Accounting chapter 4,5,6

an imprest petty cash fund of $700 was established for minor disbursements. At the end of the month, the fund included petty cash tickets for the purchase of $202 in supplies, $76 for meals, $78 for fuel, and $66 for taxi fare. how much cash should be left in the fund?

$278

leno company sells goods to the fallon company for 11,000. it offers credit terms of 4/10, n/30. if fallon company pays the invoice within the discount period, leno company will record a debit to cash in the amount of:

10,560

a company has gross revenue of $503,000; sales discounts of $2,700; and sales returns and allowances of $3,000. net revenue is:

497,300

when preparing a bank reconciliation, which of the following items should be added to the book balance?

Both EFT receipts and collection of note receivable

_ rearranges messages by a mathematical formula making the message impossible to read by someone who does not know the code.

Encryption

every adjustment on the bank side of the bank reconciliation needs to be recorded in the books

False

outstanding checks are checks that have been recorded by the bank, but are not yet recorded on the books.

False

the person to whom a check is paid is referred to as the maker

False

roadway company purchases inventory from fedway company with the shipping terms FOB destination. this means that:

Fedway company will pay the freight on this transaction

the type of fraud committed by company managers who make false and misleading entries in the books in order to improve a companys financial statements is called:

Fraudulent financial reporting

alpha company has an account at first bank. Alpha writes a check payable to beta company. in this transaction, beta company is the:

Payee

there are three parties to a check. the person or company to whom the check is paid is the

Payee

differences between the bank statement and the company's cash account are primarily the result of a time lag in recording transactions.

True

notes receivable from customers and vendors have a maturity date.

True

the bank reconciliation can be used to control cash in a bank account

True

the person performing the bank reconciliation should not have any other cash duties

True

examples of a weak control environment are

a ceo who overrides controls, a weak and ineffective board of directors, no company-wide code of ethics

when a company receives a cash dividend from a trading security, the journal entry includes:

a debit to cash and credit to dividend revenue

a business offers credit terms of 2/15, n/30. these terms indicate that:

a discount of 2% can be taken if the invoice is paid within 15 days of the invoice date.

the bookkepper recorded a deposit of $400 as $40. on the bank reconciliation, this will be an:

addition of $360 to the balance per books

the rule that all major groups of transactions should be supported by hard copy documents or electronic records is part of the control procedure of:

adequate records

after approving an invoice for payment:

after payment, the payment packet should be stamped "paid" by the person in the treasurers department who has authorized the disbursement.

when a company receives customers checks by mail:

all incoming mail containing checks from customers should be opened by the mailroom.

what is lapping accounts receivable

an embezzlement scheme whereby an employee steals customers checks and uses devious bookkeeping procedures to conceal theft.

what are some examples of the misappropriation of assets?

an employee steals some money from the petty cash fund. an employee overstates an expense reimbursement request after a company trip. Kickback scheme between a purchasing agent and vendor.

investments in trading securities:

are reported at fair value on the balance sheet

a cash budget does all of the following except:

assess the riskiness of a new product

three key duties must always be separated under a good system of internal controls:

asset handling, record keeping and transaction approval.

the public company oversight board was created to oversee the:

audits of public companies

all investments in securities not classified as trading securities or held-to-maturity securities are classified as:

available -for-sale securities

day sales in receivables

average net receivables/average daily sales

in a bank reconciliation, items recorded by the bank, but not yet recorded by the company include:

bank collections of account receivables

which of the following items can be added to or subtracted from the bank balance when preparing the bank reconciliation

bank erros

average net receivables

beginning net receivables + end receivables/ total current liabilities

how do purchase returns and allowances and purchase discounts affect gross purchases?

both are subtracted from purchases

in the cash budget, the beginning balance cash plus budgeted cash receipts minus_, equals cash available before new financing.

budgeted cash disbursements

smart hiring practices include:

clear job descriptions, back ground checks, and proper training and supervision.

an internal control system can be circumvented by:

collusion, management override and human limitations.

when reporting cash on the balance sheet, companies:

combine cash and cash equivalents.

company A has inventory out on consignment and held for sale by company B. which company will include the goods in their inventory?

company A

internal control procedures do not include:

control environment

fraudulent financial reporting is also called:

cooking the books

two accounts that would appear on the financial statements of a merchandising company that are not needed by a service company are:

cost of goods sold and inventory

inventory turnover

cost of goods sold/average inventory... cost of goods sold/(beginning inventory + ending inventory/2)

using a perpetual inventory system, what journal entry(ies) is (are) prepared when two units of merchandise are sold on account?

debit accounts receivable and credit sales revenue; debit cost of goods sold and credit inventory

on december 1, macy company sold merchandise with a selling price of $1,000 on account to mrs. jorgensen, with terms 2/10, n/30. ignoring cost of goods sold, what journal entry did macy company prepare on december 1?

debit accounts receivable for $1,000 and credit sales revenue for $1,000

on december 1, macy company sold merchandise with a selling price of $3,000 on account to mrs. jorgensen, with terms 5/10, n/30. mrs. jorgensen paid the amount due on december 9. what journal entry did macy company prepare on december 9?

debit cash for $2,850, debit sales discounts for $150 and credit accounts receivable for $3,000

on december 2, a customer returned merchandise with a selling price of $800 purchased on account to a department store. ignoring cost of goods sold, what journal entry did the department store prepare?

debit sales returns and allowances for $800 and credit accounts receivable for $800

if a buyer takes advantage of a sales discount, the journal entry recorded by the seller will include an:

debit to cash, debit to sales discount and credit to accounts receivable.

Mathew company purchases a trading security for $12,000 cash. the journal entry to record this transaction will include a:

debit to the investment in trading securities account and a credit to cash.

fraudulent financial reporting

deceives financial statement users

if inventory costs are rising and a company is using LIFO, large purchases of inventory near the end of the year will:

decrease income taxes paid.

in a bank reconciliation, a NSF check is:

deducted from the book balance

in a bank reconciliation, a bank service charge for printing checks is:

deducted from the book balance

in a bank reconciliation, an EFT cash payment is:

deducted from the book balance

all of the following will apear on the book side of the bank reconciliation except for:

deposits in transit

deposits that have been recorded on the books, but have not yet been recorded by the bank are:

deposits in transit

when preparing a bank reconciliation

deposits in transit are added to the bank balance

a periodic inventory system:

does not keep a running record of inventory on hand, is used for inexpensive goods, is not expensive to maintain.

internal controls are designed to accomplish five objectives that include compliance with legal requirements, promote operational efficiency, safeguard assets, encourage employees to follow company policy and:

ensure accurate, reliable accounting records

when goods are shipped FOB destination, revenue is recognized by the seller when the goods leave the sellers shipping dock

false

which of the following is not used to determine the cost of net purchases?

freight-out

another term for gross profit is:

gross margin

gross profit percentage

gross profit/net sales revenue

a receiving report:

identifies that the merchandise has been received and ends the purchasing process.

opportunity in the fraud triangle arises from:

improper segregation of duties, improper access to assets, weak control environment

debit cards are being used:

in place of petty cash funds, for small purchases, for package delivery fees

a payment packet of documents:

includes the invoice, receiving report and purchase order

unrealized gains on trading securities are reported on the:

income statement as other revenues and gains

a fidelity bond is an:

insurance policy that reimburses a company for employee theft.

the category "other receivables" on the balance sheet includes:

interest receivable, dividend receivable, advances to employees.

the primary way that fraud is prevented and detected is through a proper system of:

internal control

the cost of inventory that is still on hand is called:

inventory, a current asset that appears on the balance sheet.

a petty cash fund:

is established to pay for minor purchases

an unrealized gain on a trading security:

is recorded when the fair value of the trading security is more than its cost.

a system of handling cash receipts by mail whereby customers send checks in payment of their accounts directly to a post office box controlled by a bank is an:

lock-box system

internal control is a plan of organization and systems of procedures implemented by company_ and the_designed to accomplish five objectives.

management, board of directors

the type of fraud committed by employees of an entity who steal money from the company and cover it up through erroneous entries in the books is called:

misappropriation of assets

_is the most common fraud, but_ is the most expensive fraud

misappropriation of assets, fraudulent financial reporting

the three main components of the fraud triangle are:

motive, opportunity and rationalization

average daily sales

net sales/365 days

another term for a "hot check" is:

nonsuffiicient funds (NSF) check

strategies to increase the current ratio may include:

paying off current liabilities before the end of the year. increasing sales. reclassifying long-term investments as short-term investments

the inventory system that uses computer software to keep a running record of inventory on hand is the:

perpetual inventory system

creating bogus websites for the purpose of stealing unauthorized data is an:

phishing expedition

a company has a policy that all checks over $5,000 need to have the signature of the owner in addition to the signature of the bookkeeper. this is an example of:

proper approvals

which statement about internal controls is false?

public companies do not have to evaluate the effectiveness of internal controls.

an employee states that he steals office supplies for his wife and children because "everyone is doing it." this is an example of:

rationalization

the Sarbanes - Oxley Act of 2002:

requires public companies to issue an internal control report. requires an outside auditor to evaluate the soundness of a public company's internal controls.

when goods are shipped FOB destination

revenue is recognized when the goods are received by the customer

which is not an objective of an internal control system?

risk assessment

the components of internal control do not include:

safeguard assets

which of the following is a true statement about sales?

sales discounts are offered to customers in order to speed up cash flow.

a realized gain on the sale of a trading security occurs when the:

sales price is greater than the trading investments carrying amount.

which is correct order for items to appear on the income statement?

sales revenue, cost of goods sold, gross profit, operating expenses.

sales revenue is based on the _ of the inventory, while cost of goods sold is based on the _ of the inventory.

selling price, cost

the most important internal control over cash it to:

separate cash-handling duties from cash-accounting duties

the person who prepares the bank reconciliation:

should have no other cash duties

the objectives of internal control do not include:

strong control environment

with regard to accounts receivable, a separate account for each customer is kept in an:

subsidiary ledger

payment by check is an important internal control since:

the check provides a record of the payment. the check must be signed by an authorized official who should study the evidence supporting the payment.

in a cash budget, if the cash available before financing falls below the budgeted balance:

the company will need additional financing

when a company receives customers checks by mail:

the mailroom sends all customer checks to the treasurer, who has the cashier deposit the checks in the bank

when preparing a cash budget, the budgeted balance is:

the minimum amount of cash the company needs

for good internal control:

the purchasing agent should not receive the goods or approve the invoice for payment.

stock investments that are to be sold in the near future with the intent of generating profits on the sale are called:

trading securities

which of the following statements is correct ?

trading securities are always current assets

accounts (trade) receivables are amounts to be collected from customers from the sale of goods or services

true

by selling on credit, companies run the risk of not collecting some receivables

true

sales discounts and sales returns and allowances are deducted from gross revenue to determine net sales revenue.

true

the amount of revenue to be recognized in a sale transaction is the cash value of the goods or services transferred from the seller to the buyer

true

under a perpetual inventory system, when a sale is made, the seller prepares

two journal entries

nichols company has shipped goods to one of its customers FOB shipping point. Nichols company will recognize sales revenue when:

when the goods leave Nichols shipping dock