Accounting Exam 2

1. 1The type of fraud committed by employees of an entity, who steal money from the company and cover it up through erroneous entries in the books, is called:

   1. Acollusion.
   2. Bfraudulent financial reporting.
   3. Cphishing.
   4. Dmisappropriation of assets.
2. 2________ is the element in the fraud triangle that results from weak internal controls.

   1. AMotive
   2. BOpportunity
   3. CReasoning
   4. DRationalization
3. 3The three main components of the fraud triangle are:

   1. Aopportunity, motive and lack of ethics.
   2. Bmotive, opportunity and rationalization.
   3. Crationalization, opportunity and greed.
   4. Dnone of the above.
4. 4An employee claims that he overstated expense reimbursement requests to have extra money for his wife and children because "Everyone is doing it." This is an example of:

   1. Aunderstanding
   2. Brationalization
   3. Cmotive
   4. Dopportunity
5. 5The type of fraud committed by company managers, who make false and misleading entries in the books in order to improve a company's financial statements, is called:

   1. Amisappropriation of assets
   2. Bfraudulent financial reporting
   3. Ccollusion
   4. Dembezzlement
6. 6The objectives of internal control do NOT include:

   1. Asafeguarding assets.
   2. Bcompliance with standards of social responsibility.
   3. Ccompliance with legal requirements.
   4. Dpromoting operational efficiency.
7. 7The primary way that fraud is prevented, detected, or corrected is through a proper system of:

   1. Apolicies developed by upper management.
   2. Binternal and external audits
   3. Cethical standards and a code of ethics.
   4. Dinternal control
8. 8An internal control system can be circumvented by:

   1. Acollusion, encryption and management override.
   2. Bcollusion, management override and human limitations.
   3. Cnothing, if it is a good internal control system.
   4. Dcollusion, management override and segregation of duties.
9. 9Deposits that have been recorded on the company's books, but have not yet been recorded by the bank are:

   1. Aoutstanding deposits.
   2. Bdeposits in transit.
   3. Cnonsufficient funds deposits.
   4. Delectronic funds deposits.
10. 10Johnny Company deposited $25,000 in its bank on the same day as, but after the bank prepared Johnny Company's bank statement. The deposit should appear on the bank reconciliation as a(n) ________ and is called a(n) ________.

    1. Aaddition to the bank balance; outstanding deposit
    2. Baddition to the bank balance; deposit in transit
    3. Csubtraction from the bank balance; deposit in transit
    4. Dsubtraction from the bank balance; outstanding deposit

11. 11In a bank reconciliation, a NSF check is:

    1. Aadded to the bank balance.
    2. Bsubtracted from the bank balance.
    3. Cadded to the book balance.
    4. Dsubtracted from the book balance.
12. 12All of the following will appear on the book side of the bank reconciliation EXCEPT for:

    1. Abook errors
    2. Belectronic funds transfers
    3. Cservice charges
    4. Ddeposits in transit
13. 13The bookkeeper recorded a deposit of $100 as $10. On the bank reconciliation, this will be a(n):

    1. Asubtraction of $90 to the balance per books.
    2. Baddition of $90 to the balance per books.
    3. Caddition of $90 to the balance per bank.
    4. Dsubtraction of $90 from the balance per bank.
14. 14If a bookkeeper mistakenly records a disbursement as $69 instead of the correct amount of $96, the error should be shown on the bank reconciliation as a:

    1. A$165 addition to the balance per books.
    2. B$165 deduction from the balance per books.
    3. C$27 deduction from the balance per books.
    4. D$27 addition to the balance per books.
15. 15A bank statement included a NSF check from customer Kim Fields for $2,100. The journal entry to record this reconciling item should:

    1. Adebit Cash and credit NSF for $2,100.
    2. Bdebit Cash and credit Accounts Receivable for $2,100.
    3. Cdebit NSF and credit Cash for $2,100.
    4. Ddebit Accounts Receivable and credit Cash for $2,100.
16. 16The ending bank statement balance at November 30 is $7,150. The bank statement shows a service charge of $65, electronic funds receipts of $500, and a NSF check for $350. Deposits in transit total $2,550 and outstanding checks are $1,735. The balance per books at November 30 is $7,880. What is the adjusted bank balance at November 30?

    1. A$8,695
    2. B$7,235
    3. C$7,150
    4. D$7,965
17. 17When goods are shipped FOB destination:

    1. Arevenue is recognized only after cash payment is received.
    2. Brevenue is recognized when the invoice is mailed to the customer.
    3. Crevenue is recognized when the goods leave the shipping dock.
    4. Drevenue is recognized when the goods are received by the customer.
18. 18The journal entry to record lending money on a note receivable is:

    1. ACredit Accounts Receivable, credit Cash.
    2. BDebit Notes Receivable, credit Cash.
    3. CDebit Cash, credit Notes Receivable
    4. DDebit Cash, credit Accounts Receivable.
19. 19With regard to Accounts Receivable, a separate account for each customer is kept in a(n):

    1. Ageneral ledger
    2. Bcontrol ledger
    3. Csubsidiary ledger
    4. Dcontrol account
20. 20With regard to notes receivable, which of the following statements is CORRECT?

    1. AThe borrower signs a written promise to pay the lender a definite sum at the maturity date, with interest.
    2. BAll notes receivable require the borrower to pledge collateral.
    3. CNotes receivable are less formal contracts than accounts receivable.
    4. DNotes receivable are also called promissory notes because a written promise to pay is not required.
21. 21The aging-of-receivables method of estimating uncollectible accounts is:

    1. Aan income statement approach, since it focuses on the amount of expense to be reported on the income statement.
    2. Bnot an acceptable method of estimating bad debts.
    3. Cis required to be used by all companies because it focuses on what should be the most relevant and faithful representation of accounts receivable on the balance sheet.
    4. Da balance sheet approach, since it focuses on accounts receivable.
22. 22Estimating uncollectible accounts by analyzing receivables from specific customers according to how long each has been outstanding is known as the:

    1. Aaging-of-receivables method.
    2. Bpercent-of-sales method.
    3. Cdirect write-off method.
    4. Dallowance method.
23. 23The Allowance for Uncollectible Accounts is classified as:

    1. Aa contra-expense account.
    2. Ban asset account.
    3. Ca contra-asset account.
    4. Da contra-revenue account.
24. 24Estimates are NOT used to record uncollectible accounts expense when using the ________ method.

    1. Aallowance
    2. Baging-of-receivables
    3. Cpercent-of-sales
    4. Ddirect write-off
25. 25The percent-of-sales method for computing uncollectible accounts:

    1. Awill result in the same amount of estimated Uncollectible-Accounts Expense as the aging-of-receivables method.
    2. Btakes a balance sheet approach.
    3. Cemploys the expense recognition (matching) concept.
    4. Dcomputes Uncollectible-Account Expense as a percent of accounts receivable.
26. 26The entry to write off an Account Receivable under the allowance method:

    1. Areduces net income and total assets.
    2. Bincreases net income and total assets.
    3. Creduces total assets and increases net income.
    4. Dhas no effect on total assets and net income.
27. 27Under the allowance method, the entry to write off a $11,600 uncollectible account includes a:

    1. Adebit to Uncollectible Account Expense for $11,600 and credit to Allowance for Uncollectible Accounts for $11,600.
    2. Bdebit to Allowance for Uncollectible Accounts for $11,600 and credit to Accounts Receivable for $11,600.
    3. Cdebit to Accounts Receivable for $11,600 and credit to Allowance for Uncollectible Accounts for $11,600.
    4. Ddebit to Accounts Receivable for $11,600 and credit to Uncollectible-Account Expense for $11,600.
28. 28A year-end review of Accounts Receivable and estimated uncollectible percentages revealed the following:
    
    Days Outstanding Accounts Receivable Est. Percent Uncollectible
    1-30 days $65,000​ 3%
    31-60 days $45,000​ 5%
    61-90 days $21,000​ 10%
    Over 90 days $8000​ 50%
    Before the year-end adjustment, the credit balance in Allowance for Uncollectible Accounts was $1300. Under the aging-of-receivables method, the Uncollectible-Account Expense at year-end is:

    1. A%11,600
    2. B$9000
    3. C$1950
    4. D$10,300
29. 29The net realizable value of accounts receivable is the difference between gross accounts receivable and:

    1. AAllowance for Uncollectible Accounts
    2. BSales Discounts
    3. CUncollectible-Account Expense
    4. DSales Returns and Allowances
30. 30When evaluating the collectability of accounts receivable:

    1. Athe direct write-off method uses the Allowance for Uncollectible Accounts to record bad debts.
    2. Bthe allowance method uses estimates developed from the company's collection experience.
    3. Cthe Allowance for Uncollectible Accounts is an operating expense in the selling, general and administrative category.
    4. Dthe Uncollectible-Account Expense is a contra account.
31. 31Which of the following is considered to be a more stringent measure of a company's ability to pay its current liabilities than the current ratio?

    1. Aquick ratio
    2. Baccounts payable
    3. Cliquidity ratio
    4. Dcollection period
32. 32The financial statements of a merchandising company will show:

    1. Acost of goods sold as a contra revenue account on the income statement.
    2. Binventory as a current asset on the balance sheet.
    3. Cthe same accounts as the financial statements of a service company.
    4. Dgross profit after operating expenses on the income statement.
33. 33The cost of the inventory that a business has sold to customers is called:

    1. Acost of goods sold.
    2. Binventory
    3. Cgross profit
    4. Dpurchases
34. 34The cost of inventory that is still on hand is called:

    1. Apurchases, a current asset that appears on the balance sheet.
    2. Bcost of goods sold, an expense that appears on the balance sheet.
    3. Cinventory, a long-term asset that appears on the balance sheet.
    4. Dinventory, a current asset that appears on the balance sheet.
35. 35Sales revenue is based on the ________ of the inventory, while cost of goods sold is based on the ________ of the inventory.

    1. Asale price; cost
    2. Bcost; sale price
    3. Ccost; fair market value
    4. Dsale price; retail price
36. 36When inventory is shipped from the seller to the buyer with shipping terms of FOB destination:

    1. Athe seller has title to the goods while they are in transit.
    2. Btitle passes from the seller to the buyer when the goods leave the seller's shipping dock.
    3. Cthe goods will be included in the inventory of the buyer while in transit.
    4. Dthe buyer will pay the transportation costs associated with the purchase.
37. 37Company A has inventory out on consignment and held for sale by Company B. Which company will include the goods in their inventory?

    1. ACompany B
    2. BCompany A
    3. Ccannot be determined from the facts
    4. Deither Company A or Company B
38. 38Under a perpetual inventory system, the journal entry to record the purchase of inventory on account will include a:

    1. Adebit to Inventory and a credit to Accounts Payable.
    2. Bdebit to Inventory and a credit to Cash.
    3. Cdebit to Accounts Payable and a credit to Inventory.
    4. Ddebit to Purchases and a credit to Accounts Payable.
39. 39On June 1, Nicholson Company purchased inventory on account with a cost of $1600. Credit terms were 2/10, net 30. On June 2, Nicholson Company returned 50 percent of the inventory. Nicholson Company uses the perpetual inventory system. What journal entry did Nicholson Company prepare on June 2?

    1. Adebit Purchase Returns for $800 and credit Accounts Payable for $800
    2. Bdebit Purchase Returns for $1600 and credit Accounts Payable for $1600
    3. Cdebit Cash for $1600 and credit Accounts Payable for $1600
    4. Ddebit Accounts Payable for $800 and credit Inventory for $800
40. 40On July 1, Corrao Company purchased $800 of inventory on account with credit terms of 3/10, net 30. Corrao Company uses the perpetual inventory system. On July 5, Corrao Company paid the amount due. What journal entry did they prepare on July 5?

    1. Adebit Accounts Receivable for $800 and credit Cash for $800
    2. Bdebit Accounts Payable for $800, credit Inventory for $24 and credit Cash for $776
    3. Cdebit Accounts Payable for $776 and credit Cash for $776
    4. Ddebit Purchase Discount for $24, debit Accounts Payable for $752 and credit Cash for $776
41. 41The inventory system that keeps a running record of inventory on hand is the:

    1. Aperpetual inventory system
    2. Bcost of goods sold inventory system.
    3. Cperiodic inventory system.
    4. Dhybrid inventory system.
42. 42When inventory costs are increasing, the FIFO costing method will generally yield a cost of goods sold that is:

    1. Ahigher than cost of goods sold under the LIFO method.
    2. Bequal to cost of goods sold under the LIFO method.
    3. Clower than cost of goods sold under the LIFO method.
    4. Dequal to the gross profit under the LIFO method.
43. 43Under the ________ method, ending inventory is based on the costs of the most recent purchases.

    1. ALIFO
    2. BFIFO
    3. Caverage-cost
    4. Dspecific-identification
44. 44A company has a beginning inventory of $50,000 and purchases during the year of $150,000. The beginning inventory consisted of 3000 units and 8000 units were purchased during the year. 3780 units remain in ending inventory. The cost of the ending inventory using the average-cost method will be: (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.)

    1. A$131,260.
    2. B$268,700.
    3. C$199,980.
    4. D$68,720.
45. 45Thelen's inventory records show the following data at January 31:
    
    Beginning inventory Jan. 1 90 units at $9 per unit
    Jan. 10 purchase 280 units at $12 per unit
    Jan. 22 purchase 90 units at $13 per unit
    At January 31, 240 units are still on hand. What is the cost of the ending inventory at January 31 if Thelen uses the LIFO method?

    1. A$2760
    2. B$3120
    3. C$2160
    4. D$2610
46. 46Given the following data, what is cost of goods sold as determined by the FIFO method?
    
    Sales 310 units
    Beginning inventory 280 units at $7 per unit
    Purchases 108 units at $8 per unit

    1. A$2170
    2. B$2278
    3. C$2480
    4. D$2200
47. 47Which inventory costing method provides the most current, up-to-date cost of inventory on the balance sheet?

    1. Aaverage cost
    2. Bspecific identification
    3. CFIFO
    4. DLIFO
48. 48A company uses LIFO in one year, then switches to FIFO and then to average-cost. This is a violation of the:

    1. Aconsistency principle.
    2. Bhistorical cost principle.
    3. Cconservatism principle.
    4. Ddisclosure principle
49. 49Under U.S. GAAP, inventories are reported on the balance sheet at:

    1. Aselling price.
    2. Blower-of-cost-or-market.
    3. Chistorical cost only.
    4. Dcurrent replacement cost only.
50. 50Ending inventory for the year ended December 31, 2019, is understated by $8,000. How will this affect net income for 2019 and 2020?

    1. ANet income will be overstated by $8,000 in 2019 and understated by $8,000 in 2020.
    2. BNet income will be understated by $8,000 in 2019 and 2020.
    3. CNet income will be overstated by $8,000 in 2019 and 2020.
    4. DNet income will be understated by $8,000 in 2019 and overstated by $8,000 in 2020.

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Quiz on Accounting Exam 2, created by Molly Heintze on 15/12/2020.

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