AC/113 AC113 AC 113 UNIT 6 EXAM

1.

Question :

The bank reconciliation _______.

Student Answer:

 should be prepared by an employee who records cash transactions

 is part of the internal control system

 is for information purposes only

 is sent to the bank for verification

Question 2.

Question :

Which expenses are subtracted from gross profit to arrive at income from operations?

Student Answer:

 All expenses

 Cost of merchandise sold

 Operating expenses

 Sales expenses

Question 3.

Question :

Merchandise with an invoice price of $6,000 is purchased subject to terms of 2/10, n/30, FOB destination. Transportation costs paid by the seller totaled $125. What is the net cost of the merchandise?

Student Answer:

 $6,125

 $6,005

 $5,880

 $5,755

Question 4.

Question :

An element of internal control is _______.

Student Answer:

 fidelity insurance

 prepaid insurance

 monitoring

 insurance expense

Question 5.

Question :

A bank reconciliation should be prepared periodically because _______.

Student Answer:

 the depositor's records and the bank's records are in agreement

 the bank has not recorded all of its transactions

 any differences between the depositor's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected

 the bank must make sure that its records are correct

Question 6.

Question :

NBC Company had $32,000 in net sales, $15,000 in cost of merchandise sold, $18,000 in operating expenses, and $2,000 in other income. What is NBC Company's gross profit?

Student Answer:

 $17,000

 $3,000

 $1,000

 ($1,000)

Question 7.

Question :

Since merchandise inventory is normally sold within a year, how is it reported on the balance sheet?

Student Answer:

 As a revenue

 As the cost of merchandise sold

 It does not appear on the Balance Sheet

 As a current asset

Question 8.

Question :

If the seller is to pay the delivery expense of delivering merchandise, the delivery terms are stated as

Student Answer:

 FOB shipping point

 FOB destination

 FOB n/30

 FOB seller

Question 9.

Question :

The amount of deposits in transit is included on the bank statement as a (n) _______.

Student Answer:

 deduction from the balance per the depositor's books

 deduction from the balance per bank statement

 addition to the balance per bank statement

 addition to the balance per depositor books

Question 10.

Question :

Orange Co. sells merchandise on credit to Zea Co. in the amount of $9,000. The invoice is dated on September 15 with terms of 1/15, net 45. What is the amount of the discount, and up to what date must the invoice be paid in order for the buyer to take advantage of the discount?

Student Answer:

 $180, September 30

 $180, September 25

 $90, September 30

 $90, September 25

Question 11.

Question :

The purpose of the Sarbanes-Oxley Act of 2002 is to _______.

Student Answer:

 restore public confidence and trust in the financial statements of publicly held companies

 require all companies to prepare financial statements

 protect companies from demands of investors, stockholders, and creditors

 do all of these

Question 12.

Question :

What adjustment is required in the depositor's accounts to record outstanding checks?

Student Answer:

 None

 Increase Cash; decrease Accounts Receivable

 Increase Cash; increase Accounts Payable

 Increase Accounts Receivable; decrease Cash

Question 13.

Question :

The Sarbanes-Oxley Act of 2002 requires companies and their independent accountants to _______.

Student Answer:

 report on the effectiveness of the company's internal controls

 report on any fraud and theft detected in the company

 report on the state of the economy and likelihood of fraud

 report on the financial activities of the company

Question 14.

Question :

Requiring employees to take annual vacations is part of which element of internal control?

Student Answer:

 The control environment

 Risk assessment

 Control procedures

 Monitoring

Question 15.

Question :

Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $17,500. The seller issued a credit memorandum for $4,000 prior to payment. What is the amount of the cash discount allowable?

Student Answer:

 $215

 $175

 $135

 $140

Question 16.

Question :

Separating the custody of assets from accounting for assets is a part of which element of internal control?

Student Answer:

 Information and communication

 Monitoring

 The control environment

 Control procedures

Question 17.

Question :

A special cash fund used to make small payments that occur frequently is called a (n) _______.

Student Answer:

 operating expenses fund

 change fund

 market fund

 petty cash fund

Question 18.

Question :

When merchandise is purchased to resell to customers, it is recorded in the account entitled

Student Answer:

 Supplies

 Cost of Goods Sold

 Merchandise Inventory

 Sales

Question 19.

Question :

A firm's internal control environment is influenced by _______.

Student Answer:

 management's operating style

 organizational structure

 personnel policies

 all of these

Question 20.

Question :

The objectives of internal control are to _______.

Student Answer:

 control the internal organization of the accounting department personnel and equipment

 provide reasonable assurance that assets are safeguarded, information is processed accurately, and laws and regulations are complied with

 prevent fraud and promote the social interest of the company

 provide control over "internal-use only" reports and employee internal conduct