33:010:272 Lecture Notes - Lecture 5: European Cooperation In Science And Technology, Income Statement
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25 Aug 2016
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Chapter 6: there are many types of company, manufacturing company a. i. raw material a. i. 1. Inventory: how do you count amount of goods that we (company) have, perpetual system a. i. =cost of goods available for sales (cogas) b. v. ending inventory b. vi. = cost of goods: determining inventory quantities, taking a physical inventory check, determining ownership of goods while its in transit b. i. It depends on who pays the shipping fee: consigned good c. i. It does not factor in as inventory, they are just holding it. Company has to keep up with detailed record a. ii. Beginning inventory + purchase ending inventory a. iii. = cost of goods sold a. iv. which means costs of goods that you are able to sell: fifo (first in first out) b. i. Sell goods in order that they purchased b. ii. Cogas ending inventory = cost of goods sold: lifo (last in first out) c. i. Last goods in are the first goods that will be sold c. ii.
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Answers to the 30multiple choice questions | 2 points each, 30questions, for 60 point total | ||||||||||
60 points | |||||||||||
< please record | 1) | From an internal control standpoint, the asset mostsusceptible to improper diversion and use is | |||||||||
answer here | a. | prepaid insurance. | |||||||||
b. | cash. | ||||||||||
c. | Equipment | ||||||||||
d. | Investments | ||||||||||
2) | Jolene is warehouse custodian and alsomaintains the accounting record of the inventory held at thewarehouse. An assessment of this situation indicates | ||||||||||
a. | documentation procedures are violated. | ||||||||||
b. | independent internal verification is violated. | ||||||||||
c. | segregation of duties is violated. | ||||||||||
< please record | d. | establishment of responsibility is violated. | |||||||||
answer here | |||||||||||
3) | Internal control is defined, in part, as a planthat safeguards | ||||||||||
a. | all balance sheet accounts. | ||||||||||
b. | assets. | ||||||||||
c. | liabilities. | ||||||||||
d. | capital stock. | ||||||||||
4) | The control principle related to nothaving the same person authorize and pay for goods is known as | ||||||||||
a. | establishment of responsibility. | ||||||||||
b. | independent internal verification. | ||||||||||
< please record | c. | segregation of duties. | |||||||||
answer here | d. | rotation of duties. | |||||||||
5) | Two individuals at a retail store work thesame cash register. You evaluate this situation as | ||||||||||
a. | a violation of establishment of responsibility. | ||||||||||
b. | a violation of segregation of duties. | ||||||||||
c. | supporting the establishment of responsibility. | ||||||||||
< please record | d. | supporting internal independent verification. | |||||||||
answer here | |||||||||||
6) | Having different individuals receive cash,record cash receipts, and hold the cash is an example of | ||||||||||
a. | establishment of responsibility. | ||||||||||
b. | segregation of duties. | ||||||||||
c. | documentation procedures. | ||||||||||
d. | independent internal verification. | ||||||||||
7) | An adjusting entry is not required for | ||||||||||
a. | outstanding checks. | ||||||||||
b. | collection of a note by the bank. | ||||||||||
c. | NSF checks. | ||||||||||
d. | bank service charges. | ||||||||||
8) | If a check correctly written and paid bythe bank for $591 is incorrectly recorded on the company's booksfor $519, | ||||||||||
the appropriate treatment on the bankreconciliation would be to | |||||||||||
a. | deduct $72 from the book's balance. | ||||||||||
b. | add $72 to the book's balance. | ||||||||||
c. | deduct $72 from the bank's balance. | ||||||||||
d. | deduct $591 from the book's balance. | ||||||||||
9) | During 2013, Parker Enterprises generatedrevenues of $60,000. The company's expenses were as follows: | ||||||||||
cost of goods sold of $30,000, operatingexpenses of $12,000 and a loss on the sale of equipment of$2,000. | |||||||||||
Parker's gross profit is: | |||||||||||
a. | $16,000.00 | ||||||||||
b. | $18,000.00 | ||||||||||
c. | $30,000.00 | ||||||||||
d. | $60,000.00 | ||||||||||
10) | A primary difference between a periodicand perpetual inventory system is that a periodic system: | ||||||||||
a. | determines the inventory on hand only at the end ofthe accounting period. | ||||||||||
b. | provides better control over inventories. | ||||||||||
c. | records the cost of goods sold after each saletransaction. | ||||||||||
d. | keeps a record showing the merchandise inventory onhand at all times. | ||||||||||
11) | A decline in a company's gross profitcould be caused by all of the following except: | ||||||||||
a. | selling products using a lower markup. | ||||||||||
b. | clearance of discontinued inventory. | ||||||||||
c. | paying lower prices to its suppliers. | ||||||||||
d. | increasing competition resulting in a lower sellingprice. | ||||||||||
12) | South Company uses the perpetual inventorysystem. South's goods in transit at December 31 include: | ||||||||||
Sales made by South | Purchases made by South | ||||||||||
(1) FOB destination | (3) FOB destination | ||||||||||
(2) FOB shipping point | (4) FOB shipping point | ||||||||||
Which itemsshould be included in South's inventory at December 31? | |||||||||||
a. (2) and (3) | |||||||||||
b. (1) and (4) | |||||||||||
c. (1) and (3) | |||||||||||
d. (2) and (4) | |||||||||||
13) | In periods of rising prices, the inventorymethod which results in the greatest net income is the: | ||||||||||
a. | LIFO method. | ||||||||||
b. | FIFO method. | ||||||||||
c. | Weighted Average method. | ||||||||||
d. | Lower of Cost or Market method. | ||||||||||
14) | The following information was available for RawleyCompany at December 31, 2008: | ||||||||||
inventory (Jan .01) $80,000; inventory (Dec. 31)$120,000; cost of goods sold $600,000; | |||||||||||
accounts receivable $73,000; and sales$900,000. | |||||||||||
Rawley's inventory turnover in 2008 was: | |||||||||||
a. | 9.00 times. | ||||||||||
b. | 7.50 times. | ||||||||||
c. | 6.00 times. | ||||||||||
d. | 5.00 times. | ||||||||||
15) | A petty cash fund of $200 is replenishedwhen the fund contains $5 in cash and receipts for $193. | ||||||||||
The entry to replenish the fund would: | |||||||||||
a. | credit Cash Over and Short for $2. | ||||||||||
b. | credit Miscellaneous Revenue for $2. | ||||||||||
c. | debit Cash Over and Short for $2. | ||||||||||
d. | debit Miscellaneous Expense for $2. | ||||||||||
16) | An item is considered material if | ||||||||||
a. | it doesn't costs a lot of money. | ||||||||||
b. | it is of a tangible good intended for re-sale. | ||||||||||
c. | it is likely to influence the decision of aninvestor or creditor. | ||||||||||
d. | the cost of reporting the item is greater than itsbenefits. | ||||||||||
17) | Receivables might be sold to | ||||||||||
a. lengthen the cash-to-cash operating cycle. | |||||||||||
b take advantage of deep discounts on the cashrealizable value of receivables. | |||||||||||
c. generate cash quickly. | |||||||||||
d. finance companies at an amount greater than cashrealizable value. | |||||||||||
18) | If the amount of uncollectible accountexpense is understated at year end: | ||||||||||
a. | net income will be understated. | ||||||||||
b. | stockholders' equity will be understated. | ||||||||||
c. | allowance for doubtful accounts will be overstated. | ||||||||||
d. | net accounts receivable will be overstated. | ||||||||||
19) | A debit balance in the Allowance for DoubtfulAccounts | ||||||||||
a. | is the normal balance for that account. | ||||||||||
b. | indicates that actual bad debt write-offs haveexceeded previous provisions for bad debts. | ||||||||||
c. | indicates that actual bad debt write-offs have beenless than what was estimated. | ||||||||||
d. | cannot occur if the percentage of sales method ofestimating bad debts is used. | ||||||||||
20) | Bad Debts Expense is considered | ||||||||||
a. | an avoidable cost in doing business on a credit basis. | ||||||||||
b. | an internal control weakness. | ||||||||||
c. | a necessary risk of doing business on a credit basis. | ||||||||||
d. | avoidable unless there is a recession. | ||||||||||
21) | The best managed companies will have | ||||||||||
a. | no uncollectible accounts. | ||||||||||
b. | a very strict credit policy. | ||||||||||
c. | a very lenient credit policy. | ||||||||||
d. | some accounts that will prove to be uncollectible. | ||||||||||
22) | Two methods of accounting for uncollectibleaccounts are the | ||||||||||
a. | allowance method and the accrual method. | ||||||||||
b. | allowance method and the net realizable method. | ||||||||||
c. | direct write-off method and the accrual method. | ||||||||||
d. | direct write-off method and the allowance method. | ||||||||||
23) | When the allowance method of accountingfor uncollectible accounts is used, Bad Debts Expense isrecorded | ||||||||||
a. | in the year after the credit sale is made. | ||||||||||
b. | in the same year as the credit sale. | ||||||||||
c. | as each credit sale is made. | ||||||||||
d. | when an account is written off as uncollectible. | ||||||||||
24) | Allowance for Doubtful Accounts on the balancesheet | ||||||||||
a. | is offset against total current assets. | ||||||||||
b. | increases the cash realizable value of accountsreceivable. | ||||||||||
c. | appears under the heading "Other Assets." | ||||||||||
d. | is offset against accounts receivable. | ||||||||||
25) | In reviewing the accounts receivable, thecash realizable value is $14,000 before the write-off of a $1,500account. | ||||||||||
What is the cash realizable value after thewrite-off? | |||||||||||
a. | $1,500 | ||||||||||
b. | $12,500 | ||||||||||
c. | $14,000 | ||||||||||
d. | $15,500 | ||||||||||
26) | The maturity value of a $60,000, 10%, 60-day notereceivable dated July 3 is | ||||||||||
a. | $60,000 | ||||||||||
b. | $61,000 | ||||||||||
c. | $66,000 | ||||||||||
d. | $70,000 | ||||||||||
27) | The interest on a $10,000, 10%, 1-year notereceivable is | ||||||||||
a. | $1,000 | ||||||||||
b. | $10,000 | ||||||||||
c. | $10,100 | ||||||||||
d. | $11,000 | ||||||||||
28) | The maturity value of a $60,000, 8%, 3-month notereceivable is | ||||||||||
a. | $60,400 | ||||||||||
b. | $60,480 | ||||||||||
c. | $61,200 | ||||||||||
d. | $64,800 | ||||||||||
29) | Notes receivable are recorded in the accounts at | ||||||||||
a. | cash (net) realizable value. | ||||||||||
b. | face value. | ||||||||||
c. | gross realizable value. | ||||||||||
d. | maturity value. | ||||||||||
30) | Which of the following are also called tradereceivables? | ||||||||||
a. | Accounts receivable | ||||||||||
b. | Other receivables | ||||||||||
c. | Advances to employees | ||||||||||
d. | Income taxes refundable | ||||||||||