1. The Sarbanes-Oxley Act (SOX) requires managers and auditors of companies whose stock is traded on an exchange to document and verify internal controls.

TRUE OR FALSE

2. Internal control systems are:

Developed by the Securities and Exchange Commission for public companies.

Developed by the Small Business Administration for non-public companies.

Developed by the Internal Revenue Service for all U.S. companies.

Required by Sarbanes-Oxley (SOX) to be documented and verified if the company's stock is traded on an exchange (a public company).

Required only if a company plans to engage in interstate commerce.

3. The following information is available for Fenton Manufacturing Company at June 30:

Cash in bank account$ 7,155Inventory of postage stamps$ 81Money market fund balance$ 13,100Petty cash balance$ 420NSF checks from customers returned by bank$ 937Postdated checks received from customers$ 566Money orders$ 957A nine-month certificate of deposit maturing on December 31 of current year$ 8,700

Based on this information, Fenton Manufacturing Company should report Cash and Cash Equivalents on June 30 of:

4. The materiality constraint, as applied to bad debts:

Permits the use of the direct write-off method when its results approximate that of the allowance method.

Requires use of the allowance method for bad debts.

Requires use of the direct write-off method.

Requires that bad debts not be written off.

Requires that expenses be reported in the same period as the sales they helped produce.

5. A company used straight-line depreciation for an item of equipment that cost $14,550, had a salvage value of $3,000 and a six-year useful life. After depreciating the asset for three complete years, the salvage value was reduced to $1,455 but its total useful life remained the same. Determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life:

6. Gaston owns equipment that cost $31,000 with accumulated depreciation of $6,200. Gaston sells the equipment for $22,300. Which of the following would not be part of the journal entry to record the disposal of the equipment?Debit Accumulated Depreciation $6,200.

Credit Equipment $31,000.

Debit Loss on Disposal of Equipment $2,500.

Credit Gain on Disposal of Equipment $2,500.

Debit Cash $22,300.