Exam 3 Accounting

False

An error is considered material if it would trigger an IRS audit.

True

An operating cycle is the length of time it takes to convert inventory to accounts receivable plus the time it takes to convert the account receivable back to cash. This statement is

False

An unqualified audit opinion suggests that all aspects of financial statements are in compliance with generally accepted accounting principles (GAAP). This statement is

True

Cash is difficult to protect because it is easy to transfer and its ownership difficult to prove. These statements are

15,160

Corazon Company purchased an asset with a list price of $14,000. Corazon paid $500 of transportation in cost, $800 to train an employee to operate the equipment, and $200 to insure the asset against theft after it has been setup in the factory. The asset was purchased under terms 1/20/n30 and Corazon paid for the asset within the discount period. Based on this information, Corazon would capitalize the asset on its books at

True

Establishment of a petty cash fund is an asset exchange transaction.

True

Interest revenue will be shown as a credit on a bank statement.

reliable financial reporting, effective and efficient operations, compliance with applicable laws and regulations.

Internal control is a process designed to ensure

True

It is legal for a company to use one method of depreciation for tax reporting purposes and a different method for financial reporting purposes. This statement is

10,000

Kelly Company's unadjusted bank balance on May 31 is $9,500. An analysis of the bank statement revealed $1,400 of deposits in transit and $900 of outstanding checks. In addition, the bank statement showed a $200 NSF check. Based on this information, Kelly's true cash balance is

True

Land is different from other tangible assets in that its utility is not diminished by its use. This statement is

A $16,000 cash inflow in the investing activities section of the cash flow statement.

Madison Company owned an asset that had cost $44,000. The company sold the asset for $16,000. Accumulated depreciation on the day of sale amounted to $32,000. Which of the following statements is true?

The amount of depreciation expense recognized in Year 4 would be greater if Dinwiddie depreciates the car under the straight-line method than if the double-declining-balance method is used.

On January 1, Year 1, Dinwiddie Company purchased a car that cost $45,000. The car has an expected useful life of 5 years and a $10,000 salvage value. Which of the following statements is true?

31 days

Senath Company's annual report reveals net credit sales of $240,000 and average accounts receivable of $20,000. The report also shows an average inventory balance of $10,000 and cost of goods of $200,000. Based on this information, the number of days to collect accounts receivable is (treat any partial day as a whole day)

12 times per year

Senath Company's annual report reveals net credit sales of $240,000 and average accounts receivable of $20,000. The report also shows an average inventory balance of $10,000 and cost of goods of $200,000. Based on this information,the accounts receivable turnover is

Internal Revenue Service

The MACRS method of determining depreciation expense has been established by the

dividing the amount of credit sales by the average balance of accounts receivable.

The accounts receivable turnover ratio is calculated by

Modified Accelerated Cost Recovery System

The acronym MACRS stands for which of the following?

False

The implementation of an effective internal control system eliminates the possibility of fraud. This statement is

False

The primary focus of financial statement audits is the discovery of fraud.

False

The use of estimates and revision of estimates are uncommon in financial reporting.

50,000

Tyler Company purchased equipment that cost $260,000 cash on January 1, Year 1. The equipment had an expected useful life of five years and an estimated salvage value of $10,000. Tyler depreciates its assets under the straight-line method. What is the amount of depreciation expense appearing on the Year 1 income statement?

cash short and over

What account is used to record the amount of cash shortages or overages relative to a petty cash system?

Straight line

Which method of depreciation is used by most U.S. companies for financial reporting purposes?

Performance evaluation

Which of the following is an administrative control?

Record cash collections immediately, Provide customers with receipts, Deposit cash collections immediately.

Which of the following is an internal control procedure designed to protect cash receipts?

Hiring only college graduates

Which of the following is not a commonly accepted internal control activity?

Keep cash in locations that are accessible by multiple employees

Which of the following is not an internal control procedure designed to safeguard cash?

Customer service comment cards

Which of the following is not one of the nine features of an internal control system?

Adverse Opinion

Which of the following opinions is the least favorable opinion issued by an external auditor?

unqualified opinion

Which of the following opinions is the most favorable opinion issued by an external auditor?

Assigning a petty cash custodian, Use of petty cash vouchers, Physical control over the petty cash fund.

Which of the following procedures are typically used when a petty cash fund is established?

Depreciation

Which of the following terms is used to describe the process of expense recognition for property, plant and equipment?

one half of one full year of depreciation on its Year 1 tax return.

Wild company purchased an asset on December 1, Year 1. Based on the Modified Accelerated Cost Recovery System (MACRS), Wild can deduct