ac 210

Which of the following statements is false? a. The entry to record a customer's check returned as "NSF" will include a debit to Accounts Receivable and a credit to Cash. b. The sales returns and sales discounts accounts are reported on the income statement. c. Examples of the internal control principle of restricting access include the use of passwords and firewalls. d. The board of directors meets with the external auditors to discuss management's compliance with their financial reporting obligations. e. A clothing store would logically have a higher inventory turnover rate than would a cupcake shop.

e

net income divided by total sales

net profit margin

Under GAAP, an entry should be made to debit Bad Debt Expense account

when the sale is made

Which of these statements is true? a. The inventory turnover ratio is defined as cost of goods sold divided by average inventory. b. Under the perpetual inventory system, cost of goods sold is not recorded and the inventory account is not adjusted until the end of the accounting period. c. The specific identification method is very appropriate for accounting for inventory in a discount store like Dollar Tree or Dollar General. d. Taking a physical inventory is not necessary under a perpetual inventory system. e. There is no difference in cost to implement a perpetual as compared to a periodic system.

a

Which internal control procedure is violated when the cashier at the checkout stand also records the daily receipts in the journal? a. Segregation of duties b. Independent review and appraisal c. Independent verifications d. Proper authorizations

a

A customer returned damaged inventory it had purchased for credit. Which of the seller's accounts decreases? a. Purchase Returns b. Accounts Receivable c. Sales Returns d. Sales Revenue

b

Ending inventory is equal to the cost of items on hand plus a. merchandise in transit sold to customers FOB shipping point. b. merchandise in transit sold to customers FOB destination. c. the cost of all inventory purchased during the period. d. merchandise purchased in transit with terms FOB destination.

b

For which of the following reconciling items would an adjusting entry be necessary? a. A deposit in transit. b. A bank service charge. c. An error by the bank. d. Outstanding checks.

b

What are the effects on the accounting equation when a company makes the adjusting journal entry to estimate bad debt expense using the allowance method? a. Assets and owners equity increase. b. Assets and owners equity decrease. c. Assets increase and owners equity decreases. d. Assets decrease and owners equity increases.

b

Which of the following statements is true? a. A highly effective internal control should be implemented even if the cost is greater than the benefit. b. The lower of cost or market rule sometimes causes the book value of inventory to be written down below cost, but will never cause the book value of inventory to be increased above cost. c. FOB shipping point means that ownership of goods passes to the buyer when the goods reach the buyer. d. If a merchandiser offers a sales discount of 2/10, net/30 on a sale of $1,000, the amount due in 30 days is the net amount of $980. e. The primary advantage of periodic inventory systems is to allow management to detect shrinkage.

b

Which of these statements is true? A. Taking a physical inventory is not necessary under a perpetual inventory system. B. The inventory turnover ratio is defined as cost of goods sold divided by average inventory. C. The specific identification method is very appropriate for accounting for inventory in a discount store like Dollar Tree or Dollar General. D. There is no difference in cost to implement a perpetual as compared to a periodic system. E. Under the perpetual inventory system, cost of goods sold is not recorded and the inventory account is not adjusted until the end of the accounting period.

b

Which of these statements is true? a. Proper internal control procedures can guarantee the prevention of all theft. b. When reconciling a bank account, the company does not have to prepare an adjusting entry for outstanding checks. c. Typically, the lower the accounts receivable turnover ratio, the better. d. At the end of each day, the cashier should be the one responsible for comparing the amount on the cash register tape with the day's cash additions to the cash register. e. Cash received through the mail should be handled by only one employee to achieve effective internal control.

b

Which one of the following procedures is not part of preparing a bank reconciliation of a checking account? a. Tracing deposits listed on the bank statement to the books to identify deposits in transit b. Preparing adjustments to reverse the transactions recorded for checks that are still outstanding c. Identifying items added on the bank statement which have not been recorded as cash receipts by the company d. Arranging canceled checks in numerical order and tracing them to the books to identify outstanding checks

b

If a company uses the allowance method of accounting for bad debts, which one of the following statements is true? a. The use of the method violates the matching principle of GAAP. b. The company will reduce the accounts receivable balance directly at the end of the accounting period for estimated uncollectible accounts. c. It will report accounts receivable in the balance sheet at their net realizable value, less an estimate of uncollectible accounts. d. The company will record bad debts only when an account is determined to be uncollectible.

c

In preparing a monthly bank reconciliation, which of the following items would be added to the balance reported on the bank statement to arrive at the correct cash balance? a. Outstanding checks b. Bank service charge c. Deposits in transit d. A customer's note collected by the bank on behalf of the depositor

c

Ridley Company returned $2,000 of goods previously purchased on account to the seller - Scott Company - because the goods were not in accordance with specifications. The entry to record the return on Scott Company's books will include a: a. Debit to Cost of Goods Sold for $2,000 b. Credit to Accounts Payable for $2,000 c. Debit to Sales Returns and Allowances for $2,000 d. Debit to Sales Revenue for $2,000 e. Credit to Purchases Returns and Allowances for $2,000

c

When using the allowance method, what are the effects on the accounting equation when a company writes off a bad debt? a. Assets and stockholders' equity increase. b. Assets increase and stockholders' equity decreases. c. No effect on overall assets or equity. d. Assets and stockholders' equity decrease.

c

Which of the following statements is false? a. The use of the allowance method is an attempt by accountants to match bad debts as an expense with the revenue of the period in which a sale on credit takes place. b. Under the allowance method of accounting for bad debts, the company estimates the amount of bad debts before those debts actually occur. c. In accounting for inventory, the assumed cost flow (LIFO, FIFO, average) must match the physical goods flow. d. If a company uses LIFO for tax purposes, it must also use LIFO for financial reporting purposes.

c

A customer returned damaged inventory it had purchased for credit. Which of the seller's accounts decreases? a. Purchase Returns b. Sales Revenue c. Sales Returns d. Accounts Receivable

d

If a company uses the allowance method of accounting for bad debts, which one of the following statements is true? a. The use of the method violates the matching principle of GAAP. b. The company will record bad debts only when an account is determined to be uncollectible. c. The company will reduce the accounts receivable balance directly at the end of the accounting period for estimated uncollectible accounts. d. It will report accounts receivable in the balance sheet at their net realizable value, less an estimate of uncollectible accounts.

d

In preparing a monthly bank reconciliation, which of the following items would be added to the balance reported on the bank statement to arrive at the correct cash balance? a. Outstanding checks b. Bank service charge c. A customer's note collected by the bank on behalf of the depositor d. Deposits in transit

d

What are the effects on the accounting equation when a company makes the adjusting journal entry to estimate bad debt expense using the allowance method? a. Assets increase and owners equity decreases. b. Assets and owners equity increase. c. Assets decrease and owners equity increases. d. Assets and owners equity decrease.

d

When using the allowance method, what are the effects on the accounting equation when a company writes off a bad debt? a. Assets and stockholders equity increase. b. Assets and stockholders equity decrease. c. Assets increase and stockholders equity decreases. d. No effect on overall assets or equity.

d

Which of the following is true about The Sarbanes Oxley Act? a. The Act was primarily designed to decrease the trade deficit. b. The Act was signed into law in 1980. c. The Act applies to all companies in the U.S., both publicly traded and privately-owned. d. The Act establishes an audit committee, consisting of key members of management and the external auditors. e. The Act requires management to issue a report on internal controls and external auditors to audit internal controls.

d

Which of the following rules was not mandated by The Sarbanes-Oxley Act of 2002 for U.S. publicly traded companies? a. Management is now held responsible for the internal controls and must issue a report on the controls. b. The auditors must now audit the internal controls of the company. c. The board of directors must form a committee to serve as the party in between management and the external auditors. d. The company must file Form 10-K with the Securities Exchange Commission.

d

Which of the following rules was not mandated by The Sarbanes-Oxley Act of 2002 for U.S. publicly traded companies? a. Management is now held responsible for the internal controls and must issue a report on the controls. b. The auditors must now audit the internal controls of the company. c. The board of directors must form a committee to serve as the party in between management and the external auditors. d. The company must file Form 10-K with the Securities Exchange Commission.

d

Which of the following statements is false? a. Purchase discounts taken by the purchaser decrease the total cost of merchandise acquired and therefore decrease the Inventory account. b. The journal entry to write down inventory to its market value results in a loss on the income statement. c. Many countries prohibit the use of LIFO for tax or financial reporting purposes. d. Bad Debts Expense is a contra account that is used to reduce accounts receivable to its net realizable value. e. Under the perpetual inventory system, inventory losses can be identified more easily than under the periodic inventory system.

d

Which of the following statements is false? a. SEC filings are available to the public after they are received by the SEC's EDGAR service. b. The LIFO cost flow assumption will yield a lower inventory value than FIFO, during periods of inflation. c. A proper voucher system includes procedures and approvals designed to control cash payments, such as requisition, receiving, and payables departments. d. Segregation of duties means that a company assigns responsibilities so that employees are restricted to jobs for which they are adequately trained.

d

Which of the following statements is false? a. The use of the allowance method is an attempt by accountants to match bad debts as an expense with the revenue of the period in which a sale on credit takes place. b. If a company uses LIFO for tax purposes, it must also use LIFO for financial reporting purposes. c. Under the allowance method of accounting for bad debts, the company estimates the amount of bad debts before those debts actually occur. d. In accounting for inventory, the assumed cost flow (LIFO, FIFO, average) must match the physical goods flow.

d

Which of the following statements is true? a. Among the four inventory costing methods available, LIFO most often reflects the actual physical flow of goods. b. The annual report that publically traded companies must file with the Securities & Exchange Commission (SEC) is called Form 8-K. c. Comparative financial statements are those of a company in one industry presented with another company in the same industry. d. An adjustment to ending inventory under the LCM rule would be more likely to be recorded by a company that sells inexpensive pencils than a company that sells high- fashion designer clothes. e. Inventory turnover, for a merchandiser, refers to how many times the company buys and sells its inventory of goods.

d

Which of these statements is true? a. Sales Returns and Allowances is a contra-asset account. b. Freight charges associated with the purchase of inventory normally are not included in inventory cost. c. When prices are rising, use of the FIFO method will result in a lower tax liability than the other methods. d. Goods in transit shipped FOB shipping point should not be included in the sellers ending inventory. e. Specific identification is a very popular inventory method because it is very easy to apply.

d

Which one of the following procedures is not part of preparing a bank reconciliation of a checking account a. Tracing deposits listed on the bank statement to the books to identify deposits in transit b. Arranging canceled checks in numerical order and tracing them to the books to identify outstanding checks c. Identifying items added on the bank statement which have not been recorded as cash receipts by the company d. Preparing adjustments to reverse the transactions recorded for checks that are still outstanding

d

Which of the following statements is false? a. The journal entry to write down inventory to its market value results in a loss on the income statement. b. Many countries prohibit the use of LIFO for tax or financial reporting purposes. c. Purchase discounts taken by the purchaser decrease the total cost of merchandise acquired and therefore decrease the Inventory account. d. Under the perpetual inventory system, inventory losses can be identified more easily than under the periodic inventory system. e. Bad Debts Expense is a contra account that is used to reduce accounts receivable to its net realizable value.

e

Which of the following statements is true? a. An asset turnover ratio of 0.4 means that $4 in net income is generated for every $10 in assets. b. The order in which assets are reported on the balance sheet under IFRS is the same as the order under the U.S. GAAP rules. c. The Securities & Exchange Commission requires publically traded companies to have their financial statements audited by their own internal auditors. d. When the FIFO method is used, the seller assumes that the most recently acquired units are sold first. e. An audit report expressing an unqualified opinion is generally desired by the company presenting its financial statements.

e

When a specific customers account is written off by a company using the allowance method, the effect on net income and the net realizable value (book value) of the accounts receivable is

none, none