ACCT 2110 exam 3 Cornett

an internal control activity that separates responsibilities so that no one person handles all the tasks for a particular activity is referred to as segregation/separation of duties

T

the stronger the system of internal control, the higher the accuracy of the company's accounting records and financial reports

T

A check returned by a bank bc the issuer's cash account balance could not cover the check is called

NSF check

Having one employee prepare company checks and sign those checks relates to which internal control activity?

a violation of proper segregation of duties

transportation-in is:

part of the cost of net purchases

A good system of internal control requires that the physical custody of assets be separated from the accounting for those assets. this concept is known as safeguarding of assets and records

F

If a company hires honest employees and its top management acts with integrity, no internal control procedures will be necessary

F

an accounting system must be computerized in order to ensure the company has proper internal control

F

segregation of duties

accounting and cash collections should be properly separated

in the reconciliation of a bank statement, deposits in transit should be

added to the unadjusted bank statement balance

segregation of duties

allowing only certain employees to order goods and services for the company is an example of what internal control procedure

what effects occur on a retail store's accounting equation when it records the purchase of merchandise on account, assuming the use of a perpetual inventory system?

assets and liabilities increase

while preparing a bank reconciliation, which of the following items would be subtracted from the balance per the company's records?

bank service charges

safeguards over assets and records

blank checks should be stored in a locked location

if the amount assigned to ending inventory is incorrect, then:

both the balance sheet and the income statement are affected

the account which records differences between amounts of cash deposited and amounts from the cash register tapes is called

cash over and short

a physical count of inventory is required even though the company uses the perpetual inventory system. this is an example of which of the following internal control activities?

checks on recorded amounts

if a company understates its inventory at the end of the period (ending inventory), what are the effects on cost of goods sold and net income for the current year?

cost of goods sold will be overstated and net income will be understated

checks on recorded amounts

one employee or department should verify the work of another

deposits made by a company but not yet reflected in a bank statement are called

deposits in transits

adequate documents and records

initial entry into the accounting system should be from a consistent source with complete information

when the market value of inventory items has declined below their cost, which method would be the most appropriate in complying with GAAP?

lower of cost or market

it is important that the petty cash custodian

maintain supporting documentation for all payments made from the petty cash fund

according to the Sarbanes-Oxley Act of 2002, who is primarily responsible for establishing and maintaining a system of internal control over the company's financial reporting?

management of the company

which of the following is the correct entry to establish a petty cash fund in the amount of $300

petty cash fund 300 cash 300

Control activities

policies and procedures established by top management to help ensure that the company's accounting system and financial statements are as accurate as possible

strategic risks

possible external threats to the organization's success in accomplishing its goals

which of the following is not generally an internal control activity?

reducing the cost of hiring

pollen company started business at the beginning of 2012. the company selected FIFO for its inventory costing method. Pollen's profits will be maximized in 2012 in a period of:

rising prices

Clearly defined authority and responsibility

specific approval is given by management for the performance activities

at the year-end inventory count, if goods in transit are shipped FOB shipping point, they should be included in the inventory of:

the buyer

if a company has average inventory of $18,750 and cost of goods sold is $150,000, which of these is true?

the company had an inventory turnover rate of 8 times

the cost of goods sold is equal to:

the cost of goods available for sales less ending inventory

At the year-end inventory count, if goods in transit are shipped FOB destination, they should be included in the inventory count of

the seller