T/F CHAPTERS 5, 6, 7, 8 MIDTERM PREP

Question 1

INTERNAL CONTROL IS MAINLY CONCERNED WIHT THE AMOUNT OF AUTHORITY A SUPERVISOR EXERCISES OER A SUBORDINATE.

Answer

true

Question 2

A HIGHLY AUTOMATED COMPUTERIZED SYSTEM OF ACCOUNTING ELIMINATES THE NEED FOR INTERNAL CONTROL.

Answer

true

Question 3

THE SAFEGUARDING OF ASSETS IS AN OBJECTIVE OF A COMPANY'S SYSTEM OF INTERNAL CONTROL.

Answer

true

Question 4

MANAGEMENT IS RESPONSIBLE FOR ESTABLISHING A SYSTEM OF INTERNAL CONTROL.

Answer

true

Question 5

THE RESPONSIBILITY FOR KEEPING THE RECORDS FOR AN ASSET SHOULD BE SEPARATE FROM THE PHYSICAL CUSTODY OF THAT ASSET.

Answer

true

Question 6

INTERNAL CONTROL IS MOST EFFECTIVE WHEN SEVERAL PEOPLE ARE RESPONSIBLE FOR A GIVEN TASK.

Answer

true

Question 7

REQUIRING EMPLOYEES TO TAKE VACATIONS IS A WEAKNESS IN THE SYSTEM OF INTERNAL CONTROLS BECAUSE IT DOES NOT PROMOTE OPERATIONAL EFFICIENCY.

Answer

true

Question 8

THE EXTENT OF INTERNAL CONTROL FEATURES ADOPTED BY A COMPANY MUST BE EVALUATED IN TERMS OF COST-BENEFIT.

Answer

true

Question 9

AN EFFECTIVE SYSTEM OF INTERNAL CONTROL REQUIRES THAT AT LEAST TWO INDIVIDUALS BE ASSIGNED TO ONE CASH DRAWER SO THAT EACH CAN SERVE AS CHECK ON THE OTHER.

Answer

true

Question 10

ONLY LARGE COMPANIES NEED TO BE CONCERNED WITH A SYSTEM OF INTERNAL CONTROL.

Answer

true

Question 11

THE RESPONSIBILITY FOR ORDERING, RECEIVING, AND PAYING FOR MERCHANDISE SHOULD BE ASSIGNED TO DIFFERENT INDIVIDUALS.

Answer

true

Question 12

IN ORDER TO PREVENT A TRANSACTION FROM BEING RECORDED MORE THAN ONCE, A COMPANY SHOULD MAINTAIN ONLY ONE BOOK OF ORIGINAL ENTRY.

Answer

true

Question 13

FIRMS USE PHYSICAL CONTROLS PRIMARILY TO SAFEGUARD THEIR ASSETS.

Answer

true

Question 14

TRANSACTIONS THAT AFFECT INVENTORIES ON HAND HAVE AN EFFECT ON BOTH THE BALANCE SHEET AND THE INCOME STATEMENT.

Answer

true

Question 15

MANUFACTURERS USUALLY CLASSIFY INVENTORY INTO TWO CATEGORIES: FINISHED GOODS AND WORK IN PROCESS.

Answer

true

Question 16

RAW MATERIALS INVENTORIES ARE THE GOODS THAT A MANUFACTURER HAS COMPLETED AND ARE READY TO BE SOLD TO CUSTOMERS.

Answer

true

Question 17

GOODS THAT HAVE BEEN PURCHASED FOB DESTINATION BUT ARE IN TRANSIT, SHOULD BE EXCLUDED FROM A PHYSICAL COUNT OF GOODS.

Answer

true

Question 18

WORK IN PROCESS IS THAT PORTION OF MANUFACTURED INVENTORY THAT HAS BENE PLACED INTO THE PRODUCTION PROCESS BUT IS NOT YET COMPLETE.

Answer

true

Question 19

THE SPECIFIC IDENTIFICATION METHOD OF COSTING INVENTORIES TRACKS THE ACTUAL PHYSICAL FLOW OF THE GOODS AVAILABLE FOR SALE.

Answer

true

Question 20

MANAGEMENT MAY CHOOSE ANY INVENTORY COSTING METHOD IT DESIRES AS LONG AS THE COST FLOW ASSUMPTION CHOSEN IS CONSISTENT WITH THE PHYSICAL MOVEMENT OF GOODS IN THE COMPANY.

Answer

true

Question 21

THE FIRST IN, FIRST OUT (FIFO) INVENTORY METHOD RESULTS IN AN ENDING INVENTORY VALUED AT THE MOST RECENT COST.

Answer

true

Question 22

THE EXPENSE RECOGNITION PRINCIPLE REQUIRES THAT THE COST OF GOODS SOLD BE MATCHED AGAINST THE ENDING MERCHANDISE INVENTORY IN ORDER TO DETERMINE INCOME.

Answer

true

Question 23

THE SPECIFIC IDENTIFICATION METHOD OF INVENTORY VALUATION IS DESIRABLE WHEN A COMPANY SELLS A LARGE NUMBER OF LOW-UNIT COST ITEMS.

Answer

true

Question 24

IF A COMPANY HAS NO BEGINNING INVENTORY AND THE UNIT COST OF INVENTORY ITEMS DOES NOT CHANGE DURING THE YEAR, THE VALUE ASSIGNED TO THE ENDING INVENTORY WILL BE THE SAME UNDER LIFO AND AVERAGE COST FLOW ASSUMPTIONS.

Answer

true

Question 25

IF THE UNIT PRICE OF INVENTORY IS INCREASING DURING A PERIOD, A COMPANY USING THE LIFO INVENTORY METHOD WILL SHOW LESS GROSS PROFIT FOR THE PERIOD, THAN IF IT HAD USED THE FIFO INVENTORY METHOD.

Answer

true

Question 26

IF A COMPANY HAS NO BEGINNING INVENTORY AND THE UNIT PRICE OF INVENTORY IS INCREASING DURING A PERIOD, THE COST OF GOODS AVAILABLE FOR SALE DURING THE PERIOD WILL BE THE SAME UNDER THE LIFO AND FIFO INVENTORY METHODS.

Answer

true

Question 27

A COMPANY MAY USE MORE THAN ONE INVENTORY COSTING MTHOD CONCURRENTLY.

Answer

true

Question 28

USE OF THE LIFO INVENTORY VALUATION METHOD ENABLES A COMPANY TO REPORT PAPER OF PHANTOM PROFITS.

Answer

true

Question 29

IF A COMPANY CHANGES ITS INVENTORY VALUATION METHOD, THE EFFECT OF THE CHANGE ON NET INCOME SHOULD BE DISCLOSED IN THE FINANCIAL STATEMENTS.

Answer

true

Question 30

UNDER THE LOWER-OF-COST-OR-MARKET BASIS, MARKET IS DEFINED AS CURRENT REPLACEMENT COST.

Answer

true

Question 31

ACCOUNTANTS BELIEVE THAT THE WRITE DOWN FROM COST TO MARKET SHOULD NOT BE MADE IN THE PERIOD IN WHICH THE PRICE DECLINE OCCURS.

Answer

true

Question 32

AN ERROR THAT OVERSTATES THE ENDING INVENTORY WILL ALSO CAUSE NET INCOME FOR THE PERIOD TO BE OVERSTATED.

Answer

true

Question 33

IF INVENTORIES ARE VALUED USING THE LIFO COST ASSUMPTION, THEY SHOULD NOT BE CLASSIFIED AS A CURRENT ASSET ON THE BALANCE SHEET.

Answer

true

Question 34

A SEGREGATION OF DUTIES AMON EMPLOYEES ELIMINATES THE POSSIBILITY OF COLLUSION.

Answer

true

Question 35

FOR EFFICIENCY OF OPERATIONS AND BETTER CONTROL OVER CASH, A COMPANY SHOULD MAINTAIN ONLY ONE BANK ACCOUNT.

Answer

true

Question 36

CASH REGISTERS ARE AN IMPORTANT INTERNAL CONTROL DEVICE USED IN CONTROLLING OVER THE COUNTER RECEIPTS.

Answer

true

Question 37

CHECKS RECEIVED IN THE MAIL SHOULD BE IMMEDIATELY STAMPED "NSF" TO PREVENT UNAUTHORIZED CASHING OF THE CHECK.

Answer

true

Question 38

CONTROL OVER CASH DISBURSEMENTS IS IMPROVED IF MAJOR EXPENDITURES ARE PAID BY CHECK.

Answer

true

Question 39

IN A VOUCHER SYSTEM, VOUCHERS ARE PREPARED IN THE ACCOUNTS RECEIVABLE DEPARTMENT.

Answer

true

Question 40

ELECTRONIC FUNDS TRANSFER (EFT) IS A DISBURSEMENT SYSTEM THAT USES TELEPHONE OR COMPUTER TO TRANSFER CASH FROM ONE LOCATION TO ANOTHER.

Answer

true

Question 41

RETAILERS AND WHOLESALERS ARE BOTH CONSIDERED MERCHANDISERS.

Answer

true

Question 42

THE STEPS IN THE ACCOUNTING CYCLE ARE DIFFERENT FOR A MERCHANDISING COMPANY THAN FOR A SERVICE COMPANY.

Answer

true

Question 43

SALES MINUS OPERATING EXPENSES EQUALS GROSS PROFIT.

Answer

true

Question 44

UNDER A PERCEPTUAL INVENTORY SYSTEM, THE COST OF GOODS SOLD IS DETERMINED EACH TIME A SALE OCCURS.

Answer

true

Question 45

A PERIODIC INVENTORY SYSTEMS REQUIRES A DETAILED INVENTORY RECOD OF INVENTORY ITEMS.

Answer

true

Question 46

FREIGHT TERMS OF FOB DESTINATION MEANS THAT THE SELLER PAYS THE FREIGHT COSTS.

Answer

true

Question 47

FREIGHT COSTS INCURRED BY THE SELLER ON OUTGOING MERCHANDISE ARE AN OPERATING EXPENSE TO THE SELLER.

Answer

true

Question 48

SALES REVENUES ARE EARNED DURING THE PERIOD CASH IS COLLECTED FROM THE BUYER.

Answer

true

Question 49

THE SALES RETURNS AND ALLOWANCES ACCOUNT AND THE SALES DISCOUNT ACCOUNT ARE BOTH CLASSIFIED AS EXPENSE ACCOUNTS.

Answer

true

Question 50

THE REVENUE RECOGNITION PRINCIPLE APPLIES TO MERCHANDISERS BY RECOGNIZING SALES REVENUES WHEN THEY ARE EARNED.

Answer

true

Question 51

SALES ALLOWANCES AND SALES DISCOUNTS ARE BOTH DESIGNED TO ENCOURAGE CUSTOMERS TO PAY THEIR ACCOUNTS PROMPTLY.

Answer

true

Question 52

TO GRANT A CUSTOMER A SALES RETURN, THE SELLER CREDITS SALES RETURNS AND ALLOWANCES.

Answer

true

Question 53

A COMPANY'S UNADJUSTED LANACE IN INVENTORY WILL USUALLY NOT AGREE WITH THE ACTUAL AMOUNT OF INVENTORY ON HAND AT YEAR-END.

Answer

true

Question 54

FOR A MERCHANDISING COMPANY, ALL ACCOUNTS THAT AFFECT THE DETERMINATION OF INCOME ARE CLOSED TO THE INCOME SUMMARY ACCOUNT.

Answer

true

Question 55

A MERCHANDISING COMPANY HAS DIFFERENT TYPES OF ADJUSTING ENTRIES THAN A SERVICE COMPANY.

Answer

true

Question 56

NON-OPERATING ACTIVITIES EXCLUDE REVENUES AND EXPENSES AT RESULT FROM SECONDARY OR AUXILIARY OPERATIONS.

Answer

true

Question 57

OPERATING EXPENSES ARE DIFFERENT FOR MERCHANDISING AND SERVICE ENTERPRISES.

Answer

true

Question 58

NET SALES APPEARS ON BOTH THE MULTIPLE-STEP AND SINGLE-STEP FORMS OF AN INCOME STATEMENT.

Answer

true

Question 59

A MULTIPLE-STEP INCOME STATEMENT PROVIDES USERS WITH MORE INFORMATION ABOUT A COMPANY'S INCOME PERFORMANCE.

Answer

true

Question 60

THE MULTIPLE-STEP FORM OF INCOME STATEMENT IS EASIER TO READ THAN THE SINGLE-STEP FORM.

Answer

true

Question 61

TRADE RECEIVABLES OCCUR WHEN TWO COMPANIES TRADE OR EXCHANGE NOTES RECEIVABLE.

Answer

true

Question 62

OTHER RECEIVABLES INCLUDE NON-TRADE RECEIVABLES SUCH AS LOANS TO COMPANY OFFICERS.

Answer

true

Question 63

BOTH ACCOUNTS RECEIVABLE AND NOTES RECEIVABLE REPRESENT CLAIMS THAT ARE EXPECTED TO BE COLLECTED IN CASH.

Answer

true

Question 64

RECEIVABLES ARE VALUED AND REPORTED IN THE BALANCE SHEET AT THEIR GROSS AMOUNT LESS ANY SALES RETURNS AND ALLOWANCES AND LESS ANY CASH DISCOUNTS.

Answer

true

T/F CHAPTERS 5, 6, 7, 8 MIDTERM PREP

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