Accounting quizzes CHPS 5-8

which inventory costing method results in highest inventory balance during a period of rising prices? a. FIFO b. both FIFO and LIFO result in the same inventory balance c. weighted average cost d. LIFO

a. FIFO

which one of the following could never be considered to be cash equivalents? a. commons tock issued by a corporation b. corporate commerical paper c. money market funds d. US treasury bills

a. common stock issued by a corporation

deposits made by a company buy not yet reflected in a bank statement are called a. deposits in transit b. debit memoranda c. credit memoranda d. none of the above

a. deposits in transit

which one of the following items would be added to the balance per bank statement in a bank reconciliation? a. deposits in transit b. service charge c. interest on consumer note d. outstanding checks

a. deposits in transit

allowance for doubtful accounts represents a. the difference between the gross amount of accounts receivable and the net realizable value of accounts receivable b. the difference between total sales made on credit and the amount collected from those credit sales c. the amount of uncollectable accounts written off to date d. cash set aside to make up for bad debt losses

a. the difference between the gross amount of accounts receivable and the net realizable value of accounts receivable

which method assigns the cost of the most recent items purchased to ending inventory? a. weighted average cost b. FIFO c. specific identification d. LIFO

b. FIFO

which method assigns the cost of the most recent items purchased to COGS? a. weighted average cost b. LIFO c. specific identification d. FIFO

b. LIFO

which one of the following accounts most likely would appear on the income statement of a merchandise company, but not on the income statement of a service company? a. selling expenses b. administrative expenses c. COGS d. income tax expense

c. COGS

which one of the following is not considered to be a cash equivalent? a. corporate commercial paper due in 90 days after purchase b. a certificate of deposit with a term of 75 days when acquired c. US treasury bills with an original maturity of six months d. a money market account with a stock brokerage firm

c. US treasury bills with an original maturity of six months

which of the following types of inventory accounts would be used by a wholesaler or retailer? a. work in process inventory b. finished goods inventory c. merchandise inventory d. raw materials inventory

c. merchandise inventory

during a period of increasing cost prices, which inventory costing method will yield the lowest COGS? a. any method in which the company uses a periodic inventory system b. LIFO c. weighted average cost d. FIFO

d. FIFO

which inventory costing method results in the lowest income tax expense during a period of decreasing prices? a. specific identification b. LIFO c. weighted average cost d. FIFO

d. FIFO

which of the following represents the subset of board of directors that acts as a direct contact between stockholders and the independent accounting firm? a. internal audit staff b. stockholders representative c. external auditors d. audit committee

d. audit comittee

the party to a promissory note that agrees to repay money on the maturity date of the note is called the a. recipient of the note b. maker of the note c. payee of the note d. lender

d. maker of the note

which one of the approaches for the allowance method of accounting for bad debts emphasizes the net realizable value of accounts receivable on the balance sheet? a. the percentage of accounts receivable approach b. the uncollectable approach c. the direct write off method d. the percentage of net credit sales approach

a. the percentage of accounts receivable approach

how will the payee of the promissory note record the note on its books a. the promissory note will be recorded as an asset b. the promissory note will be recorded as an expense c. the promissory note will be recorded as a liability d. the promissory note will be recorded as revenue

a. the promissory note will be recorded as an asset

checks returned by a bank because customers did not have sufficient funds in their account are called a. certified checks b. NSF checks c. cancelled checks d. outstanding checks

b. NSF checks

when an inventory system updates the inventory account at the time of each sale, this is known as a. a contra-purchase system b. a perpetual system c. an accrual system d. a periodic system

b. a perpetual system

how would deposits in transit be dealt with in a bank reconciliation? a. they would be ignored b. added to bank statement balance c. deducted from company's book balance d. none of these choices

b. added to bank statement balance

a check drawn by a company for $360 in payment of a liability was recorded in the journal as $630. this item would be included on the bank reconciliation as a a. deduction from the balance per the bank statement b. addition to the balance per the company's records c. deduction from the balance per the company's records d. addition to the balance per the bank statement

b. addition to the balance per the company's records

which one of the following is not an accurate description of allowance for doubtful accounts? a. balance sheet account b. income statement account c. current asset account d. contra account

b. income statement account

discounting a note receivable a. slows the collection process b. is the process of selling a promissory note c. requires using an account called discount on notes receivable d. is the process of lending money

b. is the process of selling a promissory note

if a company uses the allowance method of accounting for bad debts, which one of the following statements is true? a. it will record bad debts only when an account is determined to be uncollectable b. it will report accounts receivable in the balance sheet at their net realizable value c. it violates the matching principle d. it will reduce the accounts receivable at the end of the accounting period for estimated uncollectable amounts

b. it will report accounts receivable in the balance sheet at their net realizable value

which of the following is not a requirement of Sarbanes-Oxley? a. external auditors can no longer provide human resource services b. must establish an internal control system that guarantees financial accuracy c. annual report must include an internal control report d. external auditors can no longer provide brokerage services

b. must establish an internal control system that guarantees financial accuracy

which one of the following items would be subtracted from the balance per books in a bank reconciliation? a. deposit in transit b. service charges c. outstanding checks d. interest on customer not

b. service charges

all of the following statements regarding the gross profit ratio are true except a. the GPR explains how many cents on every dollar are available to cover expenses other than COGS and to earn a profit b. the GPR alone is sufficient to determine a company's profitability c. if a company's net sales were $200,000 and COGS were $120,000, it's GPR would be 40% d. managers, investors, and creditors use the GPR to measure one aspect of profitability

b. the GPR alone is sufficient to determine a company's profitability

at the year end inventory count, if goods in transit are shipped FOB shipping point, they should be included in the inventory count of a. both seller and buyer b. the buyer c. neither buyer or seller d. the seller

b. the buyer

the group within an organization that is responsible for monitoring and evaluating the internal control system is called a. the accounting staff b. the internal audit staff c. the board of directors d. the audit committee

b. the internal audit staff

which one of the approaches for the allowance method of accounting for bad debts emphasizes matching debts expense with revenue on the income statement? a. the percentage of accounts receivable approach b. the percentage of net credit sales approach c. the uncollectable approach d. the direct write off method

b. the percentage of net credit sales approach

at the year end inventory count, if goods in transit are shipped FOB destination, they should be included in the inventory count of a. the buyer b. the seller c. neither

b. the seller

which of the following items is not included in cash? a. a savings account at the bank b. a checking account at the bank c. a bank certificate of deposit for one year d. all of the above are included in cash

c. a bank certificate of deposit for one year

which one of the following is a sound internal control procedure for cash disbursements? a. making copies of purchase orders for the receiving department so they know how many items to be expected upon delivery b. requiring the signature of the purchasing department supervisor on checks c. comparing purchase requisitions, purchase orders, receiving reports, and invoices d. using presigned checks to facilitate payment within the cash discount period

c. comparing purchase requisitions, purchase orders, receiving reports, and invoices

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

c. preparing adjustments to reverse the transactions recorded for checks that are still outstanding

effective cash management and control includes all of the following except: a. bank reconciliations b. the use of a petty cash fund c. short terms investments of excess cash d. purchase of stocks and bonds

d. purchase of stocks and bonds

in order to evaluate a company's gross profit ratio a. the ratio should be compared with those of prior years b. the ratio should be compared with other companies in the same industry c. the ratio should be compared with those of both prior years and competitors d. the ratio should be compared with forecasted financial statements

c. the ratio should be compared with those of both prior years and competitors

which one of the following statements best describes the term "outstanding check"? a. a check written by the company and presented to the bank for payment b.a check written by a customer that has not yet been presented to the bank for payment c. a check written by a customer that has been presented to the bank for payment d. a check written by the company but not yet presented to the bank for payment

d. a check written by the company but not yet presented to the bank for payment

how would interest earned on a checking account be dealt with in a bank reconciliation? a. added to bank statement balance b. deducted from company's book balance c. deducted from bank statement balance d. added to company's book balance

d. added to company's book balance

if the amount assigned to ending inventory is incorrect a. the balance sheet is affected, but COGS is not b. the balance sheet is affected, but the income statement is not c. the income statement is affected, but the balance sheet is not d. both balance sheet and income statement are affected

d. both balance sheet and income statement are affected

which of the following is not a reconciling item? a. NSF checks b. outstanding checks c. deposits in transit d. cancelled checks

d. cancelled checks

which of the following terms best describes "cost of goods available for sale"? a. cost of goods available for sale is an expense account b. cost of goods available for sale is subtracted from net sales to arrive at the gross profit margin c. cost of goods available for sale is added to beginning inventory to determine cost of purchases during the period d. cost of goods available for sale is allocated into cost of goods on hand and COGS at the end of the fiscal year

d. cost of goods available for sale is allocated into cost of goods on hand and COGS at the end of the fiscal year

transportation-in is a. added to transportation-out as part of the calculation of cost of goods sold b. an operating expense c. part of puchases d. part of cost of goods purchased

d. part of cost of goods purchased

which one of the following statements is true? a. when a company uses a subsidiary ledger, the balance in the control account, accounts receivable, shows only the amount the company expects to collect from the accounts receivable, net of any expected uncollectable accounts b. a subsidiary ledger takes the place of the control account for some companies c. an accounts receivable subsidiary ledger represents amounts due to vendors and suppliers d. the balance in the control account, accounts receivable, should be equal to the sum of the balances in the subsidiary ledger for accounts receivable

d. the balance in the control account, accounts receivable, should be equal to the sum of the balances in the subsidiary ledger for accounts receivable

an internal control system consists of all the following policies and procedures except a. those necessary to ensure the reliability of its accounting records b. those necessary to ensure the accomplishment of its overall objectives c. those necessary to ensure the safeguarding of an entity's assets d. those necessary to ensure that cash on hand and on deposit in checking accounts is beyond the minimal amount for ongoing operations

d. those necessary to ensure that cash on hand and on deposit in checking accounts is beyond the minimal amount for ongoing operations

which method assigns the same cost to all units whether sold or left in ending inventory? a. specific identification b. LIFO c. FIFO d. weighted average cost

d. weighted average cost