Financial Accounting before test 2

Accounts receivable are normally classified

in the balance sheet as assets.

When a product or service is delivered to a customer that previously paid in advance, the delivery is recorded as: A debit to a revenue and a credit to a liability account. A debit to a revenue and a credit to an asset account. A debit to an asset and a credit to a revenue account. A debit to a liability and a credit to a revenue account.

A debit to a liability and a credit to a revenue account.

When a customer pays in advance for a product or service, the advance payment received by the company is recorded as: A debit to an asset and a credit to a liability account. A debit to a revenue and a credit to an asset account. A debit to an asset and a credit to a revenue account. A debit to a liability and a credit to a revenue account.

A debit to an asset and a credit to a liability account.

When an account previously written off is collected in full, which is required to ensure the accounting for the complete payment history of the customer? An entry to reinstate the account receivable and an entry to record payment. An entry to record payment and an entry to record bad debt expense. An entry to reinstate the account receivable and an entry to adjust bad debt expense. An entry to adjust net sales and an entry to adjust bad debt expense.

An entry to reinstate the account receivable and an entry to record payment.

Which of the following is reported as a current liability? Notes payable due in two years. Notes payable due in 15 months. Current portion of long-term debt. Unused line of credit.

Current portion of long-term debt.

Effective internal control over cash requires segregation of duties. Which of the following duties should be segregated? Depositing checks into the bank and recording receipts in the accounting records Accepting credit cards and accepting cash Opening the mail and deposit of checks in the bank Opening the mail and making a list of checks received

Depositing checks into the bank and recording receipts in the accounting records Opening the mail and deposit of checks in the bank

Why is it often easy for top level management to commit fraud? Multiple select question. They know that the firm will not be audited. Fewer internal controls may be in place at that level. They can override the internal control system. Subordinates feel intimidated and may not report it.

Fewer internal controls may be in place at that level. They can override the internal control system. Subordinates feel intimidated and may not report it.

Gross Profit

Gross profit = sales-cost of goods sold.

When prices increase, the ___________________ inventory method provides the best matching of revenue and expenses.

LIFO

What type of companies recognize revenues when they sell inventory to customers? Manufacturing companies Service companies Merchandising companies

Manufacturing companies Merchandising companies

Which of the following is classified as part of the control environment? Multiple choice question. Policies and procedures that help ensure that managements' directives are followed Overall ethical tone of the organization with respect to internal control Formal procedures for reporting control deficiencies Identification and analysis of internal and external risk factors

Overall ethical tone of the organization with respect to internal control

Which of the following costs should be capitalized in the costs of acquiring a building? Multiple select question. Insurance on the building Current year property taxes Remodeling building Realtor commissions Legal fees to obtain title

Remodeling building Realtor commissions Legal fees to obtain title

Which of the following are expenditures for assets subsequent to acquisition? Multiple select question. Freight charges Repairs and maintenance Improvements Additions

Repairs and maintenance Improvements Additions

Which of the following methods are not used for inventory costing? (Select all that apply.) Simple-average Specific identification NIFO Weighted-average LIFO FIFO

Simple-average NIFO

Which of the following are commonly used depreciation methods? Multiple select question. Straight-line Value-based Declining-balance Activity-based Increasing-balance

Straight-line Declining-balance Activity-based

At year end, CurlZ Inc.'s inventory consists of 100 bottles of CleanZ with a cost of $1, and a selling price of $0.80 per bottle. It also has 100 boxes of DyeZ with a cost of $10, and a selling price of $11 per box. Using the lower of cost and net realizable value method, the year-end Inventory balance should include which of the following amounts? Multiple select question. The selling price of $80 for the CleanZ bottles. The cost of $1,000 for the DyeZ boxes. The selling price of $1,100 for the DyeZ boxes. The cost of $100 for the CleanZ bottles.

The selling price of $80 for the CleanZ bottles. The cost of $1,000 for the DyeZ boxes.

Identify the likely disadvantages of extending credit to customers. (Select all that apply.) Multiple select question. Lower sales revenue Lower net income Uncollectible accounts Delay in collecting accounts

Uncollectible accounts Delay in collecting accounts

Consistent with International Financial Reporting Standards, which of the following cost flow assumptions are currently permitted? Multiple select question. Weighted-average First in, first out Last in, first out

Weighted-average First in, first out

Which of the following accounts would be found in the balance sheet of a manufacturing company? Work in process Merchandise inventory Cost of goods sold

Work in process

In a bank reconciliation, a deposit outstanding is . added to the book balance. deducted from the bank balance. added to the bank balance. deducted from the book balance.

added to the bank balance.

Attorney fees and other costs necessary to secure a patent should be Multiple choice question. added to the patent account. expensed in the period incurred. included in a contra account to the patent. recorded as an extraordinary loss.

added to the patent account.

The types of expenditures that can occur subsequent to an asset's acquisition are Multiple select question. additions. repairs and maintenance. improvements. goodwill.

additions. repairs and maintenance. improvementsG

Depreciation is a process of cost _____________________________, and not a process of valuation.

allocation

Costs incurred to acquire equipment are recognized as a(n) ______________________________, while cost providing a benefit in the current period only are recognized as a(n) __________________________

asset expense

Gerhard Inc. recognizes goodwill related to the acquisition of another company. Gerhard should: Multiple select question. expense goodwill when company is acquired amortize goodwill over its estimated service life capitalize the goodwill when company is acquired periodically test goodwill for impairment

capitalize the goodwill when company is acquired periodically test goodwill for impairment

The purchase price and all costs to bring an asset to its desired condition and location for use should be ______. Multiple choice question. expensed accrued capitalized

capitalized

Inventory Turnover Ratio

cost of goods sold/average inventory

The income statement approach for estimating bad debts focuses on Multiple choice question. average accounts receivable. current year's credit sales. total sales. end-of-year accounts receivable.

current year's credit sales.

Service companies _______________________ revenues when the service is provided to customers.

earn

The receivables turnover ratio and the average collection period provide information about a company's Multiple choice question. effectiveness in managing receivables amount of net credit sales ability to generate sales

effectiveness in managing receivables

The financial statement effects of recording an allowance for estimated sales returns are that: (Select all that apply.) equity decreases equity increases assets increase net income decreases net income increases assets decrease

equity decreases net income decreases assets decrease

Which of the following may be the result of extending payment periods? Multiple select question. lower gross sales lower cost of goods sold greater required investment in receivables increased gross sales

greater required investment in receivables increased gross sales

Goodwill may only be recognized Multiple choice question. when assets are impaired. in a business acquisition. when a company pays less than fair value for an intangible. when intangible assets are undervalued.

in a business acquisition.

The two categories for intangible assets are Multiple select question. intangibles with finite lives. intangibles with indefinite lives. intangibles with infinite lives. intangibles with undefined lives.

intangibles with finite lives. intangibles with indefinite lives.

A calendar-year-end company that accepts a 3-month interest-bearing note on December 1 must accrue ____________________ revenue on

interest

A purchased intangible is valued at its original cost. Original cost for acquiring a patent would include. Multiple select question. net present value of future cash flows. accretion expense. legal costs to acquire. purchase price. required filing fees.

legal costs to acquire. purchase price. required filing fees.

On November 1, Pepper Corp. sold goods on account to Salt. Pepper agreed to accept a 3-month interest-bearing note from Salt in payment for the goods. Pepper has a December 31 year-end. On February 1, year 2, when the note matures, Pepper's journal entry will include credits to: (Select all that apply.) Multiple select question. notes receivable cash interest payable interest receivable interest revenue

notes receivable interest receivable interest revenue

Land used in a company's___________________________ is classified as property, plant and equipment, while land held solely for the expected increase in value is classified as an ______________________.

operation, investment

The three elements present in the fraud triangle are: opportunity revenge motive rationalization greed

opportunity, motive, rationalization

The estimated selling price of inventory less costs necessary to sell the inventory is referred to as net __________________

realizable value

Which of the following is a discount in the amount to be paid if the customer pays within a specified time period? Sales discount Purchase discount Quantity discount Trade discount

sales discount

Sales to customers in which the customers pay within 30 to 60 days are referred to as (Select all that apply.) nonaccrued sales. deferred sales. sales on account. credit sales.

sales on account. credit sales.

_________________________ value is the amount the company expects to receive for the asset at the end of its service life.

salvage

Glasser Corp. provided $20,000 of services on account. The account that should be credited is Multiple choice question. cash. accounts receivable. accounts payable. service revenue. Correct Answer

service revenue.

The depreciation rate we use under the declining-balance method is a multiple of the ________________-___________________ method

straight lin

Select all that apply Long-term assets are classified as Multiple select question. tangible. current. acquired. intangible.

tangible intangible

Under the Sarbanes-Oxley Act, corporate management is responsible for retention of work papers. analyst's reports. the financial statements. the stock price. internal control.

the financial statements. internal control.

Under the Sarbanes-Oxley Act, corporate management is responsible for (Select all that apply.) Multiple select question. analyst's reports. the financial statements. retention of work papers. internal control. the stock price.

the financial statements. internal control. (corporate management themselves are not required to hold on to the paperwork for 7 years)

Other terms used for an activity-based depreciation method are: Multiple select question. units of output method base depreciation method productivity method units of production method

units of output method units of production method

What requirements for corporate accountability are included in the Sarbanes-Oxley Act? Corporate management must select the auditor Corporate executives may be criminally liable for fraudulent financial statements Corporate management must hire the same audit and consulting firm Corporate executives must personally certify the financial statements

Corporate executives may be criminally liable for fraudulent financial statements Corporate executives must personally certify the financial statements

Which inventory cost flow method most realistically matches the current cost of inventory with the current revenue it produces? Multiple choice question. Specific identification FIFO LIFO Weighted-average

LIFO

Vogel Company maintains its inventory records using the FIFO assumption, but reports its inventory consistent with LIFO. At the end of the year, Vogel converts its inventory balance from FIFO to LIFO by using the Multiple choice question. inventory conversion FIFO adjustment LIFO adjustment

LIFO adjustment

Gross Profit Formula

Net Sales - COGSc

On December 31, 2021, Coolwear Inc. had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $48,400 and $940, respectively. During 2022, Coolwear wrote off $820 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $1,140 at December 31, 2022. Bad debt expense for 2022 would be: $320. $1,140. $820. $1,020.

$1,020.

Norbert Inc. purchases a machine for $21,000 with an estimated service life of three years and estimated salvage value of $1,000. The company utilizes the double-declining balance method. Depreciation expense for the last service year is: (Round to the nearest dollar.) $1,333 $1,555 $2,333

$1,333

If Executive Airways borrows $10 million on April 1, 20X1, for one year at 6% interest, how much interest expense does it record for the year ended December 31, 20X1? Multiple Choice $300,000 $450,000 $150,000 $600,000

$450,000

On November 1, 20X1, a company signed a $200,000, 12%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 20X2. What is the amount of interest expense to report in 20X2? $0 $12,000 $8,000 $24,000

$8,000

Average Inventory Formula

(Beginning Inventory + Ending Inventory) / 2

A trademark registered with the U.S. Patent and Trademark Office protects the trademark from use by others for a renewable period of Multiple choice question. 5 years. 70 years. 10 years. 50 years.

10 years

Payment for credit sales are typically due in _____ to _______ days

30-60

The formula for average collection period is Multiple choice question. 365 divided by the receivables turnover ratio. 365 divided by net credit sales. net credit sales divided by average accounts receivable. 365 divided by average accounts receivable.

365 divided by the receivables turnover ratio.

average days in inventory

365/inventory turnover ratio

Average Collection Period

365/receivables turnover ratio

A company pays for a purchase with a credit card. What is the effect of this purchase on the accounts? A revenue account will increase Accounts payable will increase Inventory will decrease An expense account will decrease

Accounts payable will increase

Which of the following is not a current liability? Notes payable due in six months. Current portion of long-term debt. An unused line of credit. Deferred revenue to be earned in nine months.

An unused line of credit.

Which of the following considerations may influence managers' choice of the FIFO inventory cost flow assumption for a company that experiences rising prices? Decreasing the tax liability Compensation/bonus tied to reported income Meeting earnings targets Increases stock prices

Compensation/bonus tied to reported income Meeting earnings targets Increases stock prices

Which of the following concepts or principles is especially relevant to the lower of cost and net realizable value rule? Multiple choice question. Periodicity Going concern Full disclosure Conservatism

Conservatism

Joyce Corp. uses the percentage-of-receivables method to account for bad debt expense. Joyce determines that a customer account of $20,000 should be written off as uncollectible. The write off of the account will include which of the following entries? Credit to Accounts Receivable Credit Allowance for Uncollectible Accounts Debit Bad Debt Expense Debit to Allowance for Uncollectible Accounts

Credit to Accounts Receivable Debit to Allowance for Uncollectible Accounts

Travel Planners, Inc. borrowed $5,000 from First State Bank and signed a promissory note. What entry should Travel Planners record? Debit Cash, $5,000; Credit Notes Receivable, $5,000. Debit Notes Receivable, $5,000; Credit Cash, $5,000. Debit Cash, $5,000; Credit Notes Payable, $5,000. Debit Notes Payable, $5,000; Credit Cash, $5,000.

Debit Cash, $5,000; Credit Notes Payable, $5,000.

On March 5, Oak Corp. provided services on account to Pine. Oak agreed to accept a $100,000, 8%, 6-month interest-bearing note from Pine in payment for the services. The entry required on Oak's books on March 5 would require which of the following entries? Debit Accounts Receivable $100,000; credit Service Revenue $100,000. Debit Notes Receivable $108,000; credit Service Revenue $108,000. Debit Notes Receivable $102,000; credit Service Revenue $102,000. Debit Notes Receivable $100,000; credit Service Revenue $100,000.

Debit Notes Receivable $100,000; credit Service Revenue $100,000.

Warner Corp. sells goods on account for $10,000 on April 2. On April 20, the customer returns $3,000 of the merchandise. The customer has not yet paid for any of the goods. What is the entry Warner will make on April 20 when the goods are returned? Debit Sales Returns; credit Allowance for Uncollectible Accounts. Debit Accounts Receivable; credit Allowance for Sales Returns. Debit Sales Returns; credit Accounts Receivable. Debit Bad Debt Expense; credit Accounts Receivable.

Debit Sales Returns; credit Accounts Receivable.

Maier Company purchases inventory from Kunze Corporation and debits inventory and credits accounts payable to record the transaction. Which of the following journal entries would Kunze make to record the sale? Multiple choice question. Debit accounts receivable, credit cost of goods sold Debit accounts receivable, credit sales revenue Debit sales revenue, credit accounts payable Debit sales revenue, credit accounts receivable

Debit accounts receivable, credit sales revenue

What is the first issue that needs to be addressed in order to properly report tangible and intangible assets? Multiple choice question. Determining the amounts to be included in the assets' initial cost How to record the disposal of the assets How to recognize additional costs incurred during the assets' service life The method for expensing the cost of the assets

Determining the amounts to be included in the assets' initial cost

Which of the following items are intangible assets? Land Patent Equipment Copyright Trademark

Patent Copyright Trademark

Which of the following are preventive controls? Physical controls Performance reviews Reconciliations Separation of duties

Physical controls Separation of duties

Which of the following are long-term tangible assets? Property Accounts receivable Equipment Copyright Trademark

Property Equipment

The acronym PCAOB stands for Multiple choice question. Public Company Accounting Oversight Board. Personal Corporations Accountability Oversight Board. Preventing Conflict of Accounting Oversight Board. Public Corporations Act Operating Board.

Public Company Accounting Oversight Board.

Which of the following costs are recognized in work in process for a manufacturing company? Multiple select question. Raw materials Interest expense Overhead Cost of goods sold Direct labor

Raw materials Overhead Direct labor

Net revenues is calculated as total revenues minus which of the following items? Allowance for uncollectible accounts Sales discounts Sales allowances Sales returns Accounts receivable

Sales discounts Sales allowances Sales returns

The weighted average cost method assumes that cost of goods sold consists of the most recently purchased units. a mixture of all the goods available for sale. the oldest units in inventory.

a mixture of all the goods available for sale.

Jan purchases a piece of land and immediately tears down an old building. The proceeds from selling the salvaged materials should be recognized as: Multiple choice question. a reduction in the cost of the purchased land a gain on disposal of the old building a reduction in the cost of a future building an addition to the cost of the purchased land

a reduction in the cost of the purchased land

The percentage-of-receivables method of estimating bad debt applies ____ to _____. various percentages; total sales a single percentage; total sales various percentages; accounts receivable a single percentage; accounts receivable

a single percentage; accounts receivable

On January 1, 20X1, Claire Corp. purchases a patent. One month after acquiring the patent, Claire paid $3,000 in legal fees to successfully defend its right to the patent. The $3,000 should be: Multiple choice question. capitalized as Legal Asset added to the Patent account expensed

added to the Patent account

The journal entry to record the amortization for a patent would include a debit to _________________ ________________ and credit to __________________

amortization expense patent

For accounting purposes, depreciation is the selling price of an asset. an allocation of a cost of an asset. a decline in value of an asset.

an allocation of a cost of an asset.

Because the future benefits of research and development costs are uncertain, FASB requires that research and development costs be treated as Multiple choice question. a liability on the balance sheet. a contra asset on the balance sheet. an expense on the income statement. an asset on the balance sheet.

an expense on the income statement.

Using the perpetual inventory system, what is the effect of a sale of inventory on assets? Multiple select question. assets decrease by the sales price of the inventory assets decrease by the cost of the inventory assets increase by the sales price of the inventory assets increase by the cost of the inventory

assets decrease by the cost of the inventory assets increase by the sales price of the inventory

For a typical credit sale, the seller records revenue when the contract is signed. when cash is collected. when all expenses are estimated. at the point of delivery.

at the point of delivery.

The PCAOB sets standards for Multiple choice question. investment brokers. management recruiting. audited financial reports. company expenses.

audited financial reports.

Management's ability to collect cash from customers in a timely manner can be evaluated using these ratios: Multiple select question. profit margin gross margin ratio average collection period receivable turnover ratio

average collection period receivable turnover ratio

Two important ratios that help in understanding a company's effectiveness in managing receivables are the: Multiple select question. average collection period gross receivable ratio receivable turnover ratio receivables profit margin

average collection period receivable turnover ratio

The original cost of the asset less the accumulated depreciation is the ______________ _____________________of the asset.

book value

When a company adjusts its own FIFO inventory records at year-end to a LIFO basis for financial statements, the company must: Multiple select question. debit inventory credit cost of goods sold credit inventory debit cost of goods sold debit LIFO adjustment credit LIFO adjustment

credit inventory debit cost of goods sold

The income statement approach for estimating bad debts uses a percentage of Multiple choice question. credit sales plus cash sales. net accounts receivable. credit sales. allowance for uncollectible accounts.

credit sales

When a business provides services to a customer, and the customer promises to pay later, this is referred to as

credit sales.

The formula to calculate the depreciation for the units-of-production method or activity-based depreciation, is ((cost - residual value)/total estimated production) x ______. Multiple choice question. current-year activity or production total activity or production gross profit percentage historical cost

current-year activity or production

Freeze Corporation uses the lower of cost or net realizable value method to write down inventory. Freeze determines that the inventory should be written down by $1,000. The effect on the financial statements is to: Multiple select question. decrease assets increase assets decrease stockholders' equity increase stockholders' equity increase net income decrease net income

decrease assets decrease stockholders' equity decrease net income

The Work-in-Process inventory account typically includes which costs? (Select all that apply.) Multiple select question. inventory storage costs direct labor raw materials indirect manufacturing costs

direct labor raw materials indirect manufacturing costs

Which of the following effectively mitigate the natural risks of running any business without being capable of completely eliminating the risk? (Select all that apply.) continuous budgeting ethical employees delegation of duties effective internal control

ethical employees effective internal control

Under IFRS rules for R&D, the costs of research-related activities are recorded as ___________________, while the costs of development-related activities are recorded as __________________ _______________________

expense intangible asset

For a patent developed internally, the research and development costs are Multiple choice question. capitalized into the cost of the patent. recorded as patent amortization expense. expensed as incurred. recorded as a contra-asset to the patent.

expensed as incurred.

True or false: Depreciation is a valuation method for property and equipment.

false`

A subsequent expenditure for an asset increases the future benefits of the asset if it Multiple select question. increases the operating efficiency of the asset. repairs and maintains the asset in working order. extends the asset's service life. increases the quality of the goods or services produced by the asset.

increases the operating efficiency of the asset. extends the asset's service life. increases the quality of the goods or services produced by the asset.

In a LIFO inventory system, inventory costs shown in the balance sheet may be distorted because they may represent costs Multiple choice question. that have not yet been incurred. incurred solely on the balance sheet date. incurred several years earlier.

incurred several years earlier.

Self-constructed buildings include which of the following costs? Multiple select question. interest costs incurred during construction material costs incurred for construction of building labor costs incurred for construction of building costs incurred related to company's administrative and support staff

interest costs incurred during construction material costs incurred for construction of building labor costs incurred for construction of building

Items held for sale in the normal course of business are referred to as

inventory

The ______ method of valuing inventory was developed to avoid reporting inventory at an amount that is ______ than the benefits it can provide. Multiple choice question. cost-benefit; greater cost-benefit; smaller lower of cost and sales revenue; greater lower of cost and net realizable value; smaller lower of cost and net realizable value; greater lower of cost and sales revenue; smaller

lower of cost and net realizable value; greater

An estimated residual value ________________ the total amount of depreciation recorded over an asset's service life.

lowers

Expenditures subsequent to acquisition may be properly capitalized when they increase the asset's service life or increase its productive capacity. However, most companies set thresholds for capitalizing these expenditures based on relevance. materiality. objectivity. neutrality.

materiality.

The type of income statement that reports a series of subtotals such as gross profit, operating income, and income before taxes is a ______ income statement. Multiple choice question. current single-step multiple-step classified

multistep

The initial valuation of purchased intangible assets requires that the intangible asset is recorded at Multiple choice question. net realizable value. lower-of-cost-or-market. net present value. original cost.

original cost

Ronald Corporation purchases inventory with terms FOB destination. The shipping costs are $300. The shipping costs are treated as a selling expense. paid by the supplier. Deducted from Ronald's inventory.

paid by the supplier.

Freight-in on inventory purchases is typically recognized as Multiple choice question. cost of goods sold when paid. part of the cost of purchasing inventory. selling and administrative expenses.

part of the cost of purchasing inventory.

A(n)__________________ is the exclusive right to manufacture a product or use a process granted for a period of ______________ years.

patent twenty

Internal control consists of plans to (Select all that apply.) report misuse of company assets to investors. provide accurate and reliable accounting information. report management errors to the police. safeguard company assets.

provide accurate and reliable accounting information. safeguard company assets.

"Net credit sales" refers to credit sales net of: Multiple select question. returns bad debt allowances discounts

returns allowances discounts

Average days in inventory measures Multiple choice question. average gross profit for the year. the average time the inventory is held. how many times the average inventory was sold per year. average time from the sale of inventory to the collection from customers.

the average time the inventory is held.

Section 404 of the Sarbanes Oxley Act requires management and auditors to document and assess the company's internal control procedures. conflicts of interest. auditors' independence standards. nonaudit services provided to the company.

the company's internal control procedures.

The depreciable cost is the cost of the asset minus the residual value. cost of the asset plus the residual value. historical cost less accumulated depreciation. cost of the asset minus depreciation expense.

the cost of the asset minus the residual value.

A bank reconciliation is a procedure used to determine if the cash balance in the bank statement equals purchases for the period. the total cash debits recorded in the accounting period. the cash flows from operating activities. the ending balance of cash in the accounting records.

the ending balance of cash in the accounting records.

A bank reconciliation is a procedure used to determine if the cash balance in the bank statement equals the total cash debits recorded in the accounting period. the cash flows from operating activities. purchases for the period. the ending balance of cash in the accounting records.

the ending balance of cash in the accounting records.

Kilian Company's inventory balance at the end of the year does not include $10,000 of inventory that was stored in a separate warehouse and accidentally excluded from the physical count. If the error is not discovered until the following year, the financial statement effect in the current year will be: Multiple choice question. the financial statements are correct understated assets, retained earnings, and net income understated assets; overstated retained earnings and net income

understated assets, retained earnings, and net income

Other terms used for an activity-based depreciation method are: Multiple select question. units of production method base depreciation method productivity method units of output method

units of production method units of output method

Which of the following items are initially recorded as an expense on the income statement? Multiple select question. Advertising costs Research and development costs Purchased intangibles

Advertising costs Research and development costs

If the estimate of uncollectible accounts at the end of the current year is too high, which of the following is true in the following year? Multiple Choice Cash collections from customers will be greater than expected. The balance of Allowance for Uncollectible Accounts will be a credit prior to its year-end adjustment. The amount reported for Bad Debt Expense will be less than the ending balance of Allowance for Uncollectible Accounts after its year-end adjustment. All of the other answers are true in the following year.

All of the other answers are true in the following year.

Margot Company constructs a new building that will replace its current office building. In addition to construction materials and labor, which of following costs incurred during the construction period should be included in the cost of the new building? Multiple select question. Depreciation on existing office building Architect fees Opportunity costs Interest costs Construction related overhead costs

Architect fees Interest costs Construction related overhead costs

Under the allowance method, which of the following does not change the balance in the Accounts Receivable account? Multiple Choice Returns on credit sales. Collections on customer accounts. Bad debt expense adjustment. Write-offs.

Bad debt expense adjustment.

The allocation of the cost of a tangible fixed asset is referred to as , _________________________________ whereas the allocation of the cost of an intangible asset is referred to as _________________________________

Blank 1: depreciation Blank 2: amortization

In a business combination, goodwill is recognized to the extent that the purchase price of the company is ___________________ than the _______________________ value of the acquired company's identifiable net assets.

Blank 1: greater, larger, higher, more, or exceeds Blank 2: fair or market

What is the accounting treatment for goodwill acquired in a business acquisition? Multiple select question. Capitalize the goodwill Test for impairment Amortize over its estimated life Expense goodwill at date of acquisition Do not amortize

Capitalize the goodwill Test for impairment Do not amortize

Which items are considered changes in estimates that would be treated on a prospective basis in the current period and future periods? Change in residual value of an asset Change in service life of an asset Forgetting to record depreciation expense in the previous period Incorrectly capitalizing an item when it should be expensed

Change in residual value of an asset Change in service life of an asset

The service life of an intangible asset may be limited by what types of provisions? Multiple select question. U.S. GAAP Contractual Regulatory Legal

Contractual Regulatory Legal

Sarah purchases land to be used for a new storage facility. Which of the following items are capitalized in the cost of land? Multiple select question. Costs to remove an old building Legal fees to secure title Commissions Current year's property taxes

Costs to remove an old building Legal fees to secure title Commissions

Larry purchases land to be used for a new corporate headquarters. Which of the following items are capitalized in the cost of land? Multiple select question. Costs to remove an old building Legal fees to secure title Current year's property taxes Grading the land Title insurance

Costs to remove an old building Legal fees to secure title Grading the land Title insurance

Rollins Corp. purchases inventory by paying the supplier $1,000 with a credit card. Recording this transaction will require which of the following? Credit cash $1,000 Credit accounts payable $1,000 Debit accounts payable $1,000 Debit cash $1,000

Credit accounts payable $1,000

Josh Corporation uses the perpetual inventory system. Josh sells goods to a customer on account for $2,000. The cost of goods sold is $1,500. What is the entry required to record the expense of the inventory sold? Multiple choice question. Debit Cost of Goods Sold $1,500; credit Sales Revenue $1,500 Debit Cost of Goods Sold $1,500; credit Inventory $1,500 Debit Accounts Receivable $2,000; credit Inventory $2,000 Debit Inventory $1,500; credit Cost of Goods Sold $1,500

Debit Cost of Goods Sold $1,500; credit Inventory $1,500

Pearce Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $120,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $50,000 and a book value of $32,000. The journal entry to record this exchange will include which of the following entries? Multiple select question. Debit accumulated depreciation $40,000 Debit equipment $32,000 Debit loss on exchange $30,000 Debit equipment $50,000 Credit accumulated depreciation $40,000 Credit equipment $120,000

Debit accumulated depreciation $40,000 Debit loss on exchange $30,000 Debit equipment $50,000 Credit equipment $120,000

On December 30, 20X1, Glaze Corp. disposed of equipment with a historical cost of $50,000 and accumulated depreciation of $30,000. The equipment was sold for $10,000 cash. The journal entry to record the sale will include which of the following entries? Debit to accumulated depreciation $30,000 Debit to loss on sale of asset $10,000 Credit to accumulated depreciation $30,000 Debit to cash $10,000 Credit to cash $10,000 Debit to equipment $20,000 Credit to equipment $50,000 Credit to loss on sale of asset $10,000

Debit to accumulated depreciation $30,000 Debit to loss on sale of asset $10,000 Debit to cash $10,000 Credit to equipment $50,000

Which of the following increases an employer's payroll costs? FICA withholding from the employee. State income tax. Federal income tax. Employer's FICA contribution.

Employer's FICA contribution.

Which of the following are long-term tangible assets? Multiple select question. Accounts receivable Equipment Property Copyright Trademark

Equipment Property

Which of the following statements describe the accounting rules for a franchise agreement? Multiple select question. Expense periodic payments as incurred. Capitalize the periodic payments each year. Expense the cost of the franchise in the year of acquisition. Amortize the cost of the franchise over its life. Capitalize the cost of the franchise.

Expense periodic payments as incurred. Amortize the cost of the franchise over its life. Capitalize the cost of the franchise.

If sales returns are incorrectly treated as expenses, what are the effects on the financial statements? (Select all that apply.) Expenses are overstated. Assets are overstated. Revenues are overstated. Liabilities are understated.

Expenses are overstated. Revenues are overstated.

Which of the following is paid by both the employee and the employer? FICA taxes. Federal unemployment taxes. State unemployment taxes. Personal income taxes.

FICA taxes.

Which of the following methods are available for costing inventory? (Select all that apply.) Multiple select question. FIFO Specific identification Simple-average Weighted-average NIFO LIFO

FIFO Specific identification Weighted-average LIFO

True or false: Income tax expense may be disclosed either on the income statement or in the notes to the financial statements.

False Reason: Income tax expense must be disclosed as a separate line item on the income statement.

Which of the following costs are capitalized as an asset for an internally developed patent? Multiple select question. Filing fees Legal fees Research and development

Filing fees Legal fees

Which of the following items may be classified as nonoperating revenues and expenses for a company that manufactures televisions? Multiple select question. Selling expenses Gain from sale of land Interest expense Interest revenue

Gain from sale of land Interest expense Interest revenue

Which of the following items are included in calculating operating income? (Select all that apply.) Gain on the sale of investments General and administrative expenses Utility expense Cost of goods sold

General and administrative expenses Utility expense Cost of goods sold

Which of the following are expenditures for assets subsequent to acquisition? Multiple select question. Improvements Additions Freight charges Repairs and maintenance

Improvements Additions Repairs and maintenance

What costs are capitalized as an intangible asset for a franchise? Multiple choice question. Initial payment for the franchise. Periodic payments for services by the franchisor. Interest on the note payable to purchase the franchise.

Initial payment for the franchise.

Because prices change over time, costs reported for these accounts tend to differ among inventory cost methods. Multiple select question. Sales Revenue Inventory Cost of Goods Sold Purchases

Inventory Cost of Goods Sold

Which of the following contributes to the importance of properly determining the cost of inventory and the cost of goods sold? Inventory may be the largest asset on some companies' balance sheets Cost of goods sold tends to be over or understated Cost of goods sold may be the largest expense on some companies' income statement Inventory is commonly reported incorrectly

Inventory may be the largest asset on some companies' balance sheets Cost of goods sold may be the largest expense on some companies' income statement

Which statement is true about the straight-line method of depreciation? Multiple choice question. It is the preferred method for companies expecting to use the asset more in its early years of life. It recognizes expense proportionately with the amount of use of the asset. It allocates an equal amount of depreciation to each year the asset is used. It is an accelerated method of depreciation.

It allocates an equal amount of depreciation to each year the asset is used.

Which information regarding the receivables turnover ratio is true? Multiple select question. It shows the number of times during a period that the average accounts receivable balance is collected. The lower the ratio, the better the company is performing. It provides an indication of a company's efficiency in collecting receivables. It shows the number of days it takes to collect accounts receivable.

It shows the number of times during a period that the average accounts receivable balance is collected. It provides an indication of a company's efficiency in collecting receivables.

Which information regarding the receivables turnover ratio is true? Multiple select question. It shows the number of times during a period that the average accounts receivable balance is collected. The lower the ratio, the better the company is performing. It shows the number of days it takes to collect accounts receivable. It provides an indication of a company's efficiency in collecting receivables.

It shows the number of times during a period that the average accounts receivable balance is collected. It provides an indication of a company's efficiency in collecting receivables.

The definition of inventory includes which of the following items? Items used currently in the production of goods to be sold Items currently in production for future sale Items held for resale Items held for use or disposal

Items used currently in the production of goods to be sold Items currently in production for future sale Items held for resale

Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest ending inventory? Multiple choice question. FIFO Weighted-average LIFO

LIFO

The ________________________ cost flow assumption more realistically matches the current cost of inventory with current sales revenue.

LIFO or last-in-first-out

Which of the following are tangible assets? Multiple select question. Copyrights Land improvements Building Trademarks

Land improvements Building

Which of the following are classified as receivables? Loans by a company to other entities Inventory purchased on account Interest due from loans to customers Investments

Loans by a company to other entities Interest due from loans to customers

Which of the following are classified as receivables? Loans by a company to other entities Investments Inventory purchased on account Interest due from loans to customers

Loans by a company to other entities Interest due from loans to customers

Which of the following are components of internal control? Monitoring Risk assessment Control environment Accounting standards Control activities

Monitoring Risk assessment Control environment Control activities

What are the financial statement effects of using the declining balance method of depreciation as compared to the straight-line method in the first year of an asset's life? Multiple select question. Net income is lower. Total assets are lower. Net income is higher. Total assets are higher. Correct Answer

Net income is lower. Total assets are lower.

Which of the following costs should be capitalized in the costs of acquiring a building? Multiple select question. Insurance on the building Current year property taxes Realtor commissions Remodeling building Legal fees to obtain title

Realtor commissions Remodeling building Legal fees to obtain title

Bern Company has 100 units costing $200 in beginning inventory. During the year, the company purchases 900 additional units for $1,980. At the end of the year, 200 units remain unsold. If Bern Company utilizes the LIFO method, cost of goods sold will be Multiple choice question. $1,760. $1,744. $1,980.

Reason: ($1,980/900 x 800) = $1,760

Which of the following are detective controls? . Reconciliations Performance reviews Audits Physical controls Proper authorization

Reconciliations Performance reviews Audits

Which of the following items should be capitalized in the cost of equipment? Multiple select question. Sales tax Legal fees to establish title Installation and testing of equipment Insurance paid in advance for the first year of use Freight to deliver the equipment

Sales tax Legal fees to establish title Installation and testing of equipment Freight to deliver the equipment

Which of the following represent reasons why managers closely monitor inventory levels? Multiple select question. To increase the average days in inventory. To ensure that sufficient units are available. To minimize costs of inventory write-downs due to obsolete inventory.

To ensure that sufficient units are available. To minimize costs of inventory write-downs due to obsolete inventory.

Which of the following items are intangible assets? Multiple select question. Accounts receivable Trademarks Buildings Land Goodwill

Trademarks Goodwill

Periodically, management should verify that amounts related to the company's physical assets agree with the _________ records.

accounting

the legal right to receive cash from a credit sale and represents an asset of the company.

accounts receivable

Which of the following items are readily available from an inventory account under the perpetual inventory system? Multiple select question. beginning inventory balance individual purchases cost of units sold freight-out sales revenue ending inventory balance

beginning inventory balance individual purchases cost of units sold ending inventory balance

The formula for calculating the double-declining-balance method is Multiple choice question. historical cost less residual value x 2/estimated service life. book value at beginning of year x 2/estimated service life book value at beginning of the year less residual value x 2/ estimated service life. historical cost x 1/service life.

book value at beginning of year x 2/estimated service life

The formula for calculating the double-declining-balance method is Multiple choice question. historical cost less residual value x 2/estimated service life. historical cost x 1/service life. book value at beginning of year x 2/estimated service life book value at beginning of the year less residual value x 2/ estimated service life.

book value at beginning of year x 2/estimated service life

The accounting term for a situation where two or more people act in coordination to circumvent internal controls is

collusion

a ________________ is protected by law and gives the creator of a published work the exclusive rights to reproduce and sell the work for the life of the creator plus 70 years

copyright

Under a perpetual inventory system, the entry to record the return of goods previously purchased on account was recorded with a debit to Accounts Payable and a credit to Inventory. This entry is: incorrect and will cause assets to be understated incorrect and will cause liabilities to overstated incorrect and will cause assets to be overstated correct

correct

Catalina Bookstore pays freight on books shipped to its store. The shipping cost is debited to Inventory. When the books are sold, the freight costs pertaining to the books are included in: Multiple choice question. selling expenses cost of goods sold revenues liabilities

cost of goods sold

Some companies refer to "cost of goods sold" as cost of sales cost of inventory cost of merchandise sold cost of products sold product costs

cost of sales cost of merchandise sold cost of products sold

Recording a write-down of inventory from cost to its lower net realizable value includes: Multiple select question. debit to Inventory credit to Sales Revenue debit to Sales Revenue credit to Inventory debit to Cost of Goods Sold

credit to Inventory debit to Cost of Goods Sold

If a company uses a perpetual inventory system, the entry to record the company's return of goods previously purchased on account includes ______ and _____. (Answer from the viewpoint of the buyer.) . credit to Inventory. debit to Purchase Returns debit to Accounts Payable credit to Accounts Receivable

credit to Inventory. debit to Accounts Payable

The two most common sources of occupational fraud are: financial statement manipulation misuse of company resources employee misrepresentation to outside stakeholders personal tax evasion

financial statement manipulation misuse of company resources

The shipping term FOB stands for Multiple choice question. free on board. free onto buyer. freight over board. freight on board.

free on board

Gerald Corporation purchases inventory FOB shipping point. The shipping costs are $300. The shipping costs are Multiple choice question. treated as a selling expense. included in Gerald's inventory. paid by the supplier.

included in Gerald's inventory.

Combining operating income with non-operating revenues and expenses yields Multiple choice question. operating income net income non-operating income income before income taxes

income before income taxes

A multiple-step income statement reports multiple levels of ________________________

income, earnings, profit, or profitability

Norma Inc. uses the perpetual inventory system. When the company records a sale, it should make entries to: Multiple select question. increase an asset and increase revenue decrease an asset and increase an expense increase an asset and decrease an expense decrease an asset and decrease revenue

increase an asset and increase revenue decrease an asset and increase an expense

The acceptance of credit cards ______ internal control over cash. Multiple choice question. decreases has no impact on increases

increases

On November 1, Pepper Corp. sold goods on account to Salt. Pepper agreed to accept a 3-month interest-bearing note from Salt in payment for the goods. Pepper has a December 31 year-end. On February 1, year 2, when the note matures, Pepper's journal entry will include credits to: (Select all that apply.) Multiple select question. interest receivable notes receivable interest payable interest revenue cash

interest receivable notes receivable interest revenue

A major difference between companies that provide services and companies that manufacture or sell goods is that those that manufacture or sell goods must account for: Multiple choice question. inventory gains and losses revenue operating expenses

inventory

Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must ac count for (Select all that apply.) inventory. liabilities. current assets. cost of goods sold.

inventory cost of good sold

The FASB requires research and development costs to be expensed because Multiple choice question. research and development costs have no future value. the costs of research are greater than the benefits. it is difficult to determine whether costs will result in future benefits.

it is difficult to determine whether costs will result in future benefits.

`The distinction between land and land improvements is that: Multiple choice question. land has an indefinite life land is depreciated and land improvements are not there is no distinction, they are treated the same for accounting purposes land has a definite life

land has an indefinite life

Long-term tangible assets include Multiple select question. land. equipment. goodwill. patents. buildings.

land. equipment. buildings.

In a business acquisition, goodwill equals the purchase price Multiple choice question. less the book value of stock acquired. plus the book value of assets acquired. less the fair value of liabilities of the acquired company. less the fair value of net assets acquired.

less the fair value of net assets acquired.

In times of rising prices, ending inventory determined using the LIFO inventory assumption will be_______________ than ending inventory determined using the FIFO inventory assumption.

lower

The estimated selling price of inventory less any costs of completion, disposal, and transportation is referred to as: Multiple choice question. net sales revenue net realizable value full cost gross profit replacement cost

net realizable value

On a multiple step income statement, the category of revenues and expenses reported immediately after operating income is referred to as _______________________ revenues and expenses.

non-operating

ncome before income taxes is calculated by combining operating income with Multiple choice question. revenues non-operating income operating expenses cost of goods sold

non-operating income

Which of the following costs should be capitalized in the costs of acquiring a building? Multiple select question. purchase price interest on the loan realtor commissions utilities for the building legal fees to obtain title

purchase price realtor commissions legal fees to obtain title

Costs related to manufacturing products typically include Multiple select question. raw materials administrative expense overhead selling expense direct labor

raw materials overhead direct labor

The _____ ratio shows the number of times during a year that the average receivable balance is collected. Multiple choice question. receivables turnover inventory turnover current average collection period

receivables turnover

Preparation of a bank _____________ helps maintain control of cash accounts.

reconcilation

A basket purchase or lump-sum acquisition of assets requires that an allocation is made to each individual asset based on the asset's ______. Multiple choice question. depreciable values residual values relative fair value book values

relative fair value

In a basket or lump-sum purchase of assets, the total acquisition cost is allocated to the individual assets by multiplying the lump-sum purchase price times Multiple choice question. the estimated percentages allocated to each asset. the residual value percentages of each asset. the relative book value percentages of each asset. the relative fair value percentages of each asset.

the relative fair value percentages of each asset.

The inventory turnover ratio directly measures ______. Multiple choice question. the days it takes to sell its average inventory balance how many days it takes to collect its sales of inventory sold on account the times per period the average inventory balance is sold

the times per period the average inventory balance is sold

Straight-line and declining balance methods allocate the cost of a long-term asset based on ___________________________ , while an activity-based method allocates the cost of an asset based on its______________________

time use

A bank statement may not agree with the amount of cash recorded by the company in the cash account because of _____________ and errors.

timing

If a company records a transaction before the bank records the same transaction, this is called a/an ______ difference. reconciliation internal control timing

timing

True or false: The accounting treatment for the cost of copyrights is identical to that of patents.

true

The issues that are important for tangible and intangible assets, include determining: Multiple select question. what amounts to include in the cost how to expense the cost of the asset over its life on which financial statement to record the asset how to record the disposal of the asset

what amounts to include in the cost how to expense the cost of the asset over its life how to record the disposal of the asset

FOB shipping point means title to the goods passes when they are shipped. when they arrive at the destination.

when they are shipped.

FOB destination means title to the goods passes Multiple choice question. when they arrive at the destination. when they are shipped to the customer.

when they arrive at the destination.

__________________________ resell inventory to retail companies or to professional users, whereas retailers sell inventory to end users.

wholesalers

If Speedy Travel, Inc. borrows $50 million on September 1 for one year at 9% interest, how much interest expense should it record by December 31 of that same year? $4.5 million. $3.0 million. $1.5 million. $0.

$1.5 million.

How is income tax reported on a multiple-step income statement? Multiple choice question. As an extraordinary item As a part of operating income Separately before non-operating revenues and expenses Separately after non-operating revenues and expenses As part of cost of goods sold

Separately after non-operating revenues and expenses

Freight-in is Multiple choice question. a selling expense. treated as a miscellaneous expense. included as a cost of inventory.

included as a cost of inventory.

The specific identification method (select all that apply): would be beneficial to a company that makes fine jewelry matches each unit of inventory with its actual cost is not an acceptable method of accounting would be beneficial to a company that makes inexpensive products with high sales volume

would be beneficial to a company that makes fine jewelry matches each unit of inventory with its actual cost

Clarion purchases land and prepares it for use. Which of the following items should be capitalized as land improvements? Multiple select question. Cost of lawn sprinkler system Cost of land Legal fees to acquire land Cost of driveways Cost of sidewalks

Cost of lawn sprinkler system Cost of driveways Cost of sidewalks

Under what circumstances are accelerated depreciation methods most appropriate? Multiple select question. For an asset that is used to produce output and has an estimated life in output. For an asset that will provide greater benefits in earlier years of its life. For an asset that will be used less in the later years of its life. For an asset used evenly throughout its life and the life is measured in years.

For an asset that will provide greater benefits in earlier years of its life. For an asset that will be used less in the later years of its life.

Larry purchases land to be used for a new corporate headquarters. Which of the following items are capitalized in the cost of land? Multiple select question. Grading the land Current year's property taxes Legal fees to secure title Costs to remove an old building Title insurance

Grading the land Legal fees to secure title Costs to remove an old building Title insurance

To calculate the amount in the inventory account, which of the following occurs? Multiple select question. Purchase returns are added to the cost of inventory Purchase discounts are added to the cost of inventory Purchase discounts are subtracted from the cost of inventory Freight-in is deducted from the cost of inventory Freight-in is added to the cost of inventory Selling expense is added to the cost of inventory Purchase returns are subtracted from the cost of inventory

Purchase discounts are subtracted from the cost of inventory Freight-in is added to the cost of inventory Purchase returns are subtracted from the cost of inventory

Weighted-average unit cost is determined by dividing cost of goods available for sale by Multiple choice question. quantity in beginning inventory. quantity in ending inventory. total quantity available for sale. quantity most recently purchased.

total quantity available for sale.

At year end, CurlZ, Inc.'s inventory consists of 200 bottles of CleanZ at $1 per bottle and 100 boxes of DyeZ at $10 per box. The net realizable values are $1.20 per bottle for CleanZ and $8 per box for DyeZ. Using the lower of cost and net realizable value method, CurlZ should report its inventory at: Multiple choice question. $1,000 $1,040 $1200 $1240

1000 Reason: The lower of cost and net realizable value method requires the DyeZ boxes be recorded at the lower selling price of $8 instead of the higher cost of $10. Thus, Inventory equals $1,000 = ((200 bottles x $1) + (100 boxes x $8)).

Lester purchased a new car for $30,000 and depreciated it straight-line over an estimated service life of five years with no residual value. After two years, Lester estimates that the remaining service life of the car is four years. Assuming that Lester continues to apply the straight-line method, depreciation recognized for each of the remaining years will be: Multiple choice question. $6,000 $7,500 $4,500 $5,000

4500

On January 1, year 1, Clem Corp. purchased equipment for $160,000. The equipment has a residual value of $10,000, and has a life of 100,000 hours. Clem uses the activity-based method of depreciation. In year 1, Clem used the machine 2,000 hours, and in year 2, Clem used the machine 3,000 hours. Which of the following statements is true? The maximum depreciation is the $10,000 residual value. Clem must change to straight-line method in year 3. Clem will depreciate the machine for $150,000 over its service life. Clem will depreciate the machine for $160,000 over its service life.

Clem will depreciate the machine for $150,000 over its service life.

On December 30, 20X1, Rocket Corp. disposed of equipment with a historical cost of $100,000 and accumulated depreciation of $70,000. The equipment was sold for $80,000 cash. The journal entry to record the sale will include which of the following entries? Multiple select question. Debit gain on sale of equipment $50,000 Credit cash $80,000 Credit accumulated depreciation $70,000 Credit equipment $100,000 Debit equipment $100,000 Debit cash $80,000 Debit accumulated depreciation $70,000 Credit gain on sale of equipment $50,000

Credit equipment $100,000 Debit cash $80,000 Debit accumulated depreciation $70,000 Credit gain on sale of equipment $50,000

Wall Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $100,000, and its accumulated depreciation at the date of exchange was $60,000. The new asset received had a fair value of $80,000 and a book value of $65,000. The journal entry to record this exchange will include which of the following entries? Credit equipment $100,000 Debit equipment $80,000 Credit accumulated depreciation $60,000 Credit gain on exchange of asset $40,000 Debit accumulated depreciation $60,000 Credit equipment $80,000 Debit equipment $65,000

Credit equipment $100,000 Debit equipment $80,000 Credit gain on exchange of asset $40,000 Debit accumulated depreciation $60,000

The average accounts receivable balance is calculated by: Multiple choice question. adding last year's and this year's ending balances of accounts receivable and dividing the sum by 365 adding last year's and this year's ending balances of accounts receivable and dividing the sum by 2 adding last year's and this year's ending balances of accounts receivable and dividing the sum by 12

adding last year's and this year's ending balances of accounts receivable and dividing the sum by 2

The lower of cost and net realizable value method was developed to Multiple choice question. prevent the company from selling the inventory below its original cost. provide an alternative to the FIFO, LIFO, and weighted-average methods. avoid reporting inventory at an amount that exceeds the benefits it provides.

avoid reporting inventory at an amount that exceeds the benefits it provides.

On December 1, Melinda Corp. performed services on account to Norman. Melinda agreed to accept a 4-month interest-bearing note from Norman in payment for the services. Melinda has a December 31 year-end. On April 1, year 2, when the note matures, Melinda's journal entry will include: (Select all that apply.) Multiple select question. debit to interest receivable credit to interest revenue credit to interest receivable debit to cash debit to interest revenue

credit to interest revenue credit to interest receivable debit to cash

Published financial statements may be incorrect because of lack of external verification. errors. choices available under GAAP. fraud.

errors Fraud

Companies that serve as intermediaries between manufacturers and end users typically are referred to as ____ companies. manufacturing service merchandising intermediary

merchandising

The Sarbanes-Oxley Act requires that lead audit partners are required to rotate every ______ years. 3 5 7 10

5

Which of the following steps are necessary to reconcile the bank balance and the cash account balance. Adjust bank's cash balance Adjust the company's cash balance Record items that reconcile the bank's cash balance Record items that reconcile the company's cash balance

Adjust bank's cash balance Adjust the company's cash balance Record items that reconcile the company's cash balance

Which of the following items are included in cash? Multiple select question. Balance in checking accounts Currency and coins Notes receivable from customers Accounts receivable from customers Checks from customers

Balance in checking accounts Currency and coins Checks from customers

Which of the following items are included in cash? Multiple select question. Notes receivable from customers Balance in checking accounts Currency and coins Checks from customers Accounts receivable from customers

Balance in checking accounts Currency and coins Checks from customers

Select all that apply Which of the following responsibilities are separated in a good internal control system for cash disbursements? Inventory control and accounts payable. Check writing and check signing. Cash disbursement documentation and the accounting recording function. Payroll functions and accounts payable functions.

Check writing and check signing. Cash disbursement documentation and the accounting recording function.

The framework for designing an internal control system is provided by the . Securities and Exchange Commission Act of 1934. Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Financial Accounting Standards Board. Public Companies Accounting Oversight Board (PCAOB).

Committee of Sponsoring Organizations (COSO) of the Treadway Commission.

Who must personally certify the financial statements and company disclosures or risk financial penalties and criminal prosecution for fraudulent misstatements? Multiple choice question. CPA firms who audit the company Board of directors of a corporation SEC staff auditors Corporate executives

Corporate executives

For internal control purposes, risk assessment considers which two types of risk? Investor and creditor risks Internal and external risks Operating and investing risks Current and noncurrent risks

Correct Answer Internal and external risks

The Committee of Sponsoring Organizations (COSO) of the Treadway Commission provided a framework for Multiple choice question. auditing internal control systems. designing an internal control system. preparing useful financial statements. designing fraud-proof accounting system.

Correct Answer designing an internal control system.

Rollins Corp. purchases inventory by paying the supplier $1,000 with a debit card. Recording this transaction will require which of the following? Credit cash $1,000 Credit accounts payable $1,000 Debit accounts payable $1,000 Debit cash $1,000

Credit cash $1,000

Joyce Corp. uses the percentage-of-receivables method to account for bad debt expense. Joyce determines that a customer account of $20,000 should be written off as uncollectible. The write off of the account will include which of the following entries? Credit to Accounts Receivable Debit Bad Debt Expense Debit to Allowance for Uncollectible Accounts Credit Allowance for Uncollectible Accounts

Credit to Accounts Receivable Debit to Allowance for Uncollectible Accounts

Effective internal control over cash requires segregation of duties. Which of the following duties should be segregated? Depositing checks into the bank and recording receipts in the accounting records Accepting credit cards and accepting cash Reason: In retail stores, the same individual will accept both cash and credit cards. Opening the mail and deposit of checks in the bank Opening the mail and making a list of checks received

Depositing checks into the bank and recording receipts in the accounting records Opening the mail and deposit of checks in the bank

Which of the following led to the passage of the Sarbanes-Oxley Act of 2002? Multiple choice question. High profile accounting scandals during the early 2000s The likely adoption of global accounting standards in the U.S. The increasing incidence of financial statement misstatements The increasing complexity of U.S. GAAP

High profile accounting scandals during the early 2000s

Which of the following are provisions included in the Sarbanes-Oxley Act? Require auditors to retain work papers for 7 years. Require that audit firms are hired by the audit committee of the board of directors. Require that the auditors are responsible for preparing the financial statements. Require that the SEC audit publicly traded companies.

Require auditors to retain work papers for 7 years. Require that audit firms are hired by the audit committee of the board of directors.

Which of the following are provisions included in the Sarbanes-Oxley Act? Require that the auditors are responsible for preparing the financial statements. Require that audit firms are hired by the audit committee of the board of directors. Require auditors to retain work papers for 7 years. Require that the SEC audit publicly traded companies.

Require that audit firms are hired by the audit committee of the board of directors. Require auditors to retain work papers for 7 years.

Which of the following may be disadvantages of extending credit to customers and relaxing collection policies?

Requires higher investment in receivables Increased bad debt

'' When merchandise is returned for a refund or for credit to be applied to other purchases, the situation is called a(n)

Sales Returns

The Public Company Accounting Reform and Investor Protection Act of 2002 is known as the SEC Reforms Act. Investor Protection Act. CPA Investigations Act. Sarbanes-Oxley Act.

Sarbanes-Oxley Act.

What would cause a bank statement not to agree with the cash balance in the accounting records? The bank paid interest that the company has not recorded. The company made an error in recording a deposit. The bank made an error in recording a deposit made by the company. The company wrote checks that have cleared the bank. Deposits outstanding that have been recorded on the company's records, but not on the bank's.

The bank paid interest that the company has not recorded. The company made an error in recording a deposit. The bank made an error in recording a deposit made by the company. Deposits outstanding that have been recorded on the company's records, but not on the bank's.

Select all that apply Which of the following are errors in accounting for cash? The bank charges a service charge for $100 on January 10, but the retail company does not record this charge until the bank statement is received. The bank processing a check for $210 as $120. Recording a check for $168 for $186 in the cash account. Recording a cash collection of $4,000 but depositing $3,000 into the bank.

The bank processing a check for $210 as $120. Recording a check for $168 for $186 in the cash account. Recording a cash collection of $4,000 but depositing $3,000 into the bank.

Who is responsible for providing an opinion on management's assessment of internal control? The company's auditors Audit committee The CEO and CFO SEC staff auditors

The company's auditors

A company makes a sale on terms 2/10, n/30. What does this mean? (Select all that apply.) The customer can take a 10% discount if paid in 30 days. The customer may take a 10% discount if paid within 2 days. The customer may take a 2% discount off the price if paid within 10 days. If payment is not made in 10 days, the net amount is due in 30 days.

The customer may take a 2% discount off the price if paid within 10 days. If payment is not made in 10 days, the net amount is due in 30 days.

Which of the following might be included in cash equivalents on the balance sheet? Trading securities Checking accounts Treasury bills Certificates of deposit Money market funds

Treasury bills Certificates of deposit Money market funds

Which of the following might be included in cash equivalents on the balance sheet? Multiple select question. Trading securities Checking accounts Treasury bills Certificates of deposit Money market funds

Treasury bills Certificates of deposit Money market funds

An informal credit arrangement with a customer for payment to be received after the sale is classified as a(n)

account receivable.

A sales return occurs when a customer returns a product for a full refund, whereas a sales ________________ is when the customer keeps the product and obtains a partial refund.

allowance

York Inc. records a year-end adjustment for estimated sales returns and allowances. As a result of this entry, York's financial statements will change as follows: (Select all that apply.) Multiple select question. liabilities decrease assets decrease liabilities increase equity decreases assets increase equity increases

assets decrease equity decreases

A trade discount is recognized by increasing the revenue amount recorded. by reducing the revenue amount recorded. as a contra account to accounts receivable. as trade discount revenue.

by reducing the revenue amount recorded.

The asset most susceptible to fraudulent activity is

cash

Currency, coins, and checking accounts are considered cash, whereas short-term highly liquid investments of 3 months or less are considered cash equivalents. liquid securities. restricted cash. trading securities.

cash equivalents.

A trade discount is a reduction from the list price, which is used to: (Select all that apply.) change prices without publishing a new catalog give quantity discounts to customers encourage customers to pay quickly reduce the sale price for interest received disguise real prices from competitors

change prices without publishing a new catalog give quantity discounts to customers disguise real prices from competitors

Credit card companies earn revenues from (Select all that apply.) . charging the retailer a fee for each credit card sale. charging the retailer interest until the purchase is paid. charging the credit card holder interest. charging the credit card holder a fee for each transaction.

charging the retailer a fee for each credit card sale. charging the credit card holder interest.

The two conditions that must exist for a sale and the related receivable to be recognized are . the product must be delivered in 60 days. collection from the customer is probable. the company has provided goods or services to the customer. cash is received from the sale.

collection from the customer is probable. the company has provided goods or services to the customer.

The Sarbanes-Oxley Act applies to . companies that are required to file with the SEC. any company organized in the United States. companies that are formed as partnerships. companies that operate internationally.

companies that are required to file with the SEC.

The Sales Returns and Sales Allowances accounts are classified as . contra liability accounts. contra revenue accounts. contra asset accounts. contra equity accounts.

contra revenue accounts.

On December 1, Melinda Corp. performed services on account to Norman. Melinda agreed to accept a 4-month interest-bearing note from Norman in payment for the services. Melinda has a December 31 year-end. On April 1, year 2, when the note matures, Melinda's journal entry will include: (Select all that apply.) debit to interest receivable debit to interest revenue credit to interest receivable debit to cash credit to interest revenue

credit to interest receivable debit to cash credit to interest revenue

A sales allowance ____ the amount owed by the customer for merchandise that is _____ by the customer. decreases; returned. increased; retained decreases; retained increases; returned

decreases; retained

Internal control components are built on the foundation of the ________ tone established by top management in its control environment

ethical or ethics

A company's plans to safeguard company assets and enhance the reliability and accuracy of accounting information are referred to as Multiple choice question. security controls. protective controls. corporate regulations. general controls. internal controls.

internal controls

Total revenues less discounts, returns, and allowances are referred to as __________________ revenues

net

The financial statement effects of recording an allowance for estimated sales returns are that: (Select all that apply.) equity increases assets increase net income decreases assets decrease net income increases equity decreases

net income decreases assets decrease equity decreases

Income tax receivable is a ______.

nontrade receivable

Two entries are required when a previously written off account is collected. These two entries include: record the adjustment to sales record bad debt expense record the collection on the account receivable reinstate the account receivable

record the collection on the account receivable reinstate the account receivable

At the end of the year, Kunze Corporation estimates that $1,600 worth of merchandise sold during the current year will be returned by customers during the subsequent year. Kunze Corporation must issue a refund to customers during the current year. record the estimated returns at the end of the year. wait until the merchandise is returned by customers to record the returns.

record the estimated returns at the end of the year.

Strong internal control systems allow greater reliance by investors on: Multiple choice question. continued success of a company stock market performance reported financial statements

reported financial statements

The key provisions of the Sarbanes-Oxley Act include requiring documentation and assessing effectiveness of internal controls. establishing the Securities and Exchange Commission. limiting the role of the FASB in accounting standard setting. requiring that corporate executives certify financial statements. restricting activities of auditors to prevent conflicts of interest.

requiring documentation and assessing effectiveness of internal controls. requiring that corporate executives certify financial statements. restricting activities of auditors to prevent conflicts of interest.

Internal control consists of plans to (Select all that apply.) report misuse of company assets to investors. safeguard company assets. report management errors to the police. provide accurate and reliable accounting information.

safeguard company assets. provide accurate and reliable accounting information.

Managers who are entrusted with taking care of the assets of the company are referred to as ______ of the company's assets. delegates proprietors stewards investors

stewards

Assume Company X is in its fifth year of operation. Analyze the following schedule. What conclusion can be drawn from the following schedule? Multiple choice question. net realizable value of accounts receivable is $305,000. the target amount in allowance for uncollectible accounts is $25,500. net sales is $305,000. bad debt expense for the period is $25,500.

the target amount in allowance for uncollectible accounts is $25,500.

A(n) _______________ difference in cash occurs when a company records a transaction either before or after the bank records the same

timing or time

Another term sometimes used for accounts receivable is trade receivable note receivable credit receivable promissory note

trade receivable