Accounting Final Exam MCQs

1 of 50
Sarbanes-Oxley was passed in response to which of the following?
The .com implosion
The savings and loan bailout
The implosion of WorldCom and Enron
None of the above
Question
2 of 50
Which of the following describes the internal control component “monitoring of controls”?
Internal auditors monitor company controls to safeguard assets, and external auditors evaluate the controls to ensure that the accounting records are accurate.
Monitoring of controls is the “tone at the top” of the business.
Monitoring of controls is designed to ensure that the business’s goals are achieved.
A company must identify its risks.
Question
3 of 50
Which of the following is a security procedure designed for e-commerce?
Burglar alarms
Firewalls
Fireproof vaults
None of the above
Question
4 of 50
Case 8.5
At December 31, 2008, McGovern Company overstated ending inventory by $50,000.
Refer to Case 8.5. How does this error affect cost of goods sold for 2008?
Has no effect on Cost of Goods Sold
Overstates Cost of Goods Sold by $50,000
Understates Cost of Goods Sold by $50,000
None of the above
Question
5 of 50
Gilkey Construction Company writes of the account of Arthur Blanks of $78,000. The journal entry to record this under the direct write off method is:
A) Bad Debts Expense 78,000
Accounts Receivable – Arthur Blanks 78,000
B) Allowance for doubtful accounts 78,000
Bad Debts Expense 78,000
C) Allowance for doubtful accounts 78,000
Accounts Receivable – Arthur Blanks 78,000
D) Accounts Receivable – Arthur Blanks 78,000
Allowance for doubtful accounts 78,000
A)
B)
C)
D)
Question
6 of 50

Refer to Case 7.11. What is the quick ratio for 2004?
.75
1.0
.61
.70
Question
7 of 50
Which of the following is the last step in the daily control over cash receipts by mail?
A mailroom employee sends all customer checks to the treasurer who has the cashier make the bank deposit.
A mailroom clerk opens the mail and sends the remittance advices to the accounting department.
The controller compares the records of the day’s bank deposit amount from the treasurer and the debit to Cash from the accounting department.
The accounting department prepares journal entries to Cash and the customers’ accounts.
Question
8 of 50
Case 7.4
Gilkey Security Systems has the following for year ended 12-31-09 before adjustments
Accounts receivable $130,000
Net Credit Sales $840,000
Allowance for doubtful accounts $3,000 debit balance
Aging of accounts receivable $19,000
Refer to Case 7.4. The balance in the allowance for doubtful accounts after the adjustment is:
$22,000.
$19,000.
$28,200.
$84,000.
Question
9 of 50
An electronic fund transfer (EFT) for payment of a bill would be:
subtracted from the bank balance of a bank reconciliation.
added to the book balance of a bank reconciliation.
added to the bank balance of a bank reconciliation.
subtracted from the book balance of a bank reconciliation.
Question
10 of 50
Case 8.1
Emerson Electronics had the following information related to its September inventory.
Number of Units Cost
Sept. 1 Beginning Inventory 100 Units $10
5 Purchase 200 Units $11
15 Sold 150 Units
26 Purchase 100 Units $12
30 Sold 200 Units
Sales were made at $20 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.1. The value of cost of goods sold under LIFO would be:
$3,900.
$4,200.
$4,000.
$3,800.
Question
11 of 50
For good internal control, the credit department should have no access to:
customer information.
customer credit applications.
computer systems.
cash.
Question
12 of 50
Accounts receivable minus the allowance for doubtful accounts equals:
net realizable value of accounts receivable.
market value of accounts receivable.
book value of accounts receivable.
historical costs of accounts receivable.
Question
13 of 50
By law, the provisions of Sarbanes-Oxley apply to:
all companies
private companies
public companies
public companies with sales greater than one billion dollars
Question
14 of 50
Case 8.5
At December 31, 2008, McGovern Company overstated ending inventory by $50,000.
Refer to Case 8.5. How does this error affect net income for 2009?
Has no effect on Net Income
Overstates Net Income by $50,000
Understates Net Income by $50,000
None of the above
Question
15 of 50
Rising interest rates, gas prices, declining profits and strong competition in the auto industry all would be factors impacting the __________ of General Motors.
control environment
segregation of duties
control activities
risk assessment
Question
16 of 50
Non sufficient funds (NSF) checks would be:
subtracted from the book balance of a bank reconciliation.
subtracted from the bank balance of a bank reconciliation.
added to the bank balance of a bank reconciliation.
added to the book balance of a bank reconciliation.
Question
17 of 50
Case 7.5
Gilkey Security Systems has the following for year ended 12-31-09 before adjustments
Accounts receivable $130,000
Net Credit Sales $840,000
Allowance for doubtful accounts $3,000 debit balance
Aging of accounts receivable $19,000
Gilkey uses the aging method of estimating bad debt expense.
Refer to Case 7.5. The journal entry for estimating bad debt expense at year end is:
A) Allowance for doubtful accounts 19,000
Accounts Receivable 19,000
B) Bad Debts Expense 22,000
Allowance for doubtful accounts 22,000
C) Bad Debts Expense 19,000
Allowance for doubtful accounts 19,000
D) Allowance for doubtful accounts 22,000
Bad Debts Expense 22,000
A)
B)
C)
D)
Question
18 of 50
Open promises to pay by customers are called:
notes receivable.
other receivables.
accounts receivable.
none of the above.
Question
19 of 50
Which of the following is a control over petty cash?
Support all fund payments with a petty cash ticket.
Keep a specific amount of cash on hand in the fund.
Designate a custodian of the petty cash fund.
All of the above are controls.
Question
20 of 50
Which of the following is a requirement of the Sarbanes-Oxley Act?
The outside auditor must issue an internal control report for each public company, and the Public Company Oversight Board evaluates the client’s internal controls
The Public Company Oversight Board issues an internal control audit report for every publicly held company.
Accounting firms may not both audit a public client and also provide certain consulting services for the same client
Public companies oversee the work of auditors of other public companies.
Question
21 of 50
Case 7.2
Oddessy consulting has the following for year ended 12-31-09 before adjustments
Accounts receivable $330,000
Net Credit Sales $1,200,000
Allowance for doubtful accounts $4,700 credit balance
Estimated percentage of Bad debts on credit sales 2%
Oddessy uses the net credit sales method of estimating bad debt expense.
Refer to Case 7.2. The journal entry for estimating bad debt expense at year end is:
A) Allowance for doubtful accounts 24,000
Accounts Receivable 24,000
B) Allowance for doubtful accounts 28,700
Bad Debts Expense 28,700
C) Bad Debts Expense 28,700
Allowance for doubtful accounts 28,700
D) Bad Debts Expense 24,000
Allowance for doubtful accounts 24,000
A)
B)
C)
D)
Question
22 of 50
Which cost would be part of the cost of land?
Putting up fencing around a building
Removing an old building from the land
Installing lights in a parking lot
Installing a sprinkler system
Question
23 of 50
In dealing with cash receipts, the amount debited to cash should equal:
the amount of the deposit
the amount of total sales
the amount of cash sales
some other amount
Question
24 of 50
Chase Bank loans P+P Company $120,000 on a 1 year promissory note on July 1, 2009. The interest rate of this loan is 12%. The principle and interest are due in one year. The journal entry to accrue interest earned on12-31-09 is:
A) Cash 7,200
Interest revenue 7,200
B) Cash 14,400
Interest revenue 14,400
C) Interest receivable 7,200
Interest Revenue 7,200
D) Interest Receivable 14,400
Interest Revenue 14,400
A)
B)
C)
D)
Question
25 of 50
Case 8.1
Emerson Electronics had the following information related to its September inventory.
Number of Units Cost
Sept. 1 Beginning Inventory 100 Units $10
5 Purchase 200 Units $11
15 Sold 150 Units
26 Purchase 100 Units $12
30 Sold 200 Units
Sales were made at $20 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.1. The value of ending inventory under FIFO would be:
$700.
$600.
$500.
$550.
Question
26 of 50
In a $500 imprest petty cash fund:
the currency minus coins plus tickets should equal $500.
the currency minus coins minus tickets should equal $500.
the currency plus coins plus tickets should equal $500.
the currency plus coins minus tickets should equal $500.
Question
27 of 50
Case 8.2
Emerson Electronics had the following information related to its September inventory.
Number of Units Cost
Sept. 1 Beginning Inventory 200 Units $10
6 Purchase 200 Units $12
16 Sold 250 Units
27 Purchase 200 Units $14
30 Sold 300 Units
Sales were made at $15 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.2. Gross profit would be how much under FIFO?
$8,250
$1,550
$1,950
$1,750
Question
28 of 50
Which of the following demonstrates internal control over cash receipts?
A mailroom employee deposits all customer checks at the bank.
A mailroom employee sends remittance advices to the treasurer
A mailroom employee sends all customer checks to the treasurer who has the cashier make the bank deposit
All of the above demonstrate internal control over cash receipts
Question
29 of 50
A written promise to pay a specified amount of money at a particular future date by a customer is a(n):
accounts receivable.
mortgage payable.
notes payable.
notes receivable.
Question
30 of 50
Case 8.2
Emerson Electronics had the following information related to its September inventory.
Number of Units Cost
Sept. 1 Beginning Inventory 200 Units $10
6 Purchase 200 Units $12
16 Sold 250 Units
27 Purchase 200 Units $14
30 Sold 300 Units
Sales were made at $15 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.2. Gross profit would be how much under LIFO?
$1,950
$8,250
$1,550
$1,750
Question
31 of 50
Which of the following describes the internal control component “control procedures”?
A company must identify its risks.
Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate.
Control procedures are the “tone at the top” of the business.
Control procedures are designed to ensure that the business’s goals are achieved.
Question
32 of 50
Mary is a warehouse worker who fills orders for shipment, receives new shipments of inventory in the warehouse and also records all inventory transactions into the accounting records. Mary is violating which of the following?
Independent checks
Physical safe guards
Segregation of duties
None of the above
Question
33 of 50
A(n) __________ is an internal control tool that reconciles the differences between a depositor’s cash records and the depositor’s cash balance in its bank account.
checking account
bank statement
bank reconciliation
imprest petty cash fund
Question
34 of 50
The direct write off method of accounting for bad debts violates which of the following accounting principles?
Entity concept
Going concern
Historical cost
Matching principle
Question
35 of 50
The intentional misrepresentation of financial information on the financial statements is called:
lack of internal controls.
theft.
fraudulent financial reporting.
employee fraud.
Question
36 of 50
Case 8.1
Emerson Electronics had the following information related to its September inventory.
Number of Units Cost
Sept. 1 Beginning Inventory 100 Units $10
5 Purchase 200 Units $11
15 Sold 150 Units
26 Purchase 100 Units $12
30 Sold 200 Units
Sales were made at $20 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.1. The value of cost of goods sold under FIFO would be:
$2,800.
$3,100.
$2,900.
$3,800.
Question
37 of 50
Case 8.6
At December 31, 2008, McGovern Company understated ending inventory by $50,000.
Refer to Case 8.6. How does this error affect net income for 2008?
Understates Net Income by $50,000
Overstates Net Income by $50,000
Has no effect on Net Income
None of the above
Question
38 of 50
The journal entry to set up a $500 imprest petty cash fund would be:
A) Miscellaneous Expense 500
Cash in bank 500
B) Cash in bank 500
Petty Cash 500
C) Petty Cash 500
Cash in bank 500
D) Accounts Receivable 500
Cash in bank 500
A)
B)
C)
D)
Question
39 of 50
Which of the following is the first step in the purchasing and payment process?
The supplier ships the goods and sends an invoice to the purchaser.
The purchaser sends a check to the supplier.
The purchaser sends a purchase order to the supplier.
The purchase receives the inventory and prepares a receiving report.
Question
40 of 50
Which inventory method would use the most current costs to determine costs of goods sold?
LIFO
Specific Identification
Weighted average
FIFO
Question
41 of 50
Which of the following is considered a long term asset?
Inventory
Accounts receivable
Land
Cash
Question
42 of 50
Which of the following is NOT one of the components of internal control?
Control procedures
Risk assessment
Theft management
Control environment
Question
43 of 50
With good internal controls, the person who handles cash can also:
issue credits to customers for merchandise returned to us.
account for cash receipts from customers.
account for cash payments.
do none of the above.
Question
44 of 50
Which inventory method would use the oldest costs to value ending inventory?
LIFO
Weighted average
Specific Identification
FIFO
Question
45 of 50
Which of the following describes the internal control component “control environment”?
Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate.
The control environment is the “tone at the top” of the business.
The control environment is designed to ensure that the business’s goals are achieved
A company must identify its risks.
Question
46 of 50
Case 8.4
Emerson Electronics had the following information related to its September inventory.
Number of Units Cost
Sept. 1 Beginning Inventory 200 Units $10
8 Purchase 200 Units $12
29 Sold 200 Units $14
200 units were sold @ $15 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.4. Emerson has how many units in Ending Inventory?
200 units
50 units
100 units
300 units
Question
47 of 50
Case 7.6
Chase Bank loans P+P Company $120,000 on a 1 year promissory note on January 1, 2009. The interest rate of this loan is 12%. The principle and interest are due on 12-31-2009.
Refer to Case 7.6. The amount of interest revenue that Chase will earn on this loan is:
$1,200.
$120,000.
$14,400.
$1,000.
Question
48 of 50
Which of the following is TRUE of internal control?
A company’s outside auditor is responsible for the company’s internal control system.
One of the major purposes of internal control is to ensure accurate, reliable accounting records.
Internal control procedures tend to diminish the importance of operational efficiency.
Public companies generally had no internal control systems prior to the enactment of the Sarbanes-Oxley Act
Question
49 of 50
Case 9.3
Leah, Inc. has machinery with a cost of $100,000. The machinery has an estimated useful life of 10 years, and an estimated salvage value of $10,000. The machinery is expected to be able to produce a total of 1,000,000 units during its estimated life.
Refer to Case 9.3. The amount of deprecation expense in the second year under straight line depreciation would be:
$1,000.
$10,000.
$9,000.
$5,000.
Question
50 of 50
Inventory should be shown on the balance sheet at:
market value.
cost.
the higher of cost or market value.
the lower of cost or market value.