ACC 5-7

A $100 petty cash fund has cash of $20 and receipts of $82. The journal entry to replenish the account would include a a.credit to Cash Short and Over for $2. b.credit to Petty Cash for $82. c.debit to Cash for $80. d.credit to Cash for $82.

a. credit to Cash Short and Over for $2.

cash short and over

subtract actual cash from register cash. If actual cash is less than cash from register debit for shortage, If actual cash is more than cash from register credit for shortage.

Which of the following would appear as a credit memorandum on the bank statement? a.Service charge b.NSF check c.EFT deposit d.Bank correction of an error from recording a $300 check paid as $30

EFT deposit

The following financial statement data are for the year ending December 31 for Agency Company: Sales $300,000 Total assets: Beginning of year 200,000 End of year 100,000 Based on this information, the amount to be used as the denominator in the asset turnover ratio is a.$150,000. b.$200,000. c.$300,000. d.$100,000.

a

he operating cycle of a business is comprised of all of the following except for a.financial statement preparation. b.collection activity. c.purchase activity. d.sales activity.

a

Average inventory is computed as a.(Inventory at the Beginning of the Period + Inventory at the End of the Period) ÷ 2. b.(Inventory at the Beginning of the Period − Inventory at the End of the Period) ÷ 365 days. c.(Inventory at the Beginning of the Period − Inventory at the End of the Period) ÷ 2. d.(Inventory at the Beginning of the Period + Inventory at the End of the Period) ÷ 365 days.

a. (Inventory at the Beginning of the Period + Inventory at the End of the Period) ÷ 2.

Daily cash operating expenses are calculated as a.(Operating Expenses − Depreciation Expense)/365. b.Cash as of Year-End/12. c.Negative Cash Flow from Operations/12. d.Total Expenses/365.

a. (Operating Expenses − Depreciation Expense)/365.

During the month, merchandise is sold for $80,500 cash and for $119,000 on account. The cost of goods sold is $101,500. What is the amount of gross profit? a.$98,000 b.$119,000 c.$199,500 d.$80,500

a. 98,000 (80,500+119,000)- 101,500 = 98,000

The difference between the income statements of a service company and a retail company is that the retail company's income statement includes a.cost of goods sold. b.operating expenses. c.net income. d.revenues.

a. COGS

Global Company sold merchandise to Montana Industries for cash, $3,450. The cost of goods sold was $1,850. Global Company refunded Montana Industries $900 for returned merchandise. The cost of goods sold was $600. Which of the following will be recorded by Global Company in the journal entry for the refund from the cost of the sale? a.Credit Estimated Returns Inventory, $600 b.Debit Inventory, $900 c.Debit Estimated Returns Inventory, $900 d.Credit Inventory, $600

a. Credit Estimated Returns Inventory, $600

The second closing entry for a retail business will include which of the following? a.Dividends b.Cost of goods sold c.Accounts payable d.Sales

a. Dividends

Which of the following statements is not true of days' cash on hand? a.Nonprofits do not have enough information to calculate this ratio. b.It can be used to estimate how long a business could survive a catastrophic event. c.It is used by start-up companies to measure how long cash is available to support operations until revenues begin to be earned. d.It is a popular measure used by nonprofits to reveal how long the nonprofit could survive if contributions dropped significantly.

a. Nonprofits do not have enough

When using the periodic LIFO inventory cost method, which of the following statements is true? a.The physical count determines the inventory on hand. b.The cost of goods sold is made up of the earlier purchases. c.The cost of goods sold is made up by averaging the end-of-period and beginning-of-period purchases. d.The cost of inventory on hand is made up of the most recent purchases.

a. The physical count determines the inventory on hand.

A bank reconciliation has a.a bank section and a company section. b.a bank section only. c.a company section only. d.a specific cash section.

a. a bank section and a company section.

Inventory should be reported as follows except a.as a long-term asset on the balance sheet. b.at lower of cost or market. c.according to the chosen cost flow assumption. d.as a current asset on the balance sheet.

a. as a long-term asset on the balance sheet.

The inventory records of Global Company indicate that $76,800 of merchandise should be on hand at the end of the month. The physical inventory indicates that $74,900 is actually on hand. The journal entry to adjust for inventory shrinkage will include a.a debit to Cost of Goods Sold for $1,900. b.a debit to Inventory for $1,900. c.a debit to Inventory for $74,900. d.None of these choices are correct, since no entry is needed.

a. debit to Cost of Goods Sold for $1,900.

Entries are made to the petty cash account when a.decreasing the established amount of the petty cash fund. b.making payments out of the fund. c.recording shortages in the fund. d.replenishing the fund.

a. decreasing the established amount of the petty cash fund.

The term cash does not include a.notes receivable. b.checks. c.money orders. d.money on deposit that is available for unrestricted withdrawal.

a. notes recievable

A bank statement a.provides a summary of all checking account transactions recorded by the bank. b.is a credit reference letter written by the depositor's bank. c.is a bill from the bank for services rendered. d.lets a depositor know the financial position of the bank as of a certain date.

a. provides a summary of all checking account transactions recorded by the bank.

When recording merchandise transactions under the periodic inventory system, which of the following is false? a.Purchases of inventory are recorded in the inventory account. b.There is no detailed record of the amount of inventory on hand at any given time. c.At the end of the period, a physical count of inventory on hand is taken. d.The sales of merchandise are not recorded in the inventory account.

a.Purchases of inventory are recorded in the inventory account. Feedback: there's no detailed record of the amount of inventory on hand at any given time

When the weighted average cost method is used for the perpetual inventory system, a weighted average unit cost for each item is determined a.at the beginning of the time period. b.each time a purchase is made. c.each time a sale is made. d.at the end of the time period.

b. each time a purchase is made.

The records of Garden Company indicate sales of $900,000, cost of goods sold of $500,000, an ending inventory balance of $100,000, and estimated returns of 1% of sales. The adjusting journal entries to record estimated returns will include a a.debit to Sales for $9,000. b.credit to Sales for $9,000. c.credit to Customer Refunds Payable for $5,000. d.debit to Inventory for $5,000.

a.debit to Sales for $9,000.

When comparing the adjusting process under the perpetual and the periodic inventory systems, a.the ending inventory is determined by a physical count under both systems. b.the cost of goods sold account is reduced by the cost of estimated returns inventory for the current year under the perpetual inventory system. c.no entry is made for estimated returns inventory under the periodic inventory system. d.the inventory shrinkage adjustment is the same under both systems.

a.the ending inventory is determined by a physical count under both systems.

The numerator in the asset turnover ratio is a.average long-term assets. b.sales. c.average current assets. d.average total assets.

b sales

Which of the following is not an internal control activity for cash? a.At the end of a shift, the clerk and the supervisor count the cash in the clerk's cash drawer and compare it to beginning cash plus cash sales. b.All cash payments should be made with cash. c.An employee compares cash received in the mail with the accompanying remittance advice. d.The employee opening the mail stamps checks and money orders "For Deposit Only" in the bank account of the business.

b. All cash payments should be made with cash.

Inventory turnover is computed as a.Sales divided by Cost of Goods Sold. b.Cost of Goods Sold divided by Average Inventory. c.Average Inventory divided by Sales. d.Average Inventory divided by Average Daily Cost of Goods Sold.

b. Cost of Goods Sold divided by Average Inventory.

Which of the following is not true concerning the Internal Control—Integrated Framework? a.The framework is the widely accepted standard by which companies analyze and evaluate internal controls. b.It was issued by the FASB. c.The framework is the widely accepted standard by which companies design internal controls. d.It is often the basis of a discussion of internal controls.

b. It was issued by the FASB.

Journal entries based on the bank reconciliation are required in the depositor's accounts for a.outstanding checks. b.NSF items. c.deposits in transit. d.bank errors.

b. NSF items.

A check drawn by a depositor for $150 in payment of a liability was recorded in the journal as $510. This item would be included on the bank reconciliation as a.a deduction from the balance per the bank statement. b.an addition to the balance per the depositor's records. c.an addition to the balance per the bank statement. d.a deduction from the balance per the depositor's records.

b. an addition to the balance per the depositor's records.

The debit balance in Cash Short and Over at the end of an accounting period is reported as a.an asset on the balance sheet. b.an expense on the income statement. c.income on the income statement. d.a liability on the balance sheet.

b. an expense on the income statement.

A bank correction of an error from recording a $50 check paid as $500 appears on the bank statement as a a.debit memorandum that decreases the account balance. b.credit memorandum that increases the account balance. c.debit memorandum that increases the account balance. d.credit memorandum that decreases the account balance.

b. credit memorandum that increases the account balance.

Inventory is reported as a(n) a.long-term asset. b.current asset. c.expense. d.current liability.

b. current asset.

The cost method that will yield an ending inventory value that is somewhere between possible high and low costs (prices) using traditional costing methods is the a.specific identification inventory cost method. b.weighted average inventory cost method. c.LIFO inventory cost method. d.FIFO inventory cost method.

b. weighted average inventory cost method.

Gross profit is a.profit after operating income. b.profit before deducting operating expenses. c.profit after deducting other expenses. d.profit after deducting operating expenses.

b.profit before deducting operating expenses.

The difference between the net method of recording sales discounts and the gross method of recording sales discounts is a.the net method records an invoice at the total invoice amount and the gross method records an invoice at the gross sales amount plus any discounts. b.the gross method records an invoice at the gross sales amount and the net method records an invoice at the gross sales amount less any discounts. c.the net method records an invoice at the gross sales amount plus any discounts and the gross method records an invoice at the gross sales amount. d.the gross amount records an invoice at the gross sales amount less any discounts and the net method records an invoice at the gross sales amount plus any discounts.

b.the gross method records an invoice at the gross sales amount and the net method records an invoice at the gross sales amount less any discounts.

Credit terms are terms for a.when payments for merchandise are to be made with cash. b.when the payments for merchandise are to be made. c.when inventory is purchased. d.when the returns of merchandise are to be made.

b.when the payments for merchandise are to be made.

Determine the operating income using the following information: Sales $680,200 Cost of goods sold 504,000 Selling expenses 50,400 Administrative expenses 25,000 a.$176,200 b.$125,800 c.$100,800 d.$680,200

c. 100,800

Banks Company sold merchandise on account for $35,000 with terms 2/10, n/30. The cost of goods sold was $27,600. If the invoice is paid within the discount period, what is the amount of cash received by Banks Company? a.$27,048 b.$27,600 c.$34,300 d.$35,000

c. 34,300 (35,000-(35000x2%))= 34,300`

Which of the following statements reflects a weak internal control system? a.All employees must take their vacations. b.All employees are well supervised. c.A single employee is responsible for receiving and counting cash. d.A system of checks and balances is established.

c. A single employee is responsible for receiving and counting cash.

Which one of the following is not an element of internal control? a.Monitoring b.Risk assessment c.Management's philosophy and operating style d.Control procedures

c. Management's philosophy and operating style

When using the periodic FIFO inventory cost method, which of the following statements is false? a.The physical count determines the inventory on hand. b.The cost of inventory on hand is made up of the most recent costs. c.The cost of inventory on hand is made up of the earliest costs. d.The cost of goods sold is made up of the earliest purchases.

c. The cost of inventory on hand is made up of the earliest costs.

Internal control does not consist of policies and procedures that a.aid management in directing operations toward achieving business goals. b.protect assets from misuse. c.ensure that business information is accurate. d.guarantee the company will make a profit.

d. guarantee the company will make a profit.

What is not considered an advantage of using the retail method of inventory costing? a.The retail method allows management to monitor operations more closely. b.The retail method may be used as an aid in taking a physical inventory. c.The retail method uses specific costs to compute inventory. d.The retail method provides inventory figures for preparing monthly and quarterly financial statements when the periodic system is used.

c. The retail method uses specific costs to compute inventory.

Compensating balances are a.amounts of required payments on liabilities. b.desired loan amounts. c.balances banks may require depositors to maintain as a minimum in their cash accounts. d.requested lines of credit.

c. balances banks may require depositors to maintain as a minimum in their cash accounts.

The lower-of-cost-or-market method cannot be applied to a.inventory as a whole. b.each major class or category of inventory. c.each item sold. d.each item in the inventory.

c. each item sold.

The bank section of the bank reconciliation a.begins with the cash balance according to the company's records. b.includes interest collected by the bank. c.ends with the adjusted balance. d.ends with the unadjusted bank balance. Feedback

c. ends with the adjusted balance.

Cost of goods sold is reported as a(n) a.current liability. b.long-term asset. c.expense. d.current asset.

c. expense

The credit balance in Cash Short and Over at the end of an accounting period is reported as a.an asset on the balance sheet. b.an expense on the income statement. c.income on the income statement. d.a liability on the balance sheet.

c. income on the income statement.

A physical inventory is not used to a.investigate major errors. b.help prevent employee theft or misuse of inventory. c.journalize the daily transactions in the inventory account. d.compare actual inventory to book inventory.

c. journalize the daily transactions in the inventory account.

Purchased inventory received is added to the inventory records after all of the following are reconciled except the a.receiving report. b.vendor's invoice. c.sales invoice. d.purchase order.

c. sales invoice

Estimating inventory may be needed for all of the following reasons except a.when monthly or quarterly financial statements are needed, but a physical inventory is taken only once a year. b.when a fire has destroyed the inventory and inventory records. c.when the periodic method is used instead of taking a physical inventory. d.when it is impractical to take a physical inventory.

c. when the periodic method is used instead of taking a physical inventory.

After the closing entries have been posted, how has Retained Earnings been affected by closed accounts? a.A credit for revenues, a credit for dividends, and a debit for expenses. b.A debit for revenues, a credit for dividends, and a credit for expenses. c.A credit for revenues, a debit for dividends, and a debit for expenses. d.A credit for revenues, a debit for dividends, and a credit for expenses.

c.A credit for revenues, a debit for dividends, and a debit for expenses.

Which of the following does not relate to either of the two adjusting entries for customer refunds, allowances, and returns? a.One entry creates an estimated returns inventory account. b.One entry reduces the sales account. c.One entry records the sales of goods to customers. d.One entry creates a customer refund liability account.

c.One entry records the sales of goods to customers.

In a perpetual inventory system a.a count must be made in order to know the inventory amount. b.the inventory records cannot be computerized. c.each purchase and sale of inventory is recorded in the inventory account. d.the amount of inventory for sale and the amount sold are not listed in the inventory account.

c.each purchase and sale of inventory is recorded in the inventory account.

Gross profit is sales a.less operating expenses. b.plus cost of goods sold. c.less inventory. d.less cost of goods sold.

d less cost of goods sold

Determine sales for the month using the following information. At month-end, cost of goods sold is $191,350 and gross profit is $167,990. a.$191,350 b.$23,360 c.$167,990 d.$359,340

d.

Gordon Company uses the retail method of inventory costing. The retail value of the ending inventory is $325,000. If the ratio of cost to retail price is 66%, what is the amount of the ending inventory to be reported on the financial statements? a.$110,500 b.$325,000 c.$107,250 d.$214,500

d. $214,500

Days' cash on hand is calculated as a.(Cash + Short-Term Investments)/[(Operating Expenses + Depreciation)/365]. b.Cash/365. c.Cash/(Operating Expenses/365). d.(Cash + Short-Term Investments)/[(Operating Expenses − Depreciation)/365].

d. (Cash + Short-Term Investments)/[(Operating Expenses − Depreciation)/365].

Which of the following is true regarding the perpetual FIFO inventory costing method? a.Unit costs for each item are averaged each time a purchase is made. b.The cost of the units sold is the cost of the most recent purchases. c.The cost of the units sold is always the cost of the original units purchased. d.Costs are included in the cost of goods sold in the order in which units were purchased.

d. Costs are included in the cost of goods sold in the order in which units were purchased.

The inventory cost method that will yield a higher ending inventory during times of inflation will be the a.specific identification inventory cost method. b.weighted average inventory cost method. c.LIFO inventory cost method. d.FIFO inventory cost method.

d. FIFO inventory cost method.

The three most common inventory cost flow assumptions are a.FIFO, retail, and weighted average cost. b.FIFO, LIFO, and specific identification. c.FIFO, retail, and specific identification d.FIFO, LIFO, and weighted average cost.

d. FIFO, LIFO, and weighted average cost.

Journal entries based on the bank reconciliation are required in the depositor's accounts for a.bank errors. b.outstanding checks. c.deposits in transit. d.NSF items.

d. NSF items.

The petty cash fund is not a.a special cash fund. b.used to pay small amounts that occur often. c.established by estimating payments needed. d.a bank checking account.

d. a bank checking account.

The control environment is influenced by all of the following primary factors except a.the company's personnel policies. b.management's philosophy and operating style. c.the company's organizational structure. d.changes in the personnel that make up the internal audit team.

d. changes in the personnel that make up the internal audit team.

Sarbanes-Oxley does not require a.companies to file their internal control reports with the 10-K report with the Securities and Exchange Commission. b.companies and their independent accountants to report on the effectiveness of the companies' internal controls. c.all publicly held companies to comply with the act. d.companies to turn over responsibility for establishing and maintaining internal controls for financial reporting to auditors.

d. companies to turn over responsibility for establishing and maintaining internal controls for financial reporting to auditors.

An NSF check appears on the bank statement as a a.debit memorandum that increases the account balance. b.credit memorandum that increases the account balance. c.credit memorandum that decreases the account balance. d.debit memorandum that decreases the account balance.

d. debit memorandum that decreases the account balance.

Sales less cost of goods sold is a.net profit. b.operating income. c.gross sales. d.gross profit.

d. gross profit Sales-COGS=Gross Profit GrossProfit - Operating Expense= Operating Income

Inventory cost flow assumptions address accounting issues when a.an item is sold and it is necessary to determine its sales price. b.an item is purchased and it is necessary to determine its cost. c.different units of merchandise are acquired at the same unit cost during the period. d.identical units of merchandise are acquired at different unit costs during the period.

d. identical units of merchandise are acquired at different unit costs during the period.

Operating income is gross profit a.plus cost of goods sold. b.less inventory. c.less cost of goods sold. d.less operating expenses.

d. less operating income

Cash equivalents do not include a.money market funds. b.U.S. Treasury bills. c.commercial paper. d.accounts receivable.

d.accounts receivable.

In the asset turnover ratio, the assets consist of a.current assets on the current balance sheet. b.property, plant, and equipment from the previous balance sheet. c.the total amount of assets on the current balance sheet. d.the average of total assets from the beginning and end of the period.

d.the average of total assets from the beginning and end of the period. ratio computed by: sales/average total sales