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Question 1
Question
All of the following are objectives of internal control except
Answer
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to safeguard assets.
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to maximize net income
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to comply with legal requirements.
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to ensure accurate and reliable accounting records.
Question 2
Question
Requiring that an employee with no access to cash do the accounting is an example of
which characteristic of internal control?
Answer
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Competent and reliable personnel
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. Assignment of responsibility
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Separation of duties
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Monitoring of controls
Question 3
Question
All of the following are controls for cash received over the counter except
Answer
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. the cash drawer should open only when the sales clerk enters an amount on the keys.
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the customer should be able to see the amounts entered into the cash register.
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the sales clerk must have access to the cash register tape.
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a printed receipt must be given to the customer
Question 4
Question
If a bookkeeper mistakenly recorded a $45 deposit as $54, the error would be shown on
the bank reconciliation as a
Answer
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$9 deduction from the book balance.
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$9 addition to the book balance.
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$54 deduction from the book balance
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$54 addition to the book balance
Question 5
Question
. If a bank reconciliation included a deposit in transit of $780, the entry to record this
reconciling item would include
Answer
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a debit to cash for $780.
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. a credit to cash for $780.
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a credit to prepaid insurance for $780.
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Nothing, as no entry is required.
Question 6
Question
Before paying an invoice for goods received on account, the controller or treasurer
should ensure that
Answer
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. the company is paying for the goods it ordered
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the company has not already paid this invoice.
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. the company is paying for the goods it actually received
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all of the above are taken into account.
Question 7
Question
Under the allowance method for uncollectible receivables, the entry to record
uncollectible-account expense has what effect on the financial statements?
Answer
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. Decreases assets and has no effect on net income
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. Decreases net income and decreases assets
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Decreases owners’ equity and increases liabilities
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ncreases expenses and increases owners’ equity
Question 8
Question
Van Gogh Company uses the aging method to adjust the allowance for uncollectible accounts at the end of the period. At December 31, the balance of accounts receivable is $240,000
and the allowance for uncollectible accounts has a credit balance of $5,000 (before adjustment).
An analysis of accounts receivable produced the following age groups:
Based on past experience, Van Gogh estimates that the percentage of accounts that will prove
to be uncollectible within the three age groups is 2%, 8%, and 20%, respectively. Based on these
facts, the adjusting entry for uncollectible accounts should be made in the amount of
Image:
Q5 58 (binary/octet-stream)
Answer
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$9,600.
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$5,000.
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$4,600.
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$14,600.
Question 9
Question
Refer to Question 5-58. The net receivables on the Balance Sheet is
Image:
Q5 58 (binary/octet-stream)
Answer
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$230,400
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$235,000.
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$235,400.
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$225,400.
Question 10
Question
Gordon Company uses the aging method in setting its allowance for doubtful receivables. Allowance for doubtful accounts prior to adjustment has a credit balance of $2,900. Management estimates that due to the economic crisis, a higher level of allowance is necessary and
decides that a $5,600 allowance is an appropriate amount at the year-end. The amount of expense to report on the Income Statement will be
Answer
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$2,700.
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$5,600
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$8,500.
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$2,900.
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