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ACC 2051 Test 2

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

1. 

When a firm uses internal auditors, it is adhering to which one of the following internal control elements?
a.
risk assessment
b.
monitoring
c.
proofs and security measures
d.
separating responsibilities for related operations
 

2. 

An element of internal control is:
a.
risk assessment
b.
journals
c.
subsidiary ledgers
d.
controlling accounts
 

3. 

The controlling account that summarizes the debits and the credits to the individual accounts in the creditors ledger is entitled:
a.
Accounts Receivable
b.
Wages Payable
c.
Accounts Payable
d.
Fees Earned
 

4. 

In which journal would an adjustment for an overcharge by a creditor be recorded?
a.
general journal
b.
purchases journal
c.
cash payments journal
d.
cash receipts journal
 

5. 

Which of the following transactions is recorded in the revenue journal?
a.
sale of excess office equipment for cash
b.
rendering services for cash
c.
rendering services on account
d.
sale of excess office equipment on account
 

6. 

Which of the following is recorded in the cash receipts journal?
a.
cash withdrawn by the owner
b.
cash purchase of equipment
c.
cash received on customer's account
d.
adjusting entry for depreciation
 

7. 

If a company uses special journals:
a.
it must have one for cash, receivables, and payables
b.
it may have no more than four
c.
the quantity and design depend on the needs of the company
d.
no matter the quantity, the design must comply with the FASB requirements
 

8. 

The difference between sales and cost of merchandise sold for a merchandising business is:
a.
Sales
b.
Net Sales
c.
Gross Sales
d.
Gross Profit
 

9. 

When purchases of merchandise are made for cash, the transaction may be recorded with the following entry:
a.
debit Cash; credit Merchandise Inventory
b.
debit Merchandise Inventory; credit Cash
c.
debit Merchandise Inventory; credit Cash Discounts
d.
debit Merchandise Inventory; credit Purchases
 

10. 

Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a:
a.
debit to Bank Credit Card Sales, debit to Credit Card Expense, and a credit to Sales
b.
debit to Cash and a credit to Sales
c.
debit to Cash, credit to Credit Card Expense, and a credit to Sales
d.
debit to Sales, debit to Credit Card Expense, and a credit to Cash
 

11. 

Under a perpetual inventory system, the costs of all sales of merchandise are credited to the account entitled:
a.
Sales Discounts
b.
Cost of Merchandise Sold
c.
Sales Returns and Allowances
d.
Merchandise Inventory
 

12. 

Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $18,000.  The seller paid transportation costs of $1,000 and issued a credit memorandum for $5,000 prior to payment.  What is the amount of the cash discount allowable?
a.
$190
b.
$180
c.
$170
d.
$130
 

13. 

X sold Y merchandise on account FOB shipping point, 2/10, net 30, for $10,000. X prepaid the $200 shipping charge.  Which of the following entries does X make to record this sale?
a.
Accounts Receivable-Y, debit $10,000; Sales, credit $10,000
b.
Accounts Receivable-Y, debit $10,000; Sales, credit $10,000, and
Accounts Receivable-Y, debit $200; Cash, credit $200
c.
Accounts Receivable-Y, debit $10,400; Sales, credit $10,400
d.
Accounts Receivable-Y, debit $10,000; Sales, credit $10,000, and Transportation Out, debit $200; Cash, credit $200
 

14. 

Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as:
a.
selling expenses
b.
general expenses
c.
other expenses
d.
administrative expenses
 

15. 

Which of the following would be reported on the statement of owner's equity for the current year?
a.
sales
b.
withdrawals for the current year
c.
cost of merchandise sold
d.
merchandise inventory
 

16. 

Which of the following is not defined as Cash?
a.
checks
b.
compensating bank balances
c.
money orders
d.
cash-in-bank
 

17. 

The cash account in the depositor's ledger is a(n):
a.
asset with a debit balance
b.
asset with a credit balance
c.
liability with a debit balance
d.
liability with a credit balance
 

18. 

The person who signs the check is called the:
a.
drawee
b.
drawer
c.
payee
d.
bank examiner
 

19. 

Accompanying the bank statement was a debit memorandum for bank service charges.  What entry is required in the depositor's accounts?
a.
debit Miscellaneous Administrative Expense; credit Cash
b.
debit Cash; credit Other Income
c.
debit Cash; credit Accounts Payable
d.
debit Accounts Payable; credit Cash
 

20. 

Receipts from cash sales of $7,500 were recorded incorrectly in the cash receipts journal as $5,700.  What entry is required in the depositor's accounts?
a.
debit Sales; credit Cash
b.
debit Cash; credit Accounts Receivable
c.
debit Cash; credit Sales
d.
debit Accounts Receivable; credit Cash
 

21. 

Accompanying the bank statement was a debit memorandum for an NSF check received from a customer.  What entry is required in the depositor's accounts?
a.
debit Other Income; credit Cash
b.
debit Cash; credit Other Income
c.
debit Cash; credit Accounts Receivable
d.
debit Accounts Receivable; credit Cash
 

22. 

Cash equivalents include:
a.
checks
b.
coins and currency
c.
money market accounts and commercial paper
d.
stocks and short-term bonds
 

23. 

A note receivable due in 60 days is listed on the balance sheet under the caption:
a.
long-term liabilities
b.
fixed assets
c.
current assets
d.
current liabilities
 

24. 

Internal control over receivables is achieved when the employee who handles the accounting for receivables:
a.
also is involved with the operating aspects of approving credit
b.
also is involved with the operating aspects of collecting receivables
c.
is not involved with the operating aspects of approving credit
d.
also is involved with authorizing adjustments to receivables
 

25. 

The two methods of accounting for uncollectible receivables are the allowance method and the:
a.
equity method
b.
direct write-off method
c.
interest method
d.
cost method
 

26. 

Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment), and an analysis of accounts in the customers ledger indicates doubtful accounts of $15,000.  Which of the following entries records the proper provision for doubtful accounts?
a.
debit Uncollectible Accounts Expense, $800; credit Allowance for Doubtful Accounts, $800
b.
debit Uncollectible Accounts Expense, $14,200; credit Allowance for Doubtful Accounts, $14,200
c.
debit Allowance for Doubtful Accounts, $800; credit Uncollectible Accounts Expense, $800
d.
debit Allowance for Doubtful Accounts, $15,800; credit Uncollectible Accounts Expense, $15,800
 

27. 

What is the type of account and normal balance of Allowance for Doubtful Accounts?
a.
Contra asset, credit
b.
Asset, debit
c.
Asset, credit
d.
Contra asset, debit
 

28. 

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible?
a.
Uncollectible Accounts Expense
b.
Accounts Receivable
c.
Allowance for Doubtful Accounts
d.
Interest Expense
 

29. 

In reference to a promissory note, the person who makes the promise to pay is called the:
a.
maker
b.
payee
c.
seller
d.
drawee
 

30. 

A 60-day, 12% note for $15,000, dated May 1, is received from a customer on account.  The maturity value of the note is:
a.
$14,700
b.
$15,000
c.
$15,300
d.
$16,200
 

31. 

A $6,000, 30-day, 12% note recorded on November 21 is not paid by the maker at maturity.  The journal entry to recognize this event is:
a.
debit Cash, $6,060; credit Notes Receivable, $6,060
b.
debit Accounts Receivable, $6,060; credit Notes Receivable, $6,000; Credit Interest Receivable, $60
c.
debit Notes Receivable, $6,060; credit Accounts Receivable, $6,060
d.
debit Accounts Receivable, $6,060; credit Notes Receivable, $6,000; Credit Interest Revenue, $60
 

32. 

Receivables are usually listed on the balance sheet after Cash in what order?
a.
Accounts Receivable, Notes Receivable, Interest Receivable
b.
Interest Receivable, Notes Receivable, Accounts Receivable
c.
Notes Receivable, Interest Receivable, Accounts Receivable
d.
Notes Receivable, Accounts Receivable, Interest Receivable
 

33. 

Under a perpetual inventory system, the amount of each type of merchandise on hand is available in the:
a.
customer's ledger
b.
creditor's ledger
c.
inventory ledger
d.
merchandise inventory account
 

34. 

The inventory data for an item for November are:

Nov.  1  Inventory......... 20 units at $20
      4  Sold.............. 10 units
     10  Purchased......... 30 units at $21
     17  Sold.............. 20 units
     30  Purchased......... 10 units at $22

Using the perpetual system, costing by the first-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?
a.
$640
b.
$610
c.
$620
d.
$630
 

35. 

The inventory data for an item for November are:

Nov.  1  Inventory......... 20 units at $20
      4  Sold.............. 10 units
     10  Purchased......... 30 units at $21
     17  Sold.............. 20 units
     30  Purchased......... 10 units at $22

Using the perpetual system, costing by the last-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?
a.
$640
b.
$630
c.
$660
d.
$610
 

36. 

The inventory data for an item for the month of May are as follows:

May  1  Inventory......... 20 units at $50
     5  Sold.............. 15 units
    10  Purchased......... 30 units at $55
    20  Sold.............. 30 units
    29  Purchased......... 20 units at $60

What is the cost of the merchandise inventory of 25 units on May 31 by the last-in, first-out method if the periodic system is used?
a.
$1,750
b.
$1,275
c.
$1,450
d.
$1,700
 

37. 

The following lots of a particular commodity were available for sale during the year:

Beginning inventory........ 10 units at $61
First purchase............. 25 units at $63
Second purchase............ 30 units at $64
Third purchase............. 15 units at $73

The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year.  What is the amount of the inventory at the end of the year according to the average cost method?
a.
$1,300
b.
$1,305
c.
$1,415
d.
$1,236
 

38. 

The following lots of a particular commodity were available for sale during the year:

Beginning inventory........ 10 units at $60
First purchase............. 25 units at $63
Second purchase............ 30 units at $64
Third purchase............. 15 units at $70

The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year.  What is the amount of the inventory at the end of the year according to the lower of cost or market, using the first-in, first-out method, if the current replacement cost is $64 a unit?
a.
$1,200
b.
$1,230
c.
$1,280
d.
$1,370
 

39. 

During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of merchandise sold is:
a.
fifo
b.
lifo
c.
average cost
d.
weighted average
 

40. 

If merchandise inventory is being valued at cost and the price level is consistently rising, which method of costing will yield the largest gross profit?
a.
average cost
b.
lifo
c.
fifo
d.
weighted average
 



 
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