Q&A Hero

Q: In reimbursing the petty cash fund: A. Cash is debited. B. Petty Cash is credited. C. Petty Cash is debited. D. Appropriate expense accounts are debited. E. No expenses are recorded.

Q: When a petty cash fund is in use: A. Expenses paid with petty cash are recorded when the fund is replenished. B. Petty Cash is debited when funds are replenished. C. Petty Cash is credited when funds are replenished. D. Expenses are not recorded. E. Cash is debited when funds are replenished.

Q: The entry to record reimbursement of the petty cash fund for postage expense should include: A. A debit to Postage Expense. B. A debit to Petty Cash. C. A debit to Cash. D. A debit to Cash Short and Over. E. A debit to Supplies.

Q: The entry necessary to establish a petty cash fund should include: A. A debit to Cash and a credit to Petty Cash. B. A debit to Cash and a credit to Cash Over and Short. C. A debit to Petty Cash and a credit to Cash. D. A debit to Petty Cash and a credit to Accounts Receivable. E. A debit to Cash and a credit to Petty Cash Over and Short.

Q: At the end of the day, the cash register's record shows $1,000 but the count of cash in the register is $1,035. The proper entry to record this excess includes a: A. Credit to Cash for $35. B. Debit to Cash for $35. C. Credit to Cash Over and Short for $35. D. Debit to Cash Over and Short for $35. E. Debit to Petty Cash for $35.

Q: At the end of the day, the cash register's record shows $1,250, but the count of cash in the cash register is $1,245. The correct entry to record the cash sales for the day is: A. Cash 1,245 Sales 1,245 B. Cash 1,245 Cash Over and Short 5 Sales 1,250 C. Cash 1,250 Sales 1,250 D. Cash 1,250 Sales 1,245 Cash Over and Short 5 E. Cash over and short 5 Sales 5

Q: Which of the following procedures would weaken the control over cash receipts that arrive through the mail? A. After the mail is opened, a list (in triplicate) of the money received is prepared with a record of the sender's name, the amount, and an explanation of why the money is sent. B. The bank reconciliation is prepared by a person who does not handle cash or record cash receipts. C. For safety, only one person should open the mail and that person should immediately deposit the cash received in the bank. D. The cashier should not also be the record keeper who records the amounts received in the accounting records. E. All of the above are good internal control procedures over cash receipts that arrive through the mail.

Q: A voucher is an internal file that: A. Is prepared after an invoice is received. B. Is used as a substitute for an invoice. C. Is used to accumulate information needed to control cash disbursements and to ensure that transactions are properly recorded. D. Takes the place of a bank check. E. Is prepared before the company orders goods.

Q: The Cash Over and Short account: A. Is used to record a credit balance in the cash account. B. Is an income statement account used for recording the income effects of cash overages and cash shortages from errors in making change and from missing petty cash receipts. C. Is not necessary in a computerized accounting system. D. Can never have a debit balance. E. Can never have a credit balance.

Q: A set of procedures and approvals that is designed to control cash disbursements and the acceptance of obligations is referred to as a(n): A. Internal cash system B. Petty cash system C. Cash disbursement system D. Voucher system E. Cash control system

Q: An income statement account that is used to record cash overages and cash shortages arising from omitted petty cash receipts and from errors in making change is called the: A. Cash Lost account. B. Bank Reconciliation account. C. Petty Cash account. D. Cash Over and Short account. E. Cash Receivable account.

Q: In year 1 a company had net sales of $50,000 and ending accounts receivable of $2,000. In year 2 this company had net sales of $80,000 and ending accounts receivable of $4,000. Use days' sales uncollected to determine which of the following statements is true:. A. Days' sales uncollected in year 1 is 14.6 days and in year 2 is 18.25 days. This measure indicates that the company's liquidity is declining. B. Days' sales uncollected in year 1 is 14.6 days and in year 2 is 18.25 days. This measure indicates that the company's liquidity is improving. C. Days' sales uncollected in year 1 is 25 days and in year 2 is 20 days. This measure indicates that the company's liquidity is declining. D. Days' sales uncollected in year 1 is 25 days and in year 2 is 20 days. This measure indicates that the company's liquidity is improving. E. Days' sales uncollected in year 1 is .04 days and in year 2 is .05 days. This measure indicates that the company's liquidity is improving.

Q: Which of the following statements is true given the data below? Company A Company B Sales $250,000 $400,000 Ending Accounts Receivable $55,000 $55,000 A. Both companies have the same degree of liquidity with regard to their accounts receivable. B. Company A is likely to collect accounts receivable more quickly than Company B. C. Company B is likely to collect accounts receivable more quickly than Company A. D. Company A and Company B will likely collect accounts receivable at the same time. E. It is impossible to estimate how much time it will take for these companies to collect their receivables based on the given information.

Q: Mattel had net sales of $4,235 million and ending accounts receivable of $775 million. Days' sales uncollected is equal to: A. 298 days B. 66.8 days C. 19.4 days D. 81.8 days E. 65.2 days

Q: A company had net sales of $31,500 and ending accounts receivable of $2,700 for the current period. Its days' sales uncollected is equal to: A. 11.7 days B. 23.3 days C. 31.3 days D. 42.5 days E. 46.6 days

Q: The number of days' sales uncollected is calculated by: A. Dividing accounts receivable by net sales. B. Dividing accounts receivable by net sales and then multiplying by 365. C. Dividing net sales by accounts receivable. D. Dividing net sales by accounts receivable and then multiplying by 365. E. Multiplying net sales by accounts receivable and dividing the result by 365.

Q: The days' sales uncollected ratio is used to: A. Measure how many days of sales remain until the end of the year. B. Determine the number of days that have passed without collecting on accounts receivable. C. Identify the likelihood of collecting sales on account. D. Estimate how much time is likely to pass before the amount of accounts receivable is collected. E. Measure the amount of layaway sales for a period.

Q: The number of days' sales uncollected: A. Is used to evaluate the liquidity of receivables. B. Is calculated by dividing accounts receivable by sales. C. Measures a company's ability to pay its bills on time. D. Measures a company's debt to income. E. Is calculated by dividing sales by accounts receivable.

Q: Why is it a matter of good internal control to deposit all cash receipts daily and make all payments for goods and services by check? A. When no paper documents are required, there is increased convenience and lower cost B. These actions control the access to cash and create an independent record of all cash activities. C. These procedures result in a more extensive testing of a company's records. D. The Sarbanes-Oxley Act requires these steps be taken by each publicly traded company. E. These procedures allow management to determine if projected cash receipts and disbursements came in over or under budgeted amounts.

Q: For which item does a bank NOT issue a debit memorandum? A. To notify a depositor of all withdrawals through an ATM. B. To notify a depositor of a deduction to a depositor's account. C. To notify a depositor of a bounced check. D. To notify a depositor of periodic payments arranged in advance, by a depositor. E. To notify a depositor of a deposit to their account.

Q: A remittance advice is: A. An explanation for a payment by check. B. A bank statement. C. A voucher. D. An EFT. E. A canceled check.

Q: A check: A. Involves the writer, the signers, the cashier, and the bank. B. Involves the maker, the payee and the bank. C. Involves the maker and the payee. D. Involves the bookkeeper, the payee, and the bank. E. Involves the signer, the cashier, and the company.

Q: Cash equivalents: A. Include savings accounts. B. Include checking accounts. C. Are short-term investments sufficiently close to their maturity date that their value is not sensitive to interest rate changes. D. Include time deposits. E. Have no immediate value.

Q: Cash equivalents: A. Are short-term, highly liquid investments. B. Include six-month CDs. C. Include checking accounts. D. Are recorded in petty cash. E. Include money orders.

Q: Cash, not including cash equivalents, includes: A. Postage stamps. B. Coins, currency, and checking accounts. C. IOUs. D. Two-year certificates of deposit. E. Money market funds.

Q: Which of the following are risks of e-commerce? A. Firewalls, fraud, and computer viruses. B. Encryption, stolen credit card numbers, and fraud. C. Stolen credit card numbers, computer viruses, and impersonation. D. Computer viruses, encryption, and stolen credit card numbers. E. Impersonation, encryption, and firewalls.

Q: Which of the following is the most serious limitation of internal controls? A. Computer error B. Human fraud or human error C. Cost-benefit principle D. Cybercrime E. Management fraud

Q: The impact of technology on internal controls includes which of the following? A. Reduced processing errors. B. Elimination of the need for regular audits. C. Elimination of the need to bond employees. D. More efficient separation of duties. E. Elimination of fraud.

Q: Prenumbered printed checks are an example of which internal control principle? A. Technological controls. B. Maintain adequate records. C. Perform regular and independent reviews. D. Establish responsibilities. E. Divide responsibility for related transactions.

Q: When two clerks share the same cash register, which internal control principle is violated? A. Establish responsibilities B. Maintain adequate records C. Insure assets D. Bond key employees E. Apply technological controls

Q: A company's internal control system: A. Eliminates the risk of loss. B. Monitors and controls business activities. C. Eliminates human error. D. Eliminates the need for audits. E. Is not necessary in large companies.

Q: A good system of internal control: A. Urges adherence to prescribed managerial policies. B. Insures profitable operations. C. Eliminates the need for an audit. D. Requires the use of noncomputerized systems. E. Is not necessary if the company uses a computerized system.

Q: The main principles of internal control include which of the following: A. Establish responsibilities. B. Maintain minimal records. C. Use only computerized systems. D. Bond all employees. E. Require automated sales systems.

Q: Assume that a buyer receives a shipment of MODEL SD010 with an invoice amount of $780, although $870 worth of goods were received. The purchase order was for $870. Since the difference was in the buyer's favor, the buyer's purchasing department should authorize payment of $780.

Q: A purchase requisition is a document the purchasing department sends to the vendor to place an order.

Q: In order to streamline the purchasing process, department managers should place orders directly with suppliers.

Q: LIFO inventory value is often less than the inventory's replacement cost because LIFO inventory is valued using the oldest purchase cost.

Q: LIFO is the preferred inventory costing method when costs are rising and managers have incentives to report higher income. When income is higher, managers may earn bonuses and have more job security and a better reputation.

Q: In a period of rising prices, FIFO usually gives a lower taxable income, which leads to an advantage when it comes to paying income tax.

Q: An advantage of the weighted-average inventory method is that it tends to smooth out the effects of price changes.

Q: Whether prices are rising or falling, FIFO always will yield the highest gross profit and net income.

Q: A company can change its inventory costing method without mentioning this change in its financial statements since it is a decision made by internal management.

Q: The consistency concept requires a company to use the same accounting methods period after period, so that financial statements are comparable across periods.

Q: The matching principle is used by some companies to avoid allocating incidental inventory costs to cost of goods sold.

Q: All incidental costs of inventory acquisition and handling, whether necessary or not, are assigned to inventory.

Q: Not many companies take a physical count of inventory each year as they rely primarily on inventory records alone to determine the inventory value.

Q: The Inventory account is a controlling account for the inventory subsidiary ledger that contains a separate record for each individual product.

Q: Incidental costs most commonly added to the costs of inventory include import duties, freight, storage, and insurance.

Q: When taking a physical count of inventory, the use of prenumbered inventory tickets assists in the control process.

Q: The cost of an inventory item includes its invoice cost and any added or incidental costs necessary to make it saleable less any discount.

Q: Net realizable value for damaged or obsolete goods is equal to the sales price plus the cost of making the sale.

Q: If the seller is responsible for paying freight charges, then ownership of inventory passes when goods arrive at their destination.

Q: If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value.

Q: Goods on consignment are goods shipped by their owner, called the consignee, to another party called the consignor.

Q: If damaged and obsolete goods cannot be sold, they are not included in inventory.

Q: Goods in transit are automatically included in a companys inventory account.

Q: The _________________ method is commonly used to estimate the value of inventory that has been destroyed, lost or stolen.

Q: When the __________ method is used with a periodic inventory system, cost of goods sold is assigned costs from the most recent purchases for the period.

Q: When applying the lower of cost or market method of inventory valuation, market is defined as the ______________________.

Q: Regardless of what inventory method or system is used, cost of goods available for sale must be allocated between ___________________ and ___________________.

Q: The ______________________ method of assigning costs to inventory and cost of goods sold requires that the cost of goods available for sale be divided by the units of inventory available when each sale takes place.

Q: The ______________________ method of assigning costs to inventory and cost of goods sold assumes that the most recent purchases are sold first.

Q: The _____________________ method of assigning costs to inventory and cost of goods sold assumes that the inventory items are sold in the order acquired.

Q: The ______________________ method of assigning costs to inventory and cost of goods sold is usually only practical for companies with expensive, custom-made inventory.

Q: The _____________________ is a measure of how quickly a merchandiser sells its merchandise inventory.

Q: The ____________________ ratio reflects how much inventory is available in terms of days' sales.

Q: An advantage of the _________________ method of inventory valuation is that it tends to smooth out the effect of erratic changes in costs.

Q: When purchase costs regularly rise, the ___________________ method of inventory valuation yields the lowest gross profit and net income, providing a tax advantage.

Q: When purchase costs regularly rise, the ___________________ method of inventory valuation yields the highest gross profit and net income.

Q: The cost of an inventory item includes the _____________, plus ______________ costs necessary to put it in a place and condition for sale.

Q: Some companies use the _________________ constraint or the __________________ constraint to avoid assigning incidental costs of acquiring merchandise to inventory.

Q: If damaged goods can be sold at a reduced price, they are included in inventory at their ________________________.

Q: If the _______________ is responsible for paying the freight, ownership of merchandise inventory passes when the goods arrive at their destination.

Q: If the _______________ is responsible for paying the freight, ownership of merchandise inventory passes when goods are loaded on the transport vehicle.

Q: Given the following information, determine the cost of goods sold at November 30 using the weighted-average perpetual inventory method. November 3: 15 units were purchased at $8 per unit. November 11: 18 units were purchased at $9.50 per unit. November 15: 15 units were sold at $45 per unit. November 18: 30 units were purchased at $10.75 per unit. November 30: 20 units were sold at $55 per.

Q: Given the following information, determine the cost of goods sold at November 30 using the LIFO perpetual inventory method. November 3: 15 units were purchased at $8 per unit. November 11: 18 units were purchased at $9.50 per unit. November 15: 15 units were sold at $45 per unit. November 18: 30 units were purchased at $10.75 per unit. November 30: 20 units were sold at $55 per unit.

Q: Given the following information, determine the cost of goods sold for November 30 using the FIFO perpetual inventory method. November 3: 15 units were purchased at $8 per unit. November 11: 18 units were purchased at $9.50 per unit. November 15: 15 units were sold at $45 per unit. November 18: 30 units were purchased at $10.75 per unit. November 30: 20 units were sold at $55 per unit.

Q: Given the following information, determine the cost of ending inventory at November 30 using the weighted-average perpetual inventory method. November 3: 15 units were purchased at $8 per unit. November 11: 18 units were purchased at $9.50 per unit. November 15: 15 units were sold at $45 per unit. November 18: 30 units were purchased at $10.75 per unit. November 30: 20 units were sold at $55 per unit.

Q: Given the following information, determine the cost of ending inventory at November 30 using the LIFO perpetual inventory method. November 3: 15 units were purchased at $8 per unit. November 11: 18 units were purchased at $9.50 per unit. November 15: 15 units were sold at $45 per unit. November 18: 30 units were purchased at $10.75 per unit. November 30: 20 units were sold at $55 per unit.

Q: Given the following information, determine the cost of ending inventory at November 30 using the FIFO perpetual inventory method. November 3: 15 units were purchased at $8 per unit. November 11: 18 units were purchased at $9.50 per unit. November 15: 15 units were sold at $45 per unit. November 18: 30 units were purchased at $10.75 per unit. November 30: 20 units were sold at $55 per unit.