ACCT201Chapters4,5,and6

The direct write - off method records Uncollectible - Account Expense:

when the specific account receivable is determined to be uncollectible.

Jumpin Corporation uses the percent-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to​ $2,030,000, and management estimates​ 5% will be uncollectible. The Allowance for Uncollectible Accounts prior to adjustment has a debit balance of​ $1,300. The amount of Uncollectible - account Expense reported on the income statement will​ be:

​$101,500.

The balance in Accounts Receivable was​ $650,000 at the beginning of the year and​ $760,000 at the end of the year. Credit sales for the year totaled​ $4,130,000. During the​ year, $410,000 in customer accounts were written off. How much cash was collected from customers during the​ period?

​$3,610,000

An aging-of-saccountsminusreceivable indicates that the amount of uncollectible accounts is​ $3,910. The Allowance for Uncollectible Accounts prior to adjustment has a debit balance of​ $600. The Accounts Receivable balance is​ $44,620. The amount of the adjusting entry for uncollectible accounts should be​ for:

​$4,510

Which of the following items can be added to or subtracted from the bank balance when preparing the bank​ reconciliation?

bank errors

When preparing a bank​ reconciliation, which of the following items should be added to the book​ balance?

both EFT receipts and collection of a note receivable by the bank

Internal​ controls:

can be circumvented.

Under the allowance method for estimating uncollectible​ accounts:

A.the Allowance for Uncollectible Accounts will normally have a credit balance. B.a company sets up an Allowance for Uncollectible Accounts to estimate the amount of the receivables the company does not expect to collect. C.the Allowance for Uncollectible Accounts is a contra account to gross Accounts Receivable. D. all of the above. YESSIR

Payment by check is an important internal control​ because:

A.the check provides a record of the payment. B.the check must be signed by an authorized official who should study the evidence supporting the payment. C.all checks must be approved by the​ bank's internal audit department before they are paid. D.A and B YESSIR

To satisfy a performance obligation means​ that:

A.the selling entity has done everything required to earn the revenue. B.the provider has substantially completed the service for the customer. C.the goods have been transferred to the customer who has assumed ownership and control over goods. D.All of the above statements are correct. YESSIR

The net realizable value of accounts receivable is the difference between gross accounts receivable​ and:

Allowance for Uncollectible Accounts.

Which of the following statements regarding cash equivalents is​ INCORRECT?

Because cash equivalents are less liquid than​ cash, they must be reported separately from the Cash account.

Fraudulent financial reporting is the only type of fraud that involves making false or misleading entries in the books of the company.

False

Which of the following is a CORRECT statement regarding the bank​ reconciliation?

Journal entries need to be made for all transactions on the book side to get the accounts up-to-date.

Which of the following statements regarding fraud is​ INCORRECT?

Misappropriation of assets is a type of fraud that is committed by company managers who make false and misleading entries in the books in order to improve a​ company's financial results.

​________ is the most common​ fraud, but​ ________ is the most expensive fraud.

Misappropriation of​ assets; fraudulent financial reporting

Collusion is the method used to defeat an internal controls system.

TRUE

Which statement is​ FALSE?

The accounting department should be in charge of record keeping and depositing​ customers' checks.

Accounts​ (trade) receivable are amounts to be collected from customers from the sale of goods or services.

True

As items are actually​ returned, the company reduces its sales refunds payable account for the amount of cash or accounts receivable credit it gives back to customers.

True

The shipping terms in the sales contract determine when ownership of goods changes hands between the buyer and the seller.

True

Under the allowance​ method, Uncollectible - Account Expense is recorded in the same accounting period as the sale.

True

A petty cash​ fund:

is established to pay for minor purchases.

A​ company's petty cash​ fund:

is opened with a particular amount of cash.

The percent - of - sales method of computing uncollectible accounts for Accounts Receivable is used by some companies​ because:

it is easier and quicker to apply.

Which of the following is NOT a way to safeguard​ controls?

keeping accurate financial records

In most reported fraud​ cases, fraudsters exhibit one or more behavioral red flags. Which of the following is NOT one of these behavioral red​ flags?

living within​ one's means Your answer is correct.

When customer checks are received in the​ mail, which employees are involved in processing the​ checks?

mailroom​ employee, accounting department​ employee, controller,​ treasurer, cashier in the​ treasurer's department

Malware is short​ for:

malicious software.

Internal control is a plan of organization and system of​ procedures, implemented by company​ ________ and the​ ________, designed to accomplish five objectives.

management, board of directors

The type of fraud committed by employees of an​ entity, who steal money from the company and cover it up through erroneous entries in the​ books, is​ called:

misappropriation of assets.

After approving an invoice for​ payment:

payment is made and the payment packet should then be stamped​ "paid" by the person in the​ treasurer's department who has authorized the disbursement.

Creating bogus websites for the purpose of stealing unauthorized data is​ a(n):

phishing expedition.

A company has a policy that all checks over​ $5,000 need to have the signature of the owner in addition to the signature of the bookkeeper. This is an example​ of:

proper approvals.

All of the following are examples of a weak control environment​ EXCEPT:

proper segregation of duties.

An employee claims that he overstated expense reimbursement requests to have extra money for his wife and children because​ "Everyone is doing​ it." This is an example​ of:

rationalization

Once the company receives newly purchased​ inventory, it prepares​ a(n) ________ to list the goods received.

receiving report

When goods are shipped FOB​ destination:

revenue is recognized when the goods are received by the customer.

Which is NOT an objective of an internal control​ system?

risk assessment

The person who prepares the bank​ reconciliation:

should have no other cash duties.

An internal control system can be circumvented​ by:

collusion, management override and human limitations.

When reporting cash on the balance​ sheet, companies:

combine cash and cash equivalents.

The objectives of internal control do NOT​ include:

compliance with standards of social responsibility.

Which is NOT a component of comparisons and compliance​ monitoring?

control environment

Internal control procedures do NOT​ include:

control environment.

Fraudulent financial reporting is also​ called:

cooking the books.

With regard to Accounts​ Receivable, a separate account for each customer is kept in​ a(n):

subsidiary ledger.

In a bank​ reconciliation, a NSF check​ is:

subtracted from the book balance.

In a bank​ reconciliation, a bank service charge for printing checks​ is:

subtracted from the book balance.

In a bank​ reconciliation, an EFT cash payment​ is:

subtracted from the book balance.

The balance in the Allowance for Uncollectible Accounts is considered prior to the year - end adjustment​ under:

the aging-of-receivables method.

When evaluating the collectability of accounts​ receivable:

the allowance method uses estimates developed from the​ company's collection experience.

Nichols Company has shipped goods to one of its customers FOB shipping point. Nichols Company will recognize sales revenue​ when:

the goods leave​ Nichols' shipping dock.

Most companies will​ use:

the percent - method for interim statements and the aging - of - receivables method at the end of the year.

For good internal​ control:

the purchasing agent should not receive the goods or approve the invoice for payment.

Fraudulent financial​ reporting:

deceives investors into investing.

When preparing a bank​ reconciliation:

deposits in transit are added to the bank balance.

All of the following will appear on the book side of the bank reconciliation EXCEPT​ for:

deposits in transit.

Deposits that have been recorded on the​ company's books, but have not yet been recorded by the bank​ are:

deposits in transit.

The percent - of - sales method for computing uncollectible​ accounts:

employs the expense recognition​ (matching) concept.

Internal controls are designed to accomplish five objectives that include compliance with legal​ requirements, promote operational​ efficiency, safeguard​ assets, encourage employees to follow company policy​ and:

ensure​ accurate, reliable accounting records.

The two most common types of fraud impacting the financial statements​ are:

fraudulent financial reporting and misappropriation of assets.

The type of fraud committed by company​ managers, who make false and misleading entries in the books in order to improve a​ company's financial​ statements, is​ called:

fraudulent financial reporting.

The entry to write off an Account Receivable under the allowance​ method:

has no effect on total assets and net income.

A payment packet of​ documents:

includes the​ invoice, receiving report and purchase order.

A fidelity bond is​ a(n):

insurance policy that reimburses a company for any losses due to employee theft.

The bookkeeper recorded a deposit of $400 as $ 40. On the bank​ reconciliation, this will be​ a(n):

addition of $360 to the balance per books.

The general rule that all major groups of transactions should be supported by either hard copy documents or electronic records is part of the control procedure​ of:

adequate records.

The primary way that fraud is​ prevented, detected, or corrected is through a proper system​ of:

internal control.

Estimating uncollectible accounts by analyzing receivables from specific customers according to how long each has been outstanding is known as​ the:

aging - of - receivables method.

Payments by EFT are an important internal control for all of the following reasons EXCEPT​ for:

all EFT payments are made by the cashier in the Accounting Department.

Opportunity in the fraud triangle arises​ from:

all of the above.

Three key duties that must always be separated under a good system of internal controls​ are:

asset​ handling, record keeping and transaction approval.

For​ retailers, a way to speed up cash collections​ is:

to accept debit and credit card sales.

Jensen Corporation uses the percentage- of-sales method to estimate uncollectibles. Net credit sales for the current year amount to​ $2,010,000 and management estimates​ 3% will be uncollectible. The Allowance for Doubtful Accounts prior to adjustment has a debit balance of​ $18,000. After all adjusting entries are​ made, the balance in Allowance for Uncollectible Accounts will​ be:

​$42,300.

Using the percentage-of-sales ​method, the estimated total uncollectible accounts are​ $7,122. The Allowance for Uncollectible Accounts prior to adjustment has a debit balance of​ $3,135. The Accounts Receivable balance is​ $44,820. The amount of the adjusting entry for Uncollectible-Accounts Expense​ is:

​$7,122.

The ending bank statement balance at November 30 is​ $7,070. The bank statement shows a service charge of​ $95, electronic funds receipts of​ $800 and a NSF check for​ $350. Deposits in transit total​ $2,050 and outstanding checks are​ $1,835. The balance per books at November 30 is​ $6,930. What is the adjusted book balance at November​ 30?

​$7,285

The ending bank statement balance at November 30 is​ $7,150. The bank statement shows a service charge of​ $65, electronic funds receipts of​ $500, and a NSF check for​ $350. Deposits in transit total​ $2,550 and outstanding checks are​ $1,735. The balance per books at November 30 is​ $7,880. What is the adjusted bank balance at November​ 30?

​$7,965

A year-end review of Accounts Receivable and estimated uncollectible percentages revealed the​ following: Accounts Receivable Est. Percent Uncollectible ​$64,000 ​2% ​$44,000 ​4% $20,000 ​12% ​$6,000 ​ 51% Before the year-end ​adjustment, the credit balance in Allowance for Uncollectible accounts was​ $900. Under the aging-of-receivables ​method, the balance in the Allowance for Uncollectible Accounts will be​ ________ after the adjusting entry is made.

​$8,500

On December 31 of the current​ year, James Company has an accounts receivable balance of​ $319,000 before any year-end adjustments. The Allowance for Doubtful Accounts has a​ $1,400 credit balance. The company prepares the following aging schedule for accounts​ receivable: Total Balance ​$319,000 Percent uncollectible What is the Uncollectible-account Expense at December 31 of the current year after​ adjustments?

​$9,050

The three main components of the fraud triangle​ are:

​motive, opportunity and rationalization.

The following account balances were extracted from the accounting records of Thomas Corporation at the end of the​ year: Accounts Receivable $1,105,000 Allowance for Uncollectible Accounts​ (Credit) ​$37,000 Uncollectible-Account Expense ​$60,000 What is the net realizable value of the accounts​ receivable?

$1,068,000

The following item appeared on a balance​ sheet: Accounts​ Receivable, less allowance of​ $28,712 ......$1,435,600 The gross balance in Accounts Receivable before the allowance was deducted​ was:

$1,464,312.

A company that uses the allowance​ method, writes-off a receivable of​ $3,000. Prior to the journal​ entry, the credit balance in the Allowance for Uncollectible Accounts was​ $23,432 and Accounts Receivable were​ $2,009,000. After the entry to write-off the receivable is​ made, the net realizable value of Accounts Receivable will​ be:

$1,985,568.

​Lori's Company has the following​ items: cash in a checking​ account, $7,000; cash in a savings​ account, $10,000; high-grade government securities due in one month​ (purchased last​ month), $3,586; accounts​ receivable, $3,000. How much should appear as Cash and Cash Equivalents on the balance​ sheet?

$20,586

An imprest petty cash fund of​ $700 was established for minor disbursements. At the end of the​ month, the fund included petty cash tickets for the purchase of​ $202 in​ supplies, $77 for​ meals, $82 for​ fuel, and​ $71 for taxi fare. How much cash should be left in the​ fund?

$268

The New Jewelry Store sells mostly costume​ jewelry, but it also sells an expensive watch brand. The owner of the store is concerned about monitoring sales and inventory of the watches. He decided to perform a quick inventory count of the watches on a daily basis as a control procedure. The owner counts 59 watches at the end of business on Thursday. On​ Friday, a shipment of 27 watches is received. The point-of-sale terminal for Friday indicates that 7 watches were sold that day. A quick inventory of watches at the end of business on Friday indicates that 71 watches are on hand. How​ many, if​ any, watches are probably​ stolen?

8

Which of the following are examples of the misappropriation of​ assets?

A.An employee theft of inventory. B.An employee overstates an expense reimbursement request after a company trip. C.A kickback scheme in the purchasing function. D.all of the above YESSIR

What is​ fraud?

A.Fraud is the misappropriation of assets. B.Fraud is untruthful financial reporting. C.Fraud is the intentional misrepresentation of facts made for the purpose of persuading another individual to act in a way that causes injury or damage to that individual. D.all of the above YESSIR

What is the purpose of fraudulent financial​ reporting?

A.Net income and total assets are understated so managers can receive their bonuses. B.Net income and total assets are overstated so managers can receive their bonuses. C.A company can borrow money that would not otherwise be available. D.B and C YESSIR

The​ "tone at the​ top" refers​ to:

A.a component of the control environment. B.a concept that applies only to large corporations. C.owners and top managers behaving honorably to set a good example for employees. D.A and C. YESSIR

All of the following will appear on the bank statement EXCEPT​ for:

A.checks paid and deposits made before the cutoff date on the bank statement. B.book errors. C.checks paid and deposits made after the cutoff date on the bank statement. D. B and C. YESSIR

Smart hiring practices​ include:

A.clear job descriptions. B.background checks. C.proper training and supervision. D.all of the above. YESSIR

Debit cards are being​ used:

A.for package delivery fees. B.in place of petty cash funds. C.for small purchases. D.all of the above. YESSIR

The Sarbanes - Oxley Act of​ 2002:

A.requires public companies to issue in writing that financial reports are accurate and that internal controls are adequate. B.has stiff penalties and prison time for violators of financial statement fraud. C.allows public companies to avoid a review of internal controls. D. A and B YESSIR

The aging - of - receivables method for estimating uncollectible​ accounts:

A.results in an immediate write - off of receivables that are more than 90 days past due. B.focuses on the amount of receivables that will not be collected. C.uses a balance sheet approach. D.B and C. YESSIR

E-commerce pitfalls include all of the following​ EXCEPT:

A.stolen credit card numbers. B.phishing expedition. C.malware. D.encryption. YESSIR

On December​ 2, a customer returned​ merchandise, with a selling price of​ $1,400 purchased on​ account, to a department store. Ignoring cost of goods​ sold, which journal entry should the department store​ prepare? Assume no discounts were offered.

Debit Sales Refunds Payable for​ $1,400 and credit Accounts Receivable for​ $1,400.

The Allowance for Uncollectible Accounts is classified​ as:

a contra - asset account.

​Stelloh's Berry Farm accepted a bank - issued credit card in payment of a​ $1,600 sales transaction.​ Stelloh's bank charges​ 1% to process the transaction. The journal entry to record the sales transaction will include​ (Ignore cost of goods​ sold.):

a debit to Cash for​ $1,584, a debit to Credit Card Discount Expense for​ $16 and a credit to Sales Revenue for​ $1,600.