1.

aving one person responsible for the related activities of ordering merchandise, receiving
goods, and paying for them

1. Increases the potential for errors and fraud.

2. A bank reconciliation should be prepared

1. To explain any difference between the depositors balance per books with the
balance per bank.

3. Employees sometimes commit fraud because of personal financial problems caused by

too much debt.

1. True

4. The most important element of the fraud triangle is rationalization.

1. False

5. When two or more people get together for the purpose of circumventing prescribed
controls, it is called

1. Collusion.

6. Internal controls are not designed to safeguard assets from

1. Natural disasters

7. Internal control is defined, in part, as a plan that safeguards

1. assets

8. A traditional definition of internal control specifically includes all of the following

features except

1. Insistence that employees not take earned vacations.

9. If employees are bonded

1. They have been insured against misappropriation of assets

10. A consequence of separation of duties is that

1. Theft is still possible when several employees are involved

11. Which of the following statements is correct?

1. Due to its liquid nature, cash is the easiest asset to steal.

12. Which of the following is not an internal control procedure for cash?
 1. Payments should be made with cash.

13. Sams Grocery Store has the following policy: Only one cashier can have access to a
cash drawer. Which internal control principle supports this policy?

1. Establishment of responsibilities.

14. At Emerson Company, one bookkeeper prepares the cash deposits while the other
bookkeeper enters the collections in the journal and ledger. Which of the following is the
best explanation of this type of internal control principle over cash receipts?

1. Segregation of duties.

15. Which of the following would not be included in the definition of cash?

1. Petty Cash

16. Adler Company developed the following reconciling information preparing its December
bank reconciliation. Using the above information, determine the cash balance per books
(before adjustments) for the Adler Company.

1. $4625

17. Which of the following would not be subtracted from the balance per books on bank
reconciliation?

1. Outstanding Checks

18. A NSF check should appear in which section of the bank reconciliation?

1. Deduction from the balance per books.

19. Which of the following would be deducted from the balance per books on bank
reconciliation?

1. Service Charges

20. In the month of November, Gavin Company Inc wrote checks in the amount of $27,750.
In December, check sin the amount of $37974 were written. In November, $25,404 of
these checks was presented to the bank for payment and $32, 649 in December. What is
the amount of outstanding checks at the end of December?

1. $7,671

21. Which of the following is an example of a bank reconciliation item that requires an
adjusting entry?

1. NSF CHECK
22. At April 30, Mendoza Company has the following bank information: What is Mendozas
adjusted cash balance on April 30?

1. 7,740

23. Russel Company assembled the following information in completing its March bank
reconciliation. As a result of this reconciliation, Russel will

1. Reduce its cash account by $315

24. While preparing the bank reconciliation, you notice that a check, written by the company
for $750, has been outstanding for 5 months. What is the best action for you to take?

1. Investigate to determine why the check has not cleared

25. At April 30, Kessler Company has the following bank information. What is Kesslers
adjusted cash balance on April 30?

1. $12,175

26. A basic principle of cash management is to increase the speed of paying liabilities.

1. False

27. Management of cash in the responsibility of the company

1. Treasurer

28. Collier Company has implemented a just-in-time system, which relies on suppliers to
deliver goods for resale as needed. The implementation is most consistent with which of
the following basic principles of cash management?

1. Keeping inventory levels low

29. Which of the following is not a basic principle of cash management?

1. Pay all liabilities early

30. A cash budget contributes to more effective cash management.

1. True

31. Higgins Company gathered the following reconciling information in preparing its
October bank reconciliation. The adjusted cash balance per books on October 31 is

1. 14580

32. Two individuals at a retail store work the same cash register. You evaluate this situation
as
 1. A violation of establishment of responsibility

33. The following information was taken from Mitchell Company cash budget for the Month
of July. If the company has a policy of maintaining end of the month cash balance of
$100,000, the amount the company would have to borrow is

1. 40,000

34. What is the rationale for the internal control principle, segregation of duties?

1. The work of one employee should without duplication of effort, provide a reliable
basis for evaluating the work of another employee

35. The custodian of a company asset should

1. Not have access to the accounting records for that asset

36. Joe is a warehouse custodian and also maintains the accounting record of the inventory
held at the warehouse. An assessment of this situation indicates

1. Segregation of duties is violated

37. Internal auditors

1. Evaluate the system of internal controls for the companies that employ them

38. The following information was taken from Hurlbert Company cash budget for the month
of June. If the company has a policy of maintaining end of the month cash balance of
$40,000, the amount the company would have to borrow is:

1. 10000

39. An adjusting entry is not required for

1. Outstanding checks

40. Expected direct materials purchase in Wade Company is $525,00 in the first quarter and
$675,000 in the second quarter. Forty percent of the purchases are paid in cash as
incurred, and the balance is paid in the follow quarter. The budgeted cash payments for
purchases in the second quarter are:

1. 585,000

41. The reconciliation of the cash register tape with the cash in the register is an example of

1. Independent internal verification

1. Non-Trade receivables should be reported separately from trade receivables. What is this
statement either true or false?
 1. It is true because non trade receivables do not result from business operations and
should not one included with accounts receivable.
2. Receivables are valued and reported in the balance sheet at their gross amount less any
sales returns and allowances and less any cash discounts.
1. False
3. Receivables are
1. claims that are expected to be collected in cash
4. Interest is usually associated with
1. notes receivable
5. The term receivables refers to
1. amounts due from individuals or companies.
6. Under the allowance method, Bad Debt Expense is recorded
1. for an amount that the company estimates it will not collect.
7. Wilton sells softball equipment. On November 14, they shipped $3000 worth of softball u
uniforms to Paola Middle School, termed 2/10, n/30. On November 21, they received an
order from Douglas High School for $1800 worth of custom printed bats to be produced in
December. on Novem45ber 30 Paola Middle School returned $300 worth of defective
merchandise. Wilton has received no payments from either school as of month end. What
amount will be recognized as net accounts receivable on the balance sheet as of November
30?
1. $2700
8. Receivables are valued and reported in the balance sheet as their gross amount less any
sales returns and allowances and less any cash discounts.
1. False
9. An aging of a companys accounts receivable indicates that $4500 are estimated to be
uncollectible. If allowance for Doubtful Accounts has a $1200 credit balance, the adjustment
to record bad debts for the period will require a
1. debit to Bad Debt Expense for $3300
10. M. Cornett is a corporation that sells breakfast cereal. Based on the accounts listed below,
what are M. Cornetts total trade receivables?
1. $10000
11. in 2014 Wilkinson Company had net credit sales of $1,500,000. On January 2, 2014,
Allowance for doubtful accounts has a credit balance of $36,000. During 2014, $60,000 of
uncollectible accounts received were written off. Past experience indicated that the
allowance should be 10% of the balance in receivables (percentage of receivables basis). If
the accounts receivable balance at December 31 was $400,000, what is the required
adjustment to the allowance for Doubtful Accounts at December 31, 2014?
1. $64,000
12. The bookkeeper recorded the following journal entry: ADA 1000 AR Rechard James 1000.
Which of the following statements is false?
1. This entry is only prepared on the last day of the accounting period.
13. Using the allowance method, the uncollectible accounts for the year are estimated to be
$40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 credit before
adjustment, what is the balance after adjustment?
1. $40,000
14. Using the percentage of receivables method for recording bad debt expense, estimated
uncollectible accounts are $45,000. If the balance of the Allowance for Doubtful Accounts is
$11,000 debit before adjustment, what is the balance after adjustment?
1. $45,000
15. Nichols Company uses the percentage of receivables method for recording bad debts
expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000.
Management estimates that 4% of receivables will be uncollected. What adjusting entry will
Nicholls Company make if the Allowance for Doubtful Accounts has a credit balance of
$2000 before adjustment?
1. Bad Debt Expense 6000/Allowance for Doubtful Accounts $6000
16. Young Company lends Dobson Industries $40,000 on August 1, 2014, accepting a 9-month,
12% interest note. If young prepares its financial statements as of December 31, 2014,
what adjusting entry must it make?
1. Interest receivables 2000, Interest revenue 2000
17. When a company receives an interest-bearing note receivable, it will
1. debit notes receivable for the face value of the note
18. The interest on a $6,000, 6%, 90-day note receivable is
1. 90
19. Rosen Company receives a $5,000, 3 month, 6% promissory note from Bay Company in
settlement of an open accounts receivable. What entry will Rosen Company make upon
receiving the note?
1. Notes Receivable 5000, Accounts receivable 5000
20. Which of the following is not true regarding a promissory note?
1. Promissory notes may not b98pe transferred to another party by endorsement.
21. The financial statements of the Belfry Manufacturing Company reports net sales of $500,000
and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of the
year, respectively. What is the average collection period for accounts receivable in days?
1. 44
22. The financial statements of the Phelps Manufacturing Company reports net sales of
$500,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and
end of the year respectively. What is the accounts receivable turnover for Phelps?
1. 8.3
23. Windsor Corporation sells its goods on terms of 2/10, n/30. It has an accounts receivable
turnover of 8. What is the average collection period (days)?
1. 46
24. The accounts receivable turnover
1. can be used to compute the average collection period
25. The following information is related to December 31, 2013 Balances. During 2014 sales on
account were $195,000 and collections on account were $115,000. Also during 2014 the
company wrote off $11,000 in uncollectible accounts. An analysis of outstanding receivable
accounts at year end indicated that bad debts should be estimated at $72,000. bad debt
expense for 2014 is:
1. $23,000
26. Schofield Retailers accepted $60,000 of Silver Bank MasterCard credit card charges for
merchandise sold on August 1. Silver Bank charges 4% for its credit card use. The entry to
record this transaction by Schofield Retailers will include credit to Sales Revenue of $60,000
and a debit to
1. Cash for $57,600 and Service Charge Expense for $2400.
27. The procedure of transferring journal entries to the ledger accounts is called
1. Posting
28. ABC Company accepted a national credit card for a $7,000 purchase. The cost of the
goods sold is $5400. The credit card company charges a 3% fee. what is the impact of this
transaction on net operating income?
 1. Increased by $1190
29. On April 5 Donnas Boutique accepted a Visa card for a $600 purchase. Visa charges a 2%
service fee. The entry to record this transaction would include a
1. Debit to Service Charge Expense of $12
30. When a service has been performed, but no cash has been received, which of the following
statements is true?
1. The entry includes a debit to accounts receivable.
31. Young Company lends Dobson industries $40,000 on January 1, 2014, accepting a 9 month
12 % interest note. If Dobson dishonors the note and does not pay in full at maturity but
Young expects that it will eventually be able to collect the debt, which of the following entries
should most likely be made by Young Company?
1. AR $43600/ NR 40k/IR 3600
32. Doane Company receives $7,000, 3 month, 6% promissory note from Ray Company in
settlement of an open accounts receivable. What entry will Doane Company Make upon
receiving the note?
1. NR 7k IR 105 AR Ray Comp 7k IR 105
33. In reviewing the accounts receivable, the cash receivable value is $21,000 before the write-
off of $1,500 account. What is the cash receivable value after the write off?
1. $21000
34. In 2014 the Golic Co. had net credit sales of $600,000. On January 1, 2014, the Allowance
for Doubtful Accounts had a credit balance of $15,000. During 2014, $24,000 of
uncollectible accounts receivable were written off. Past experience indicates that the
allowance should be 10% of the balance in receivables. If the accounts receivable balance
at December 31 was $160,000, what is the required adjustment to the allowance for doubtful
accounts at December 31, 2014?
1. 25000
35. The maturity of a $40,000, 9%, 40 Day note receivable dated July 3 is
1. 40,400
36. When customers make purchases with a national credit card, the retailer
1. is not involved in the collection process
37. Thompson Corporation unadjusted trial balances includes the following. Bade debts are
estimated to be 6% of outstanding receivables . What amount of debt expense will the
company recorded?
1. 61120
38. XYZ company accepted a national credit card for a $7500 purchase. The cost of the goods
sold was $6000. The Credit card company charges a 3% interest fee. What is the impact of
this transaction on net operating income?
1. Increased by #1275
39. The following information is related to December 31, 2013 balance. During 2014 sales on
account were $580,000 and collect ions on account were $344,000. Also during 2014 the
company y wrote off $32,000 in uncollectible accounts. An analysis of outstanding
receivable accounts at year end indicated the bad debts should be estimated at $216,000.
Bad debt expense for 2014 is
1. d
40. The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record
Bad Debt Expense
1. is relevant when using the percentage of receivables basis.
41. The retailer considers Visa and MasterCard sales as
1. cash sales
42. During 2014, sedge wick inc had sales on account of 264,000, cash sales of 108,000 and
collections on account of 168,000. In addition they collected 2900 which had been written
off as uncollectible in 2013. As a result of these transaction the change in the accounts
receivable balance indicates a
1. 93100