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