ACCTG 231 Exam 1 Bayer

Wildcat Floral Company has 2/10, net 30 terms with their wholesale flower vendor. Their most recent invoice was for $1,200, but they do not have enough cash on hand to take the discount, and do not have the option to take a loan from the bank. If they do not take advantage of the discount, how much will Wildcat Floral Company pay their vendor?

$1,200

At May 31, Allegro Company had a general ledger cash balance of $7,400. At the end of May, the bank statement had a balance of $7,500. Deposits in transit amounted to $1,000 and there was a service charge of $10. Outstanding checks totaled $1,110. What is the correct amount of cash?

$7,390

Purple Inc. purchased $76,500 of parts from a vendor who offered credit terms of 3/15, n/45. If Purple Inc. takes advantage of the discount, the amount paid to the vendor will be:

$74,205

If a company borrows $20,000 at an APR of 5% for one year, how much interest is due at the end of one month?

$83.33

In P x R x T what is T for monthly interest

1/12

In P x R x T what is T for daily interest

1/365

In P x R x T what is T for Annual interest

12/12 or 365/365

Wildcat Corporation has purchased raw materials from a vendor and was offered credit terms of 2/10, n/30. Which of the following explains these terms?

2% discount if paid within 10 days

What is the APR associated with a 2/30, n/60 discount offered to customers?

24.8%

Annualized interest rate equation

365/(invoice days-discount days)x discount%/(100%-discount%)

What type of entity could have double taxation?

corporation

What type of entity has limited liability?

corporation

Millie's Pet Company has a vendor that offers a purchase discount with a 12% APR. They recently purchased dog food for $2,000, but do not have enough cash on hand to take advantage of the discount offered. However, they have the ability to borrow money from the bank at an 8% APR. Should Millie's Pet Company borrow money from the bank to take the discount, or wait until they have enough cash on hand to pay the entire bill?

Borrow from the bank to take the discount

FOB shipping point indicates that goods in transit belong to the:

Buyer

Limited liability applies to:

Casual investors in a corporation

Quinter, Inc., a small company only has one accountant. This person performs all custody, recording and authorization functions for the business. What is the term for an alternative control that can be put into place by the owner of Quinter, Inc. to make up for the lack of separation of incompatible duties?

Compensating controls

Which of the following is NOT correct based on a purchase term 3/15, net 60?

Due in 15 days

There were only 30 tubs of ice cream to be sold, but the listing said 38. Which qualitative characteristic does this listing lack?

Faithful representation

All companies are required to follow GAAP

False

True/False: Expense-Revenue=Profit

False

True/False: In the bank reconciliation O/S checks and DIT's are adjustments made to the bank.

False

True/False: Internal controls prevents all theft/fraud from occurring

False

Throughout history, business transactions have become more complex over time. As a result, accounting has:

evolved over time to meet user needs

If information contains errors, it is not

faithfully represented

Internal control is used by companies to prevent all frauds from occurring.

false

The goal of a bank reconciliation is to prevent fraud.

false

Which of the following is an external stakeholder in a supermarket?

he company which supplies the baked goods for the bakery

All the checks used by Graphics, Inc. to pay its bills are prenumbered. This is an application of which of the following internal controls:

maintaining adequate documents and records

If something could affect a users decision, it is called?

material

Accounting concept: Historical cost

measure things at todays cost

A deposit in transit, or DIT, is one that:

Has not cleared the bank

An outstanding check is one that?

Has not cleared the bank

Accounting Concept: Business Entity

Keep your personal affairs separate from the business

What is NOT part of the revenue cycle?

Making products

Internal controls limit which of the following in the fraud triangle?

Opportunity

What is P x R x T?

Principal, Rate, Time

Which of the following represents the profit equation?

Profit = Revenue - Expense

Which of the following is not part of the revenue process?

Receive goods and services

What is earned during the revenue cycle?

Revenue

Determining the credit and payment policies for customers is part of the:

Revenue process

What is the profit definition?

Revenue-Expense

Who owns the goods until they with FOB destination terms?

Seller

What type of entity is the easiest to form?

Sole proprietorship

What type of entity(ies) can have one owner?

Sole proprietorship, corporation

Which of the following is a type of fraud that a bank reconciliation can detect?

Stolen Deposits

Cabela's had $105,350 in Visa and Discover Card sales, $45,391 in store card sales and $35,624 in cash and check sales. Visa and Discover have a 3% interchange fee. Which of the following is true about Cabela's receipt of cash?

The 3% interchange fee will be deducted from the amount of cash that Cabela's receives from Visa and Discover

A company should borrow from a bank when:

The bank APR is lower than the purchase discount APR

When completing a two-column bank reconciliation for January, the accounting clerk noticed an error for a deposit made in January. While the clerk recorded an $1,000.00 deposit in the accounting records, the bank recorded a $100.00 deposit in the bank account. After double checking the deposit information, the clerk realized that the accounting records were wrong and the bank recorded the deposit correctly. Which of the following is true about the January bank reconciliation?

The book balance must be reduced by $900

Which of the following is NOT an example of a for profit company?

red cross

The controller of Allitron, Inc. is one of two individuals in the company allowed to sign checks. This is an application of which of the following internal controls:

requiring proper authorization

Which of the following reflects a weakness in the internal control for cash?

The person receiving cash in the mail makes out the deposit ticket, deposits the cash, and then records the deposit in the accounting records.

Which is NOT the goal of the bank reconciliation?

To prevent fraud

True/False: The books will be updated for amounts on the bank statement ntot the book

True

Accounting concept: Monetary unit

US, Aussie dollars, Euros

Accounting concept: Materiality

What could influence a users decision

When is a sale earned/recognized by the seller with FOB shipping terms?

When shipped

Accounting concern: Going concern

are we worried the business WON'T continue in the future

Which type of business may be owned by one individual?

both a sole proprietorship and a corporation

Accounting concept: periodicity

break the business into time segments (annual, quarterly, monthly)

The owner of a dry cleaning business maintains separate checkbooks for his business and his personal affairs. This best describes an application of the:

business entity concept

The bookkeeper who records cash receipts also deposits daily cash receipts at the bank on his way home from work. This is a violation of which of the following characteristics of good internal control:

separating incompatible duties

Accounting is...

the language of buisness

Accounting can be defined as financial communication, or the language of business.

true