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Sarbanes-Oxley was passed in response to which of the following? The .com implosion The savings and loan bailout The implosion of WorldCom and Enron None of the above Question 2 of 50 Which of the following describes the internal control component “monitoring of controls”? Internal auditors monitor company controls to safeguard assets, and external auditors evaluate the controls to ensure that the accounting records are accurate. Monitoring of controls is the “tone at the top” of the business. Monitoring of controls is designed to ensure that the business’s goals are achieved. A company must identify its risks. Question 3 of 50 Which of the following is a security procedure designed for e-commerce? Burglar alarms Firewalls Fireproof vaults None of the above Question 4 of 50 Case 8.5 At December 31, 2008, McGovern Company overstated ending inventory by $50,000. Refer to Case 8.5. How does this error affect cost of goods sold for 2008? Has no effect on Cost of Goods Sold Overstates Cost of Goods Sold by $50,000 Understates Cost of Goods Sold by $50,000 None of the above Question 5 of 50 Gilkey Construction Company writes of the account of Arthur Blanks of $78,000. The journal entry to record this under the direct write off method is: A) Bad Debts Expense 78,000 Accounts Receivable – Arthur Blanks 78,000 B) Allowance for doubtful accounts 78,000 Bad Debts Expense 78,000 C) Allowance for doubtful accounts 78,000 Accounts Receivable – Arthur Blanks 78,000 D) Accounts Receivable – Arthur Blanks 78,000 Allowance for doubtful accounts 78,000 A) B) C) D) Question 6 of 50 Refer to Case 7.11. What is the quick ratio for 2004? .75 1.0 .61 .70 Question 7 of 50 Which of the following is the last step in the daily control over cash receipts by mail? A mailroom employee sends all customer checks to the treasurer who has the cashier make the bank deposit. A mailroom clerk opens the mail and sends the remittance advices to the accounting department. The controller compares the records of the day’s bank deposit amount from the treasurer and the debit to Cash from the accounting department. The accounting department prepares journal entries to Cash and the customers’ accounts. Question 8 of 50 Case 7.4 Gilkey Security Systems has the following for year ended 12-31-09 before adjustments Accounts receivable $130,000 Net Credit Sales $840,000 Allowance for doubtful accounts $3,000 debit balance Aging of accounts receivable $19,000 Refer to Case 7.4. The balance in the allowance for doubtful accounts after the adjustment is: $22,000. $19,000. $28,200. $84,000. Question 9 of 50 An electronic fund transfer (EFT) for payment of a bill would be: subtracted from the bank balance of a bank reconciliation. added to the book balance of a bank reconciliation. added to the bank balance of a bank reconciliation. subtracted from the book balance of a bank reconciliation. Question 10 of 50 Case 8.1 Emerson Electronics had the following information related to its September inventory. Number of Units Cost Sept. 1 Beginning Inventory 100 Units $10 5 Purchase 200 Units $11 15 Sold 150 Units 26 Purchase 100 Units $12 30 Sold 200 Units Sales were made at $20 per unit and Emerson uses the perpetual inventory system. Refer to Case 8.1. The value of cost of goods sold under LIFO would be: $3,900. $4,200. $4,000. $3,800. Question 11 of 50 For good internal control, the credit department should have no access to: customer information. customer credit applications. computer systems. cash. Question 12 of 50 Accounts receivable minus the allowance for doubtful accounts equals: net realizable value of accounts receivable. market value of accounts receivable. book value of accounts receivable. historical costs of accounts receivable. Question 13 of 50 By law, the provisions of Sarbanes-Oxley apply to: all companies private companies public companies public companies with sales greater than one billion dollars Question 14 of 50 Case 8.5 At December 31, 2008, McGovern Company overstated ending inventory by $50,000. Refer to Case 8.5. How does this error affect net income for 2009? Has no effect on Net Income Overstates Net Income by $50,000 Understates Net Income by $50,000 None of the above Question 15 of 50 Rising interest rates, gas prices, declining profits and strong competition in the auto industry all would be factors impacting the __________ of General Motors. control environment segregation of duties control activities risk assessment Question 16 of 50 Non sufficient funds (NSF) checks would be: subtracted from the book balance of a bank reconciliation. subtracted from the bank balance of a bank reconciliation. added to the bank balance of a bank reconciliation. added to the book balance of a bank reconciliation. Question 17 of 50 Case 7.5 Gilkey Security Systems has the following for year ended 12-31-09 before adjustments Accounts receivable $130,000 Net Credit Sales $840,000 Allowance for doubtful accounts $3,000 debit balance Aging of accounts receivable $19,000 Gilkey uses the aging method of estimating bad debt expense. Refer to Case 7.5. The journal entry for estimating bad debt expense at year end is: A) Allowance for doubtful accounts 19,000 Accounts Receivable 19,000 B) Bad Debts Expense 22,000 Allowance for doubtful accounts 22,000 C) Bad Debts Expense 19,000 Allowance for doubtful accounts 19,000 D) Allowance for doubtful accounts 22,000 Bad Debts Expense 22,000 A) B) C) D) Question 18 of 50 Open promises to pay by customers are called: notes receivable. other receivables. accounts receivable. none of the above. Question 19 of 50 Which of the following is a control over petty cash? Support all fund payments with a petty cash ticket. Keep a specific amount of cash on hand in the fund. Designate a custodian of the petty cash fund. All of the above are controls. Question 20 of 50 Which of the following is a requirement of the Sarbanes-Oxley Act? The outside auditor must issue an internal control report for each public company, and the Public Company Oversight Board evaluates the client’s internal controls The Public Company Oversight Board issues an internal control audit report for every publicly held company. Accounting firms may not both audit a public client and also provide certain consulting services for the same client Public companies oversee the work of auditors of other public companies. Question 21 of 50 Case 7.2 Oddessy consulting has the following for year ended 12-31-09 before adjustments Accounts receivable $330,000 Net Credit Sales $1,200,000 Allowance for doubtful accounts $4,700 credit balance Estimated percentage of Bad debts on credit sales 2% Oddessy uses the net credit sales method of estimating bad debt expense. Refer to Case 7.2. The journal entry for estimating bad debt expense at year end is: A) Allowance for doubtful accounts 24,000 Accounts Receivable 24,000 B) Allowance for doubtful accounts 28,700 Bad Debts Expense 28,700 C) Bad Debts Expense 28,700 Allowance for doubtful accounts 28,700 D) Bad Debts Expense 24,000 Allowance for doubtful accounts 24,000 A) B) C) D) Question 22 of 50 Which cost would be part of the cost of land? Putting up fencing around a building Removing an old building from the land Installing lights in a parking lot Installing a sprinkler system Question 23 of 50 In dealing with cash receipts, the amount debited to cash should equal: the amount of the deposit the amount of total sales the amount of cash sales some other amount Question 24 of 50 Chase Bank loans P+P Company $120,000 on a 1 year promissory note on July 1, 2009. The interest rate of this loan is 12%. The principle and interest are due in one year. The journal entry to accrue interest earned on12-31-09 is: A) Cash 7,200 Interest revenue 7,200 B) Cash 14,400 Interest revenue 14,400 C) Interest receivable 7,200 Interest Revenue 7,200 D) Interest Receivable 14,400 Interest Revenue 14,400 A) B) C) D) Question 25 of 50 Case 8.1 Emerson Electronics had the following information related to its September inventory. Number of Units Cost Sept. 1 Beginning Inventory 100 Units $10 5 Purchase 200 Units $11 15 Sold 150 Units 26 Purchase 100 Units $12 30 Sold 200 Units Sales were made at $20 per unit and Emerson uses the perpetual inventory system. Refer to Case 8.1. The value of ending inventory under FIFO would be: $700. $600. $500. $550. Question 26 of 50 In a $500 imprest petty cash fund: the currency minus coins plus tickets should equal $500. the currency minus coins minus tickets should equal $500. the currency plus coins plus tickets should equal $500. the currency plus coins minus tickets should equal $500. Question 27 of 50 Case 8.2 Emerson Electronics had the following information related to its September inventory. Number of Units Cost Sept. 1 Beginning Inventory 200 Units $10 6 Purchase 200 Units $12 16 Sold 250 Units 27 Purchase 200 Units $14 30 Sold 300 Units Sales were made at $15 per unit and Emerson uses the perpetual inventory system. Refer to Case 8.2. Gross profit would be how much under FIFO? $8,250 $1,550 $1,950 $1,750 Question 28 of 50 Which of the following demonstrates internal control over cash receipts? A mailroom employee deposits all customer checks at the bank. A mailroom employee sends remittance advices to the treasurer A mailroom employee sends all customer checks to the treasurer who has the cashier make the bank deposit All of the above demonstrate internal control over cash receipts Question 29 of 50 A written promise to pay a specified amount of money at a particular future date by a customer is a(n): accounts receivable. mortgage payable. notes payable. notes receivable. Question 30 of 50 Case 8.2 Emerson Electronics had the following information related to its September inventory. Number of Units Cost Sept. 1 Beginning Inventory 200 Units $10 6 Purchase 200 Units $12 16 Sold 250 Units 27 Purchase 200 Units $14 30 Sold 300 Units Sales were made at $15 per unit and Emerson uses the perpetual inventory system. Refer to Case 8.2. Gross profit would be how much under LIFO? $1,950 $8,250 $1,550 $1,750 Question 31 of 50 Which of the following describes the internal control component “control procedures”? A company must identify its risks. Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate. Control procedures are the “tone at the top” of the business. Control procedures are designed to ensure that the business’s goals are achieved. Question 32 of 50 Mary is a warehouse worker who fills orders for shipment, receives new shipments of inventory in the warehouse and also records all inventory transactions into the accounting records. Mary is violating which of the following? Independent checks Physical safe guards Segregation of duties None of the above Question 33 of 50 A(n) __________ is an internal control tool that reconciles the differences between a depositor’s cash records and the depositor’s cash balance in its bank account. checking account bank statement bank reconciliation imprest petty cash fund Question 34 of 50 The direct write off method of accounting for bad debts violates which of the following accounting principles? Entity concept Going concern Historical cost Matching principle Question 35 of 50 The intentional misrepresentation of financial information on the financial statements is called: lack of internal controls. theft. fraudulent financial reporting. employee fraud. Question 36 of 50 Case 8.1 Emerson Electronics had the following information related to its September inventory. Number of Units Cost Sept. 1 Beginning Inventory 100 Units $10 5 Purchase 200 Units $11 15 Sold 150 Units 26 Purchase 100 Units $12 30 Sold 200 Units Sales were made at $20 per unit and Emerson uses the perpetual inventory system. Refer to Case 8.1. The value of cost of goods sold under FIFO would be: $2,800. $3,100. $2,900. $3,800. Question 37 of 50 Case 8.6 At December 31, 2008, McGovern Company understated ending inventory by $50,000. Refer to Case 8.6. How does this error affect net income for 2008? Understates Net Income by $50,000 Overstates Net Income by $50,000 Has no effect on Net Income None of the above Question 38 of 50 The journal entry to set up a $500 imprest petty cash fund would be: A) Miscellaneous Expense 500 Cash in bank 500 B) Cash in bank 500 Petty Cash 500 C) Petty Cash 500 Cash in bank 500 D) Accounts Receivable 500 Cash in bank 500 A) B) C) D) Question 39 of 50 Which of the following is the first step in the purchasing and payment process? The supplier ships the goods and sends an invoice to the purchaser. The purchaser sends a check to the supplier. The purchaser sends a purchase order to the supplier. The purchase receives the inventory and prepares a receiving report. Question 40 of 50 Which inventory method would use the most current costs to determine costs of goods sold? LIFO Specific Identification Weighted average FIFO Question 41 of 50 Which of the following is considered a long term asset? Inventory Accounts receivable Land Cash Question 42 of 50 Which of the following is NOT one of the components of internal control? Control procedures Risk assessment Theft management Control environment Question 43 of 50 With good internal controls, the person who handles cash can also: issue credits to customers for merchandise returned to us. account for cash receipts from customers. account for cash payments. do none of the above. Question 44 of 50 Which inventory method would use the oldest costs to value ending inventory? LIFO Weighted average Specific Identification FIFO Question 45 of 50 Which of the following describes the internal control component “control environment”? Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate. The control environment is the “tone at the top” of the business. The control environment is designed to ensure that the business’s goals are achieved A company must identify its risks. Question 46 of 50 Case 8.4 Emerson Electronics had the following information related to its September inventory. Number of Units Cost Sept. 1 Beginning Inventory 200 Units $10 8 Purchase 200 Units $12 29 Sold 200 Units $14 200 units were sold @ $15 per unit and Emerson uses the perpetual inventory system. Refer to Case 8.4. Emerson has how many units in Ending Inventory? 200 units 50 units 100 units 300 units Question 47 of 50 Case 7.6 Chase Bank loans P+P Company $120,000 on a 1 year promissory note on January 1, 2009. The interest rate of this loan is 12%. The principle and interest are due on 12-31-2009. Refer to Case 7.6. The amount of interest revenue that Chase will earn on this loan is: $1,200. $120,000. $14,400. $1,000. Question 48 of 50 Which of the following is TRUE of internal control? A company’s outside auditor is responsible for the company’s internal control system. One of the major purposes of internal control is to ensure accurate, reliable accounting records. Internal control procedures tend to diminish the importance of operational efficiency. Public companies generally had no internal control systems prior to the enactment of the Sarbanes-Oxley Act Question 49 of 50 Case 9.3 Leah, Inc. has machinery with a cost of $100,000. The machinery has an estimated useful life of 10 years, and an estimated salvage value of $10,000. The machinery is expected to be able to produce a total of 1,000,000 units during its estimated life. Refer to Case 9.3. The amount of deprecation expense in the second year under straight line depreciation would be: $1,000. $10,000. $9,000. $5,000. Question 50 of 50 Inventory should be shown on the balance sheet at: market value. cost. the higher of cost or market value. the lower of cost or market value.

Sarbanes-Oxley was passed in response to which of the following?

The .com implosion

The savings and loan bailout

The implosion of WorldCom and Enron

None of the above
Question
2 of 50
Which of the following describes the internal control component “monitoring of controls”?

Internal auditors monitor company controls to safeguard assets, and external auditors evaluate the controls to ensure that the accounting records are accurate.

Monitoring of controls is the “tone at the top” of the business.

Monitoring of controls is designed to ensure that the business’s goals are achieved.

A company must identify its risks.
Question
3 of 50
Which of the following is a security procedure designed for e-commerce?

Burglar alarms

Firewalls

Fireproof vaults

None of the above
Question
4 of 50
Case 8.5
At December 31, 2008, McGovern Company overstated ending inventory by $50,000.
Refer to Case 8.5. How does this error affect cost of goods sold for 2008?

Has no effect on Cost of Goods Sold

Overstates Cost of Goods Sold by $50,000

Understates Cost of Goods Sold by $50,000

None of the above
Question
5 of 50
Gilkey Construction Company writes of the account of Arthur Blanks of $78,000. The journal entry to record this under the direct write off method is:
A) Bad Debts Expense 78,000
Accounts Receivable – Arthur Blanks 78,000
B) Allowance for doubtful accounts 78,000
Bad Debts Expense 78,000
C) Allowance for doubtful accounts 78,000
Accounts Receivable – Arthur Blanks 78,000
D) Accounts Receivable – Arthur Blanks 78,000
Allowance for doubtful accounts 78,000

A)

B)

C)

D)
Question
6 of 50

Refer to Case 7.11. What is the quick ratio for 2004?

.75

1.0

.61

.70
Question
7 of 50
Which of the following is the last step in the daily control over cash receipts by mail?

A mailroom employee sends all customer checks to the treasurer who has the cashier make the bank deposit.

A mailroom clerk opens the mail and sends the remittance advices to the accounting department.

The controller compares the records of the day’s bank deposit amount from the treasurer and the debit to Cash from the accounting department.

The accounting department prepares journal entries to Cash and the customers’ accounts.
Question
8 of 50
Case 7.4
Gilkey Security Systems has the following for year ended 12-31-09 before adjustments
Accounts receivable $130,000
Net Credit Sales $840,000
Allowance for doubtful accounts $3,000 debit balance
Aging of accounts receivable $19,000
Refer to Case 7.4. The balance in the allowance for doubtful accounts after the adjustment is:

$22,000.

$19,000.

$28,200.

$84,000.
Question
9 of 50
An electronic fund transfer (EFT) for payment of a bill would be:

subtracted from the bank balance of a bank reconciliation.

added to the book balance of a bank reconciliation.

added to the bank balance of a bank reconciliation.

subtracted from the book balance of a bank reconciliation.
Question
10 of 50
Case 8.1
Emerson Electronics had the following information related to its September inventory.
Number of Units Cost
Sept. 1 Beginning Inventory 100 Units $10
5 Purchase 200 Units $11
15 Sold 150 Units
26 Purchase 100 Units $12
30 Sold 200 Units
Sales were made at $20 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.1. The value of cost of goods sold under LIFO would be:

$3,900.

$4,200.

$4,000.

$3,800.
Question
11 of 50
For good internal control, the credit department should have no access to:

customer information.

customer credit applications.

computer systems.

cash.
Question
12 of 50
Accounts receivable minus the allowance for doubtful accounts equals:

net realizable value of accounts receivable.

market value of accounts receivable.

book value of accounts receivable.

historical costs of accounts receivable.
Question
13 of 50
By law, the provisions of Sarbanes-Oxley apply to:

all companies

private companies

public companies

public companies with sales greater than one billion dollars
Question
14 of 50
Case 8.5
At December 31, 2008, McGovern Company overstated ending inventory by $50,000.
Refer to Case 8.5. How does this error affect net income for 2009?

Has no effect on Net Income

Overstates Net Income by $50,000

Understates Net Income by $50,000

None of the above
Question
15 of 50
Rising interest rates, gas prices, declining profits and strong competition in the auto industry all would be factors impacting the __________ of General Motors.

control environment

segregation of duties

control activities

risk assessment
Question
16 of 50
Non sufficient funds (NSF) checks would be:

subtracted from the book balance of a bank reconciliation.

subtracted from the bank balance of a bank reconciliation.

added to the bank balance of a bank reconciliation.

added to the book balance of a bank reconciliation.
Question
17 of 50
Case 7.5
Gilkey Security Systems has the following for year ended 12-31-09 before adjustments
Accounts receivable $130,000
Net Credit Sales $840,000
Allowance for doubtful accounts $3,000 debit balance
Aging of accounts receivable $19,000
Gilkey uses the aging method of estimating bad debt expense.
Refer to Case 7.5. The journal entry for estimating bad debt expense at year end is:
A) Allowance for doubtful accounts 19,000
Accounts Receivable 19,000
B) Bad Debts Expense 22,000
Allowance for doubtful accounts 22,000
C) Bad Debts Expense 19,000
Allowance for doubtful accounts 19,000
D) Allowance for doubtful accounts 22,000
Bad Debts Expense 22,000

A)

B)

C)

D)
Question
18 of 50
Open promises to pay by customers are called:

notes receivable.

other receivables.

accounts receivable.

none of the above.
Question
19 of 50
Which of the following is a control over petty cash?

Support all fund payments with a petty cash ticket.

Keep a specific amount of cash on hand in the fund.

Designate a custodian of the petty cash fund.

All of the above are controls.
Question
20 of 50
Which of the following is a requirement of the Sarbanes-Oxley Act?

The outside auditor must issue an internal control report for each public company, and the Public Company Oversight Board evaluates the client’s internal controls

The Public Company Oversight Board issues an internal control audit report for every publicly held company.

Accounting firms may not both audit a public client and also provide certain consulting services for the same client

Public companies oversee the work of auditors of other public companies.
Question
21 of 50
Case 7.2
Oddessy consulting has the following for year ended 12-31-09 before adjustments
Accounts receivable $330,000
Net Credit Sales $1,200,000
Allowance for doubtful accounts $4,700 credit balance
Estimated percentage of Bad debts on credit sales 2%
Oddessy uses the net credit sales method of estimating bad debt expense.
Refer to Case 7.2. The journal entry for estimating bad debt expense at year end is:
A) Allowance for doubtful accounts 24,000
Accounts Receivable 24,000
B) Allowance for doubtful accounts 28,700
Bad Debts Expense 28,700
C) Bad Debts Expense 28,700
Allowance for doubtful accounts 28,700
D) Bad Debts Expense 24,000
Allowance for doubtful accounts 24,000

A)

B)

C)

D)
Question
22 of 50
Which cost would be part of the cost of land?

Putting up fencing around a building

Removing an old building from the land

Installing lights in a parking lot

Installing a sprinkler system
Question
23 of 50
In dealing with cash receipts, the amount debited to cash should equal:

the amount of the deposit

the amount of total sales

the amount of cash sales

some other amount
Question
24 of 50
Chase Bank loans P+P Company $120,000 on a 1 year promissory note on July 1, 2009. The interest rate of this loan is 12%. The principle and interest are due in one year. The journal entry to accrue interest earned on12-31-09 is:
A) Cash 7,200
Interest revenue 7,200
B) Cash 14,400
Interest revenue 14,400
C) Interest receivable 7,200
Interest Revenue 7,200
D) Interest Receivable 14,400
Interest Revenue 14,400

A)

B)

C)

D)
Question
25 of 50
Case 8.1
Emerson Electronics had the following information related to its September inventory.
Number of Units Cost
Sept. 1 Beginning Inventory 100 Units $10
5 Purchase 200 Units $11
15 Sold 150 Units
26 Purchase 100 Units $12
30 Sold 200 Units
Sales were made at $20 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.1. The value of ending inventory under FIFO would be:

$700.

$600.

$500.

$550.
Question
26 of 50
In a $500 imprest petty cash fund:

the currency minus coins plus tickets should equal $500.

the currency minus coins minus tickets should equal $500.

the currency plus coins plus tickets should equal $500.

the currency plus coins minus tickets should equal $500.
Question
27 of 50
Case 8.2
Emerson Electronics had the following information related to its September inventory.
Number of Units Cost
Sept. 1 Beginning Inventory 200 Units $10
6 Purchase 200 Units $12
16 Sold 250 Units
27 Purchase 200 Units $14
30 Sold 300 Units
Sales were made at $15 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.2. Gross profit would be how much under FIFO?

$8,250

$1,550

$1,950

$1,750
Question
28 of 50
Which of the following demonstrates internal control over cash receipts?

A mailroom employee deposits all customer checks at the bank.

A mailroom employee sends remittance advices to the treasurer

A mailroom employee sends all customer checks to the treasurer who has the cashier make the bank deposit

All of the above demonstrate internal control over cash receipts
Question
29 of 50
A written promise to pay a specified amount of money at a particular future date by a customer is a(n):

accounts receivable.

mortgage payable.

notes payable.

notes receivable.
Question
30 of 50
Case 8.2
Emerson Electronics had the following information related to its September inventory.
Number of Units Cost
Sept. 1 Beginning Inventory 200 Units $10
6 Purchase 200 Units $12
16 Sold 250 Units
27 Purchase 200 Units $14
30 Sold 300 Units
Sales were made at $15 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.2. Gross profit would be how much under LIFO?

$1,950

$8,250

$1,550

$1,750
Question
31 of 50
Which of the following describes the internal control component “control procedures”?

A company must identify its risks.

Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate.

Control procedures are the “tone at the top” of the business.

Control procedures are designed to ensure that the business’s goals are achieved.
Question
32 of 50
Mary is a warehouse worker who fills orders for shipment, receives new shipments of inventory in the warehouse and also records all inventory transactions into the accounting records. Mary is violating which of the following?

Independent checks

Physical safe guards

Segregation of duties

None of the above
Question
33 of 50
A(n) __________ is an internal control tool that reconciles the differences between a depositor’s cash records and the depositor’s cash balance in its bank account.

checking account

bank statement

bank reconciliation

imprest petty cash fund
Question
34 of 50
The direct write off method of accounting for bad debts violates which of the following accounting principles?

Entity concept

Going concern

Historical cost

Matching principle
Question
35 of 50
The intentional misrepresentation of financial information on the financial statements is called:

lack of internal controls.

theft.

fraudulent financial reporting.

employee fraud.
Question
36 of 50
Case 8.1
Emerson Electronics had the following information related to its September inventory.
Number of Units Cost
Sept. 1 Beginning Inventory 100 Units $10
5 Purchase 200 Units $11
15 Sold 150 Units
26 Purchase 100 Units $12
30 Sold 200 Units
Sales were made at $20 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.1. The value of cost of goods sold under FIFO would be:

$2,800.

$3,100.

$2,900.

$3,800.
Question
37 of 50
Case 8.6
At December 31, 2008, McGovern Company understated ending inventory by $50,000.
Refer to Case 8.6. How does this error affect net income for 2008?

Understates Net Income by $50,000

Overstates Net Income by $50,000

Has no effect on Net Income

None of the above
Question
38 of 50
The journal entry to set up a $500 imprest petty cash fund would be:
A) Miscellaneous Expense 500
Cash in bank 500
B) Cash in bank 500
Petty Cash 500
C) Petty Cash 500
Cash in bank 500
D) Accounts Receivable 500
Cash in bank 500

A)

B)

C)

D)
Question
39 of 50
Which of the following is the first step in the purchasing and payment process?

The supplier ships the goods and sends an invoice to the purchaser.

The purchaser sends a check to the supplier.

The purchaser sends a purchase order to the supplier.

The purchase receives the inventory and prepares a receiving report.
Question
40 of 50
Which inventory method would use the most current costs to determine costs of goods sold?

LIFO

Specific Identification

Weighted average

FIFO
Question
41 of 50
Which of the following is considered a long term asset?

Inventory

Accounts receivable

Land

Cash
Question
42 of 50
Which of the following is NOT one of the components of internal control?

Control procedures

Risk assessment

Theft management

Control environment
Question
43 of 50
With good internal controls, the person who handles cash can also:

issue credits to customers for merchandise returned to us.

account for cash receipts from customers.

account for cash payments.

do none of the above.
Question
44 of 50
Which inventory method would use the oldest costs to value ending inventory?

LIFO

Weighted average

Specific Identification

FIFO
Question
45 of 50
Which of the following describes the internal control component “control environment”?

Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate.

The control environment is the “tone at the top” of the business.

The control environment is designed to ensure that the business’s goals are achieved

A company must identify its risks.
Question
46 of 50
Case 8.4
Emerson Electronics had the following information related to its September inventory.
Number of Units Cost
Sept. 1 Beginning Inventory 200 Units $10
8 Purchase 200 Units $12
29 Sold 200 Units $14
200 units were sold @ $15 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.4. Emerson has how many units in Ending Inventory?

200 units

50 units

100 units

300 units
Question
47 of 50
Case 7.6
Chase Bank loans P+P Company $120,000 on a 1 year promissory note on January 1, 2009. The interest rate of this loan is 12%. The principle and interest are due on 12-31-2009.
Refer to Case 7.6. The amount of interest revenue that Chase will earn on this loan is:

$1,200.

$120,000.

$14,400.

$1,000.
Question
48 of 50
Which of the following is TRUE of internal control?

A company’s outside auditor is responsible for the company’s internal control system.

One of the major purposes of internal control is to ensure accurate, reliable accounting records.

Internal control procedures tend to diminish the importance of operational efficiency.

Public companies generally had no internal control systems prior to the enactment of the Sarbanes-Oxley Act
Question
49 of 50
Case 9.3
Leah, Inc. has machinery with a cost of $100,000. The machinery has an estimated useful life of 10 years, and an estimated salvage value of $10,000. The machinery is expected to be able to produce a total of 1,000,000 units during its estimated life.
Refer to Case 9.3. The amount of deprecation expense in the second year under straight line depreciation would be:

$1,000.

$10,000.

$9,000.

$5,000.
Question
50 of 50
Inventory should be shown on the balance sheet at:

market value.

cost.

the higher of cost or market value.

the lower of cost or market value.

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