Question 1

How many of the statements regarding bank reconciliations appearing below are true?
A bank reconciliation is an internal report prepared to verify the accuracy of both the cash account of a business or individual and the bank statement.
After preparing a bank reconciliation, no adjusting journal entries need to be made for outstanding checks or deposits in transit.
If a company's records show a different cash balance from that shown on the company's bank state ment, either the company or the bank has made an error.

Accepted Answer

A)   None
B)   One
C)   Two
D)   ThreeE) A) and C)
F) A) and B)

Question 2

A company starts the period with 100 computers in inventory, purchases 30 more, returns 4 of them to suppliers, and has 83 in inventory at the end of the period. How many computers were sold?

Accepted Answer

A)   47 computers.
B)   43 computers.
C)   17 computers.
D)   83 computers.E) All of the above
F) B) and D)

Question 3

The internal control principle related to separating employees' duties so that the work of one person can be used to check the work of another person is called:

Accepted Answer

A)   duplication of responsibility.
B)   independent internal verification.
C)   segregation of duties.
D)   rotation of duties.E) C) and D)
F) A) and B)

Question 4

A merchandising company's operating cycle begins with the sale of merchandise and ends with the cash collection from sales.

Accepted Answer

A) True 
 B)False

Question 5

Physical counts of inventory are necessary to measure and adjust for inventory shrinkage.

Accepted Answer

A) True 
 B)False

Question 6

The Gross Profit Percentage for 2011 would be (round to one decimal place)

Accepted Answer

A)   25.6%
B)   31.5%
C)   55.6%
D)   68.5%E) A) and C)
F) B) and C)

Question 7

A properly designed system of internal controls is an integral part of the accounting system.

Accepted Answer

A) True 
 B)False

Question 8

Thirty years ago, most companies relied mainly upon periodic inventory systems. Why?

Accepted Answer

A)   Theft was an insignificant source of loss compared to today.
B)   The tax code required physical inventory counts until tax regulations were changed in the 1980s.
C)   New technology, allowing perpetual inventory systems to be installed more easily and inexpensively, was not available thirty years ago.
D)   Before the advent of computers, perpetual systems were less accurate than periodic systems.E) A) and B)
F) A) and C)

Question 9

At the end of the accounting period, which of the following accounts would not be closed?

Accepted Answer

A)   Sales Discounts
B)   Cost of Goods Sold
C)   Sales Returns & Allowances
D)   InventoryE) None of the above
F) A) and B)

Question 10

Sales revenue is $367,810 while sales returns and allowances and sales discounts total $24,180. The cost of goods sold is $216,490, operating and other expenses are $28,500, and the company pays $31,640 in income tax. Which of the following is true?

Accepted Answer

A)   Net sales is $127,140 and gross profit is $98,640.
B)   Net sales is $67,000 and gross profit is $98,640.
C)   Net sales is $343,630 and gross profit is $127,140.
D)   Net sales is $367,810 and gross profit is $67,000.E) All of the above
F) None of the above

Question 11

A company reported a decrease in sales from $860,000 last year to $760,000 this year and a decrease in gross profit from $400,000 last year to $360,000 this year. Was the drop in gross profit caused by a decline in the gross profit per sale, a decline in the sales volume, or a combination of the two?

Accepted Answer

The gross profit percentage increased th...

Question 12

Which of the following is a true statement?

Accepted Answer

A)   Sales discounts is a contra-asset account
B)   Sales returns & allowances is a contra-revenue account
C)   Sales returns & allowances is a credit balance account.
D)   Sales discounts is a contra-account to inventory.E) None of the above
F) A) and C)

Question 13

In order to calculate shrinkage:

Accepted Answer

A)   both periodic and perpetual inventory systems are needed.
B)   a periodic inventory system is more effective.
C)   a perpetual inventory system requires an occasional count of actual inventory.
D)   it does not matter which system one uses.E) B) and D)
F) C) and D)

Question 14

What is the necessary journal entry to be recorded by Flynn Company for the EFT?

Accepted Answer

A)   Option A
B)   Option B
C)   Option C
D)   Option DE) B) and C)
F) A) and C)

Question 15

What is the amount of Other expenses (non-operating) ?

Accepted Answer

A)   $19,700
B)   $15,200
C)   $17,500
D)   $24,200E) None of the above
F) C) and D)

Question 16

When sales discounts in the current year exceed sales discounts in the prior year, assuming all else remains unchanged, what is the effect on the gross profit percentage?

Accepted Answer

A)   The percentage will not change.
B)   The percentage will increase.
C)   The percentage will decrease.
D)   It may increase or decrease.E) A) and D)
F) A) and C)

Question 17

If a company returns an item to a supplier, the supplier will record the return as:

Accepted Answer

A)   sales returns and allowances.
B)   shrinkage.
C)   sales discounts.
D)   purchase returns and allowances.E) B) and C)
F) None of the above

Question 18

Notification by the bank that a customer's deposited check was returned NSF requires that the company make the following adjusting journal entry:

Accepted Answer

A)   Option A
B)   Option B
C)   Option C
D)   Option DE) None of the above
F) A) and B)

Question 19

The following information was available to the accountant of Horton Company when preparing the monthly bank reconciliation:  The amount of cash that should appear on the balance sheet following completion of the reconciliation and adjustment of the accounting records is:

Accepted Answer

A)   $660.
B)   $640.
C)   $620.
D)   $305.E) C) and D)
F) None of the above

Question 20

The use of internal controls gives guaranteed protection against losses due to operating activities.

Accepted Answer

A) True 
 B)False

Exam 6: Internal Control and Financial Reporting for Cash and Merchandise Sales

Sales revenue is $367,810 while sales returns and allowances and sales discounts total $24,180. The cost of goods sold is $216,490, operating and other expenses are $28,500, and the company pays $31,640 in income tax. Which of the following is true?

Correct Answer
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Correct Answer
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A company starts the period with 100 computers in inventory, purchases 30 more, returns 4 of them to suppliers, and has 83 in inventory at the end of the period. How many computers were sold?

Correct Answer
verified

What is the amount of Other expenses (non-operating) ?

Correct Answer
verified

Physical counts of inventory are necessary to measure and adjust for inventory shrinkage.

Correct Answer
verified

The use of internal controls gives guaranteed protection against losses due to operating activities.

Correct Answer
verified

A merchandising company's operating cycle begins with the sale of merchandise and ends with the cash collection from sales.

Correct Answer
verified

In order to calculate shrinkage:

Correct Answer
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Thirty years ago, most companies relied mainly upon periodic inventory systems. Why?

Correct Answer
verified

Which of the following is a true statement?

Correct Answer
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The Gross Profit Percentage for 2011 would be (round to one decimal place)

Correct Answer
verified

The following information was available to the accountant of Horton Company when preparing the monthly bank reconciliation: The amount of cash that should appear on the balance sheet following completion of the reconciliation and adjustment of the accounting records is:

Correct Answer
verified

If a company returns an item to a supplier, the supplier will record the return as:

Correct Answer
verified

At the end of the accounting period, which of the following accounts would not be closed?

Correct Answer
verified

What is the necessary journal entry to be recorded by Flynn Company for the EFT?

Correct Answer
verified

Notification by the bank that a customer's deposited check was returned NSF requires that the company make the following adjusting journal entry:

Correct Answer
verified

When sales discounts in the current year exceed sales discounts in the prior year, assuming all else remains unchanged, what is the effect on the gross profit percentage?

Correct Answer
verified

A properly designed system of internal controls is an integral part of the accounting system.

Correct Answer
verified

The internal control principle related to separating employees' duties so that the work of one person can be used to check the work of another person is called:

Correct Answer
verified

Correct Answer
verified
The gross profit percentage increased th...
View Answer

Exam 6: Internal Control and Financial Reporting for Cash and Merchandise Sales

Sales revenue is $367,810 while sales returns and allowances and sales discounts total $24,180. The cost of goods sold is $216,490, operating and other expenses are $28,500, and the company pays $31,640 in income tax. Which of the following is true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A company starts the period with 100 computers in inventory, purchases 30 more, returns 4 of them to suppliers, and has 83 in inventory at the end of the period. How many computers were sold?

Correct AnswerverifiedShow Answer

What is the amount of Other expenses (non-operating) ?

Correct AnswerverifiedShow Answer

Physical counts of inventory are necessary to measure and adjust for inventory shrinkage.

Correct AnswerverifiedShow Answer

The use of internal controls gives guaranteed protection against losses due to operating activities.

Correct AnswerverifiedShow Answer

A merchandising company's operating cycle begins with the sale of merchandise and ends with the cash collection from sales.

Correct AnswerverifiedShow Answer

In order to calculate shrinkage:

Correct AnswerverifiedShow Answer

Thirty years ago, most companies relied mainly upon periodic inventory systems. Why?

Correct AnswerverifiedShow Answer

Which of the following is a true statement?

Correct AnswerverifiedShow Answer

The Gross Profit Percentage for 2011 would be (round to one decimal place)

Correct AnswerverifiedShow Answer

The following information was available to the accountant of Horton Company when preparing the monthly bank reconciliation: The amount of cash that should appear on the balance sheet following completion of the reconciliation and adjustment of the accounting records is:

Correct AnswerverifiedShow Answer

If a company returns an item to a supplier, the supplier will record the return as:

Correct AnswerverifiedShow Answer

At the end of the accounting period, which of the following accounts would not be closed?

Correct AnswerverifiedShow Answer

What is the necessary journal entry to be recorded by Flynn Company for the EFT?

Correct AnswerverifiedShow Answer

Notification by the bank that a customer's deposited check was returned NSF requires that the company make the following adjusting journal entry:

Correct AnswerverifiedShow Answer

When sales discounts in the current year exceed sales discounts in the prior year, assuming all else remains unchanged, what is the effect on the gross profit percentage?

Correct AnswerverifiedShow Answer

A properly designed system of internal controls is an integral part of the accounting system.

Correct AnswerverifiedShow Answer

The internal control principle related to separating employees' duties so that the work of one person can be used to check the work of another person is called:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe gross profit percentage increased th...View AnswerShow Answer

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verified
The gross profit percentage increased th...
View Answer