Exit Exam
Hughey Co. as lessee records a finance lease of machinery on January 1, 2018. The seven annual lease payments of $875,000 are made at the end of each year. The present value of the lease payments at 10% is $4,260,000. Hughey uses the effective-interest method of amortization and sum-of-the-years'-digits depreciation (no residual value). Prepare all of Hughey's journal entries for 2018 Annual Reduction Lease Interest (10%) of Lease Date Payments on Liability Liability Lease Liability 1/1/18 $4,260,000 12/31/18 $875,000 $426,000 $449,000 3,811,000 12/31/19 875,000 381,100 493,900 3,317,100
01./01/18 Leased machinery 4,260,000 Leased Liability 4,260,000 12/31/18 lease Liability 449,000 Lease Intrest expense 426,000 Cash 875,000
Kennison Company has cash in bank of $20,000, restricted cash in a separate account of $3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should report cash of
20,000
Marr Co. had the following sales and accounts receivable balances, prior to any adjustments at year end: Credit sales $10,000,000 Accounts receivable 3,000,000 Allowance for uncollectible accounts 50,000 Marr uses 3% of accounts receivable to determine its allowance for uncollectible accounts at year end. By what amount should Marr adjust its allowance for uncollectible accounts at year end?
40,000
An entity has the following cost components for 100,000 units of product for the year: Direct materials $200,000 Direct labor 100,000 Manufacturing overhead 200,000 Selling and administrative expense 150,000 All costs are variable except for $100,000 of manufacturing overhead and $100,000 of selling and administrative expenses. The total costs to produce and sell 110,000 units for the year are
695,000
Ryan Distribution Co. has determined its December 31, 2017 inventory on a FIFO basis at $980,000. Information pertaining to that inventory follows: Estimated selling price $1,020,000 Estimated cost of disposal 40,000 Normal profit margin 120,000 Current replacement cost 900,000 Ryan records losses that result from applying the lower-of-cost-or-market rule. At December 31, 2017, the loss that Ryan should recognize is
80,000
Cost drivers are
Activities that cause costs to increase as the activity increases
Which of the following best describes current practice in accounting for leases
All long-term leases are capitalized
Which one of the following best describes direct labor?
Both a product cost and a prime cost.
An internal auditor suspects that certain client employees are ordering merchandise for themselvesover the internet without recording the purchase or receipt of the merchandise. When vendors'invoices arrive, one of the employees approves the invoices for payment. After the invoices are paid, theemployee destroys the invoices and the related vouchers. In gathering evidence regarding the fraud, theinternal auditor most likely would select items for testing from the file of all:
Cash disbursements.
Which of the following is not typical receivables skimming scheme?
Cashier Theft
Which of the following statements is true regarding a statement of cash flows prepared under IFRS?
Certain bank overdrafts may be classified as cash and cash equivalents.
Coordination of internal and external auditing can reduce the overall costs. Who is responsible foractual coordination of internal and external auditing efforts
Chief audit executive
Which of the following is not one of the lease classification tests?
Collectibility
Tracing a sample of purchase requisitions to receiving reports and to the PP&E records is used to test:
Cutoff
When auditing property, plant, and equipment (PP&E), the internal auditor's approach is generally to:
Examine evidence supporting additions during the year.
Which of the following is NOT a method for delaying expense recognition?
Expensing capital expenditures
Which of the following is not reported in the income statement under IFRS
Extraordinary items
Mention the main schemes under financial statement fraud
Five basic types of financial statement fraud exist: fictitious sales improper expense recognition incorrect asset valuation (Links to an external site.) hidden liabilities unsuitable disclosures
What is the most accurate term for the procedures used by the board to oversee activities performed to achieve organizational objectives?
Governance
What is the most accurate term for the procedures used by the board to oversee activities performed toachieve organizational objectives?
Governance
Ethical corporate behavior is expected to lead to
Higher profitability in the long-term
The IIA's Code of Ethics does not include as one of its principles:
Independence
New Inventory standard: When the future revenue-producing ability associated with inventory drops below its original cost, the inventory should be written down in the period in which the loss occurs with the loss recognized in the income statement. Historical cost is abandoned when the future utility of the asset is no longer as great as its original cost. This is known as the lower-of-cost-and-Net Realizable Value (LCNRV) method of valuing inventory and is an accepted GAAP practice. When inventory declines in value below its original cost, the inventory should be written down to reflect the loss. Who Is NOT Affected by the Amendments in This Update?
Inventory that is measured using LIFO and/or retail method
Which inventory cost flow method is prohibited according to IFRS?
LIFO
Not reporting environmental issues is an example of:
Lack of integrity
Incomplete disclosure of the company's revenue recognition policy is an example of:
Lack of transparency
Failure to write down uncollectible receivables for bad debts results in which of the following?
Overstatement of both accounts receivable and net income
With respect to whistleblowing, the Sarbanes-Oxley Act:
Protects employees of publicly traded companies who provide evidence in fraud cases
In testing for a proper cutoff of purchases of materials, the internal auditor would most likely examine:
Receiving report
Which of the following is the best control procedure to prevent the payment of an invoice twice
Review of supporting documentation by the person signing the check
A weakness in internal control over recording retirements of equipment may cause an internal auditor to:
Select certain items of equipment from the accounting records and locate them in the plant.
Which of the following is not considered an important element of segregation of duties in the purchasingprocess?
Separating the check signing and check mailing functions
Under IFRS the amount of capital received in excess of par value would be credited to
Share premium
An internal auditor who encounters an ethical dilemma not explicitly addressed by The IIA's Code ofEthics should always:
Take action consistent with the principles embodied in The IIA's Code of Ethics.
The authority of the internal audit function is limited to that granted by:
The Management and the Board
When identifying risks that might result in material misstatements due to fraud, auditors should consider which of the following?
The significance of the risk of a material misstatement The pervasiveness of the risk of a material misstatement
Enterprise Risk Management
a process used by a company to identify its risks and develop responses to them that enable it to be reasonably assured of meeting its goals
A long term operating lease is report it in the books under the new standard
true
The FASB agrees with the capitalization approach and requires companies to capitalize all long-term leases
true
Under IFRS companies does not use premium or discount accounts, but instead show the bond at its net amount
true
What are the four corruption schemes
bribery, illegal gratuities, economic extortion, and conflicts of interest
Which of the following fraudulent entries is most likely to be made to conceal the theft of an asset?
debit expenses and credit the assets
The third step in the process for revenue recognition is to
determine the transaction price
In the engagement planning phase, the scope of an internal audit engagement is defined by
engagement objectives
Which one it is NOT a main fraud category based on ACFE
extortion
The first step in the process for revenue recognition is to
identify the contract with customers.
The second step in the process for revenue recognition is to
identify the separate performance obligations in the contract.
Control environment, risk assessment, control activities, information and communication, and monitoring are all components of which of the following?
internal controls
A plant site donated by a township to a manufacturer that plans to open a new factory should be recorded on the manufacturer's books at
its fair value.
Fraudulent financial reporting can be accomplished by all of the following methods, EXCEPT
none of the above
The classifications of a lease by the lessee are
operating and finance leases
The classifications of a lease by the lessee are
operating and finance leases.
The last step in the process for revenue recognition is to
recognize revenue when each performance obligation is satisfied
Monitoring internal control systems is the primary responsibility of the:
senior management
COSO's 2013 Internal Control - Integrated Framework does not include the following as one of the keycomponents of internal control systems
strategy
The definition of internal auditing, given by The IIA, includes a focus on
all of the above (risk management, governance,and internal controls)
The fourth step in the process for revenue recognition is to
allocate transaction price to the separate performance obligations
A "bill and hold" scheme is most likely to include
billing of items that are held by customers for future revenue production purposes.
