Accounting 2110 Exam 3

It is important that the cash custodian -

Maintain supporting documentation for all payments made from the petty cash fund

In the reconciliation of a bank statement, deposits in transit should be -

Added to the unadjusted bank statement balance

This company policy requires receiving reports to be made for all deliveries by suppliers

Adequate documents and records

What effects occur on a retail stores accounting equation when it records the purchase of merchandise on account, assuming the use of a perpetual inventory system?

Assets AND liabilities increase

If the amount assigned to ending inventory is incorrect, then -

Both the balance sheet and the income statement are affected

Deposits made by a company but not yet reflected in a bank statement are called -

Deposits in transit

Every new employee is required to spend 2 days in training courses to learn company policies What is this an example of?

Effective personnel policies

This company policy prevents accountants from handling cash

Segregation of duties

Transportation-in is part of -

the cost of net purchases

Which of the following is not generally an internal control activity?

Reducing the cost of hiring

Pollet company started business at the beginning of 2012. The company selected FIFO for its inventory costing method. Pollen's profits will be maximized in 2012 in a period of -

Rising prices

Every evening, a jewelry store removes all items of merchandise valued at over $100 from its display What is this an example of?

Safeguards over assets and records

Allowing only certain employees to order goods and services for the company is an example of what internal control procedure?

Segregation of duties

The cost of goods sold is equal to -

The cost of goods available for sale less ending inventory

If a company has average inventory of $18,750 and COGS is $150,000, what would be the company's inventory turnover rate?

Turnover rate = COGS/Avg. inventory Turnover rate = 150,000/18,750 = 8

This includes the accounting system, all policies and procedures of the business, and the environment in which they operate

Internal control structure

When the market value of inventory items has declined below their cost, which method would be the most appropriate in complying with GAAP?

Lower of cost or market

According to the Sarbanes-Oxley act of 2002, who is primarily responsible for establishing and maintaining a system of internal control over the company's financial reporting?

Management of the company

A check returned by a bank because the issuers cash account balance could not cover the check is called a

NSF check

What is the proper journal entry for establishing a petty cash fund in the amount of $300?

Petty cash fund 300(debit) Cash 300(credit)

While preparing a bank reconciliation, which of the following items would be subtracted from the balance per the company's records?

Bank service charges

Having one employee prepare company checks and sign those checks relates to which internal control activity?

A violation of proper segregation of duties

These are the policies and procedures that govern the identification, measurement, recording, and communication of economic information

Accounting controls

Copper industries reported net income of $95,000 for 2012. Early in 2013, the company discovered an error was made in the inventory count and that its ending inventory for 2012 was overstated by $5,000. What is the effect of this error for 2012?

Assets and equity would have been overstated by $5,000 on this balance sheet; expenses would have been understated by $5,000 on the income statement, making net income overstated by $5,000

If a company understates its inventory at the end of the period, what are the effects on COGS and net income for the current year?

COGS will be overstated and net income will be understated

The account which records differences between amounts of cash deposited and amounts from the register tapes is called -

Cash over and short

A physical count of inventory is required even though the company uses the perpetual inventory system. This is an example of which internal control activity?

Check on recorded amounts

This policy requires cash deposits be reconciled with cash register records at the end of every day

Checks on recorded amounts

At the year end inventory account, if goods in transit are shipped FOB shipping point, they should be included in the inventory of -

the buyer

At the year end inventory count, if goods in transit are shipped FOB destination, they should be included in the inventory count of -

the seller