has been completed. The adjustment to the financial statements would be: (a) increase in current liabilities of $6,000 (b) an increase in assets of $6,000 (c) a decrease in expenses of $6,000 (d) an increase in revenue of $6,000 (e) a decrease in retained earnings of $6,000. 19. Which one of the following is not a part of an internal control system? (a) documentation (b) hiring reliable and competent personnel (c) assignment of responsibilities (d) declaring quarterly dividends (e) depositing all cash receipts daily 20. When preparing a balance sheet the assets are arranged in liquidity order. Which one of the accounts is in the wrong sequence? (a) cash (b) accounts receivable (c) notes receivable (d) land (e) inventory TRUE OR FALSE 1. External auditors prepare the financial statements for corporations. - False 2. The balance in the accounts receivable account in the general ledger should be equal to the total of the balances in the subsidiary accounts receivable ledger. - True 3. A corporation must pay a dividend every quarter when it makes a profit. - False 4. Net assets = Liabilities - Shareholders' Equity - False 5. Cost of Goods Sold = Gross margin + Purchases - False 6. GAAP does not include amortization of trucks - True. 7. Segregation of duties is not necessary in charitable organizations. - False 8. \"Supplies\" is a temporary account. - False 9. All companies use the periodic system of inventory control. - False 10. The allowance for uncollectible accounts is shown as a liability on the balance sheet. - False MULTIPLE CHOICE FIRST DOC 11. A credit to a prepaid expense account will: (a) decrease assets (b) increase revenue (c) increase shareholders' equity (d) increase assets (e) increase accounts payable. 12. A debit to a prepaid expense account will: (a) decrease assets (b) increase expenses (c) decrease net income (d) increase liabilities (e) increase assets. 13. A debit to an unearned revenue account will: (a) increase assets (b) increase revenue (c) increase shareholders' equity (d) all of the above (e) none of the above. 14. Which of the following statements is correct? (a) Large corporations usually use perpetual inventory control systems. (b) Periodic inventory control systems are not reliable. (c) Companies using the perpetual inventory control systems have higher profits. (d) Physical counts of inventory are not required for a company using a perpetual inventory system. (e) GAAP states that companies must use a perpetual inventory control system . 15. Which of the following statements is correct? (a) At year-end all accounts must be closed. (b) Only expense accounts must be closed. (c) Only balance sheet accounts must be closed. (d) The balance in the dividend account is carried forward. (e) All temporary accounts must be closed. 16. Which of the following statements suggest a company is using a periodic inventory control system? (a) low volume of sales transactions (b) merchandise stored in warehouses across the country (c) high volume of sales transactions and manual accounting system (d) large company with professional management (e) items in inventory have a high unit cost 17. Which of the following practices suggest a weakness in internal control? (a) all cash receipts are deposited daily (b) bills must be approved before being processed by the accounting department (c) all supporting documents are stamped paid when processed by accounting (d) the accounting department issues invoices to customers and records all cash received from them (e) the bank reconciliation is prepared by the finance department and approved by the controller 18. The following information was taken from the records of Hong Kong Trading Company: Assets $200,000; Current liabilities $40,000; Long term liabilities $100,000;Owner's equity $60,000. The current liabilities include unearned legal fees of $12,000 but the records show that 50% of the litigation service has been completed. The adjustment to the financial statements would be: (a) increase in current liabilities of $6,000 (b) an increase in assets of $6,000 (c) a decrease in expenses of $6,000 (d) an increase in revenue of $6,000 (e) a decrease in retained earnings of $6,000. 19. Which one of the following is not a part of an internal control system? (a) documentation (b) hiring reliable and competent personnel (c) assignment of responsibilities (d) declaring quarterly dividends (e) depositing all cash receipts daily 20. When preparing a balance sheet the assets are arranged in liquidity order. Which one of the accounts is in the wrong sequence? (a) cash (b) accounts receivable (c) notes receivable (d) land (e) inventory SECOND DOC 11. A credit to a prepaid expense account will: (a) decrease assets (b) increase revenue (c) increase shareholders' equity (d) increase assets (e) increase accounts payable. 12. A debit to a prepaid expense account will: (a) decrease assets (b) increase expenses (c) decrease net income (d) increase liabilities (e) increase assets. 13. A debit to an unearned revenue account will: (a) increase assets (b) increase revenue (c) increase shareholders' equity (d) all of the above (e) none of the above. 14. Which of the following statements is correct? (a) Large corporations usually use perpetual inventory control systems. (b) Periodic inventory control systems are not reliable. (c) Companies using the perpetual inventory control systems have higher profits . (d) Physical counts of inventory are not required for a company using a perpetual inventory system. (e) GAAP states that companies must use a perpetual inventory control system. 15. Which of the following statements is correct? (a) At year-end all accounts must be closed. (b) Only expense accounts must be closed. (c) Only balance sheet accounts must be closed. (d) The balance in the dividend account is carried forward. (e) All temporary accounts must be closed. 16. Which of the following statements suggest a company is using a periodic inventory control system? (a) low volume of sales transactions (b) merchandise stored in warehouses across the country (c) high volume of sales transactions and manual accounting system (d) large company with professional management (e) items in inventory have a high unit cost 17. Which of the following practices suggest a weakness in internal control? (a) all cash receipts are deposited daily (b) bills must be approved before being processed by the accounting department (c) all supporting documents are stamped paid when processed by accounting (d) the accounting department issues invoices to customers and records all cash received from them (e) the bank reconciliation is prepared by the finance department and approved by the controller 18. The following information was taken from the records of Hong Kong Trading Company: Assets $200,000; Current liabilities $40,000; Long term liabilities $100,000;Owner's equity $60,000. The current liabilities include unearned legal fees of $12,000 but the records show that 50% of the litigation service has been completed. The adjustment to the financial statements would be: (a) increase in current liabilities of $6,000 (b) an increase in assets of $6,000 (c) a decrease in expenses of $6,000 (d) an increase in revenue of $6,000 (e) a decrease in retained earnings of $6,000. 19. Which one of the following is not a part of an internal control system? (a) documentation (b) hiring reliable and competent personnel (c) assignment of responsibilities (d) declaring quarterly dividends (e) depositing all cash receipts daily 20. When preparing a balance sheet the assets are arranged in liquidity order. Which one of the accounts is in the wrong sequence? (a) cash (b) accounts receivable (c) notes receivable (d) land (e) inventory