ACC 212 Final Exam Study Guide - VIDEO QUESTIONS (Chapters 5 - 8 )
Which of the following statements regarding operating cycles are true? A company must complete its operating cycle efficiently to be successful The activities in the operating cycle ultimately lead to cash The operating cycle is a series of activities that a company undertakes to generate revenues Merchandising and manufacturing companies have operating cycles, but service companies typically do not.
A company must complete its operating cycle efficiently to be successful The activities in the operating cycle ultimately lead to cash The operating cycle is a series of activities that a company undertakes to generate revenues
Which of the following are considered disadvantages of allowing customers to purchase goods on credit? A delay in cash collections Bad debt costs Decreased revenues Increased wage costs to determine if customers are creditworthy Increased wage costs resulting from the collection process
A delay in cash collections Bad debt costs Increased wage costs to determine if customers are creditworthy Increased wage costs resulting from the collection process
Which of the following statements about the receivables turnover ratio is true? A higher receivables turnover ratio means faster (better) turnover The receivables turnover ratio is calculated by dividing net sales revenue by average receivables The receivables turnover ratio is calculated by dividing 365 by the number of days to collect receivables The receivables turnover ratio measures the average number of days from sale on account to collection.
A higher receivables turnover ratio means faster (better) turnover
Which of the following statements about credit sales are true? Revenue is reported when the company is paid by the customer Accounts receivable arise from credit sales Accounts receivable should be reported at net realizable value. Revenue is reported when the company fulfills its promise to transfer control of a good or service to a customer The cost of a bad debt should be recorded in the accounting period in which a business realizes that a customer will not pay the amount owed
Accounts receivable arise from credit sales Accounts receivable should be reported at net realizable value. Revenue is reported when the company fulfills its promise to transfer control of a good or service to a customer
Which of the following describe the ways in which the cost of inventory is reported? As a current asset As cost of goods sold As gross profit As sales revenue On the balance sheet On the income statement
As a current asset As a cost of goods sold On the balance sheet On the income statement
Which of the following are categories of employee fraud? Asset misappropriation Corruption Deception Financial statement fraud
Asset misappropriation Corruption Financial statement fraud
How can a company enhance its document procedures? Assign sequential numbers to documents Check to ensure that each document number corresponds to one and only one accounting entry Require digital and paper documents for all business activities Require pass codes to open cash registers Restrict access to check-signing equipment
Assign sequential numbers to documents Check to ensure that each document number corresponds to one and only one accounting entry Require digital and paper documents for all business activities
Which of the following describes segregation of duties? Assigning responsibilities for recordkeeping to employees who do not have access to the assets for which they are accounting Assigning workers to the same tasks but on different days Having a sufficient number workers available for all necessary jobs Restricting employees to jobs for which they have adequate training
Assigning responsibilities for recordkeeping to employees who do not have access to the assets for which they are accounting
What is the equation for cost of goods available for sale? Beginning inventory plus cost of goods sold Cost of goods sold plus purchases Beginning inventory plus purchases Ending inventory minus beginning inventory
Beginning inventory plus purchases
Which of the following is included in the operating cycle of a merchandising company? Buy inventory Collect cash Make inventory Pay operating expenses Sell services
Buy inventory Collect cash Pay operating expenses Sell services
Which of the following are included in the cash amount that is reported in the current assets section of a company's balance sheet? Cash deposited with banks Cash equivalents Petty cash on hand Restricted cash expected to be used up within one year Restricted cash not expected to be used up within one year
Cash deposited with banks Cash equivalents Petty cash on hand
In a perpetual inventory system, which of the following accounts are used by merchandisers to record sales of merchandise? Cash or Accounts Receivable Cost of Goods Sold Gross Profit Inventory Sales Revenue
Cash or Accounts Receivable Cost of Goods Sold Inventory Sales Revenue
Which of the following are documented on a bank statement that is provided to a company? Checks written by the company that have cleared the bank Deposits made by the business Errors made by the business in recording cash transactions Interest earned on the account balance Service charges
Checks written by the company that have cleared the bank Deposits made by the business Interest earned on the account balance Service charges
What types of companies are required to comply with the requirements of the Sarbanes-Oxley Act (SOX)? All companies located in the U.S. All foreign companies that do business in the U.S Companies that trade on the U.S. stock exchanges Foreign companies that trade on the U.S. stock exchanges U.S. companies that trade on the U.S. stock exchanges
Companies that trade on the U.S. stock exchange
Which of the following statements regarding reporting sales-related transactions are true? Companies track sales returns, allowance, and discount information internally to inform management decisions Most externally reported income statements begin with Sales Revenue, net Most externally reported income statements begin with Sales Revenue, gross If a company has sales returns and allowances and sales discounts, its Sales Revenue, gross will be less than its Sales Revenue, net.
Companies track sales returns, allowance, and discount information internally to inform management decisions Most externally reported income statements begin with Sales Revenue, net
Which controls activities would be performed to meet the independently verify principle of internal control? Assigning each task to only one employee Comparing the company's accounting information to information kept by an independent third party Prenumbering documents to ensure that all business activities are supported by documentation Restricting access to company's assets and records Segregating of duties
Comparing the company's accounting information to information kept by an independent third party
What is the term used to describe the attitude people in the organization hold regarding internal control? Compliance Control environment Segregation of duties Risk assessment Monitoring activities
Control environment
In a perpetual inventory system, which of the following accounts appear on the income statement of merchandisers? Cash or Accounts Receivable Cost of Goods Sold Inventory Sales Revenue
Cost of Goods Sold Sales Revenue
At year-end, Waring Company determined that it should write down its inventory by $475. What account(s) will be included in the entry to write-down the inventory? Cost of Goods Sold Inventory Inventory Write-Down Loss on Inventory Valuation Write-Down
Cost of Goods Sold Inventory
Which of the following statements regarding cost of goods sold is true? Cost of Goods Sold is a current asset reported on the balance sheet Cost of Goods Sold is a current asset reported on the income statement Cost of Goods Sold is an expense account reported on the balance sheet Cost of Goods Sold is an expense account reported on the income statement
Cost of Goods Sold is an expense account reported on the income statement
Which of the following accounts are included in the month-end adjustment for expected additional returns? Cash Cost of Goods sold Inventory Inventory—Estimated Returns Refund Liability Sales Revenue
Cost of Goods sold Inventory - Estimated Returns Refund Liability Sales Revenue
f a perpetual inventory method is used, what is "forced out" using the cost of goods sold equation? Cost of ending inventory Cost of goods available for sale Cost of goods sold
Cost of ending inventory
If a periodic inventory method is used, what is "forced out" using the cost of goods sold equation? Cost of ending inventory Cost of goods available for sale Cost of goods sold
Cost of goods sold
What is the cost of goods available for sale allocated to? Beginning inventory and purchases Cost of goods sold reported on the income statement and ending inventory reported on the balance sheet Gross profit sold reported on the income statement and ending inventory reported on the balance sheet Net sales sold reported on the income statement and ending inventory reported on the balance sheet
Cost of goods sold reported on the income statement and ending inventory reported on the balance sheet
Which of the following statements regarding inventory are true? Costs included in the inventory account include only the amounts paid to acquire the asset Costs included in the inventory account include the amounts paid to acquire the asset and prepare it for sale Inventory is reported as a current asset on the balance sheet. As inventory is sold, the cost of the inventory is expensed as cost of goods sold on the income statement Inventory that was sold during the period remains on the balance sheet as a current asset
Costs included in the inventory account include the amounts paid to acquire the asset and prepare it for sale Inventory is reported as a current asset on the balance sheet. As inventory is sold, the cost of the inventory is expensed as cost of goods sold on the income statement
A company deposits and stores its cash in a bank. Which internal control principles are evident in this procedure? Documents procedure Establishing responsibility Independently verifying the information Restricting access Segregating duties
Document procedure Independently verifying the information Restricting access
Which of the following explain why internal controls can never completely prevent and detect errors and frauds? The costs of controls always exceed their benefits Employees may collude to get around controls Employees may override controls Fraud Human error
Employees may collude to get around controls Employees may override controls Fraud Human error
Which of the following are goals of a manager charged with overseeing inventory? Ensuring inventory quality meets the customers' expectations and company standards Maintaining a sufficient quantity of inventory Minimize the cost of carrying inventory Obtaining sales orders from customers so that goods can be sold soon after they are acquired
Ensuring inventory quality meets the customers' expectations and company standards Maintaining a sufficient quantity of inventory Minimize the cost of carrying inventory
Which of the following are common principles of internal control? Control environment Establish responsibility Reporting procedures Restrict access Segregate duties
Establish responsibility Restrict access segregate duties
When costs are rising, which method would result in the largest amount of income tax expense? FIFO LIFO Specific identification Weighted average cost
FIFO
Lambert Company, a wholesale merchandiser, would record a sale when the goods leave Lambert's shipping department only if which of the following possible times for transfer of controls is specified in the sales agreement? FOB cash on delivery FOB destination FOB prepaid FOB shipping point Correct
FOB shipping point
Which of the following statements regarding sales discounts are true? Companies can choose between the "gross method" and the "net method" to account for sales discounts If Geneva Company sells office supplies on account to a local business for $2,000 with payment terms of 2/30, n/60, the company's Sales Revenue of $2,000 will be reduced by a $40 Sales Discount if the discount is taken Merchandisers can entice their customers to pay promptly for sales on account by offering a sales discount Terms of "3/10, n/30" mean that if the purchaser pays by the 30th day of taking ownership of the goods, a 3% purchase discount can be deducted from the amount owed.
If Geneva Company sells office supplies on account to a local business for $2,000 with payment terms of 2/30, n/60, the company's Sales Revenue of $2,000 will be reduced by a $40 Sales Discount if the discount is taken Merchandisers can entice their customers to pay promptly for sales on account by offering a sales discount
Which of the following are the factors that exist when fraud occurs? Deception Incentive Opportunity Rationalization Unethical behavior
Incentive Opportunity Rationalization
What is the formula for calculating interest on a note receivable? Interest = Principal × Interest Rate Interest = Principal × Interest Rate × Time Interest = Principal × Interest Rate ÷ Time
Interest = Principal x Interest Rate x Time
What accounts are included in the entry to accrue interest earned but not yet received? Cash Interest Receivable Interest Revenue Note receivable
Interest Receivable Interest Revenue
Which of the following is not reported on a multistep income statement? Cost of goods sold Gross profit Inventory Sales revenue
Inventory
What is the term used to describe the process of buying and selling inventory? Cash-to-cash cycle Inventory management Inventory turnover Operating cycle
Inventory turnover
Potboiler Company has a lending agreement with its bank that states that the company must maintain stockholders' equity of at least $500,000. The company will be required to repay its loan balance on demand if that requirement is not met. What term is used to describe this type of requirement in a lending agreement? Call feature Credit rating Loan covenant Securitization
Loan Covenant
Which of the following statements regarding sales of bundled items are true? Many businesses package several items into a "bundle" and sell the bundle at a single price Revenue is recognized when the final performance obligation included in a sale of bundled items is satisfied The transaction price must be allocated to the various performance obligations based on the stand-alone selling prices of the product(s) and service(s) When a bundle includes only products, the seller fulfills its performance obligations at the delivery of the product bundle
Many businesses package several items into a "bundle" and sell the bundle at a single price The transaction price must be allocated to the various performance obligations based on the stand-alone selling prices of the product(s) and service(s) When a bundle includes only products, the seller fulfills its performance obligations at the delivery of the product bundle
Accounting rules require companies using LIFO to compare inventory cost to _________
Market value
Which of the following describe a note receivable? More formal way of extending credit Specified interest rate Specified maturity date Stronger legal claim Used for small-dollar items
More formal way of extending credit Specified interest rate Specified maturity date Stronger legal claim
Accounting rules require companies using FIFO to compare inventory cost _____________
Net realizable value
Which of the following can be used to calculate cost of goods sold? Beginning inventory plus purchases Ending inventory plus purchases Net sales minus cost of goods available for sale Net sales minus gross profit
Net sales - gross profit
What are the two systems used to record inventory transactions? Accrual basis Cash basis Periodic Perpetual Shrink
Periodic Perpetual
Which of the following is not an example of a company implementing controls to restrict access? Protecting computer systems with firewalls Placing security cameras in a server room Requiring employees to use passcodes or keys to access important files Restricting access to check-signing equipment Securing cash or valuables in a safe
Placing security cameras in a server room
Janet Cartwright feels that she is underpaid and is entitled to the inventory that she steals from the company's warehouse. What is the term used to describe this fraud triangle factor? Entitlement Incentive Opportunity Rationalization Justification
Rationalization
Which of the following is the term used to describe the process of selling and collecting? Credit-granting activities Receivables turnover Operating cycle Turnover ratio
Receivable turnover
Which of the following are the steps followed by the allowance method? Record the estimated bad debts in the period credit sales occur using an end-of-period adjustment Record the estimated bad debts when they are known to be uncollectible Write-off specific customer balances in the period credit sales occur using an end-of-period adjustment Write-off specific customer balances when they are known to be uncollectible
Record the estimated bad debts in the period credit sales occur using an end-of-period adjustment Write-off specific customer balances when they are known to be uncollectible
Which of the following statements regarding purchase discounts are true? Terms of "2/10, n/30" mean that if the purchaser pays by the 10th day of taking ownership of the goods, a 2% purchase discount can be deducted from the amount owed A company that accounts for purchase discounts when the goods are first purchased is using the "gross method." Companies can choose between the "gross method" and the "net method." Regardless of the method used, inventory ultimately is recorded at its cost after subtracting any purchase discounts taken
Terms of "2/10, n/30" mean that if the purchaser pays by the 10th day of taking ownership of the goods, a 2% purchase discount can be deducted from the amount owed Companies can choose between the "gross method" and the "net method." Regardless of the method used, inventory ultimately is recorded at its cost after subtracting any purchase discounts taken
Which of the following are the reasons that a company's records can differ from the bank's records? Checks were written by the company that have cleared the bank Deposits made by the company that have been processed by the bank The bank has recorded items the company doesn't know about until the bank statement is examined The company has recorded Items the bank doesn't know about at the time it prepares the statement of account
The bank has recorded items the company doesn't know about until the bank statement is examined The company has recorded Items the bank doesn't know about at the time it prepares the statement of account
Which of the following statements about the days to collect is true? A higher number of days to collect receivables is more desirable than a lower number The days to collect is calculated by dividing net sales revenue by average net receivables The days to collect is calculated by dividing the receivables turnover ratio by 365 The days to collect measures the average number of days from sale on account to collection
The days to collect measures the average number of days from sale on account to collection
Which of the following statements regarding the perpetual and periodic inventory systems are true? The periodic inventory system continually records, or tracks, inventory The perpetual inventory system allows managers to determine how much inventory needs to be purchased to replenish what has been sold The periodic inventory system allows managers to estimate shrinkage The perpetual inventory system is superior to the periodic inventory system because it provides the most up-to-date record of purchasing and selling inventory
The perpetual inventory system allows managers to determine how much inventory needs to be purchased to replenish what has been sold The perpetual inventory system is superior to the periodic inventory system because it provides the most up-to-date record of purchasing and selling inventory
Which of the following inventories are held and reported by a manufacturer? Work in process inventory Merchandise inventory Consignment inventory Merchandise inventory and consignment inventory
Work in process inventory
A weak system of internal controls provides the _______ to commit fraud.
opportunity