Fraud
What are the three components of the fraud triangle?
Motive, opportunity, rationalization
Bank Error
Bank or Book?
Bank
What's the formula for net realizable value of accounts receivable?
A/R- Allowance for uncollectible
Income Statement
What is the quick ratio formula?
All of the following are controls for cash received over the counter except
A. the sales clerk must have access to the cash register tape.
B. the customer should be able to see the amounts entered into the cash register.
C. a printed receipt must be given to the customer.
D. the cash drawer should open only when the sales clerk enters an amount on the keys.
A
A does not have to do with monitoring the flow of money
Deposits in Transit
Bank or Book?
Add or subtract?
Bank
Add
Linus Company uses the percent-of-sales method to estimate uncollectible. Net credit sales for the current year amount to $ 110,000, and management estimates 4% will be uncollectible. The Allowance for Uncollectible Accounts prior to adjustment has a credit balance of $ 3,000. The amount of expense to report on the income statement will be
A. $ 6,600.
B. $ 7,400.
C. $ 4,400.
D. $ 1,500.
C
$110,000 x 4% = $4,400
When does the cost of inventory become an expense?
A. When payment is made to the supplier
B. When cash is collected from the customer
C. When inventory is delivered to a customer
D. When inventory is purchased from the supplier
C
What is the formula for gross profit %?
Double points: What's the formula for gross profit?
GP/REV
Gross Profit= Rev-COGS
As part of a strong internal control system, which of the following accounting duties need to be separated from cash handling?
A. Record keeping
B. Filing
C. Transaction approval
D. Both A and C need to be separated from cash handling.
D.
Separation of duties is an art form
Asset Handling
Record Keeping
Transaction Approval
If a bank reconciliation included a deposit in transit of $790, the entry to record this reconciling item would include a
A. debit to Cash for $790.
B. credit to Cash for $790.
C. credit to Prepaid insurance for $790.
D. No entry is required.
D
Which of the following statements is true?
A. Collections on account decrease receivables.
B. Write-offs of accounts decrease receivables.
C. Credit sales increase receivables.
D. All of these statements are true.
D
Go to slide 6
YAY!
The income statement for Happy Foods shows gross profit of $150,000, operating expenses of $128,000, and cost of goods sold of $212,000. What is the amount of net sales revenue?
A. $ 340,000
B. $ 278,000
C. $ 362,000
D. $ 490,000
C
Requiring that an employee with no access to cash do the accounting is an example of which characteristic of internal control
A. separation of duties
B. assignment of responsibility
C. competent and reliable personnel
D. monitoring of controls
A
A journal entry would need to be made for which of the following adjustments on a bank reconciliation?
A. Outstanding checks
B. Bank service charges
C. Deposits in transit
D. Bank error to be corrected by the bank
B
This question can also be asked which one belongs on the book side
Accounts Receivable has a debit balance of $ 2,000, and the Allowance for Uncollectible Accounts has a credit balance of $ 600. A $ 110 account receivable is written off. What is the amount of net receivables (net realizable value) after the write-off?
A. $ 1,510
B. $ 1,400
C. $ 1,890
D. $ 1,290
B
Before the write-off: 2,000 – 600 = 1,400
After the write-off: 1,890 – 490 = 1,400
Go to slide 7
YAY!
Carey Corporation received a four-month 9%, $ 2,800 note receivable on March 1. The adjusting entry on March 31 will include
A. a credit to Interest Revenue for $ 21.
B. a debit to Interest Receivable for $ 84.
C. a debit to Cash for $ 252.
D. a debit to Interest Receivable for $ 252.
A
Which of the following is an example of misappropriation of assets?
A. A manager makes a journal entry to a secret company account that they have set up to spend on personal expenses
B. An employee takes a bribe from a contractor to ensure they get the company’s business
C. To seem like the company is in better standing to investors a manager edits the journal entries to understate the company’s liabilities
D. In order to reach the quota to get his bonus a manager makes a few extra journal entries for some extra sales that were never really made
B
Misappropriation of assets deals with employees
The Cash account of Reese Corporation had a balance of $3,540 at October 31, 2018. Included were outstanding checks totaling $1,800 and an October 31 deposit of $300 that did not appear on the bank statement. The bank statement, which came from Turnstone State Bank, listen an October 31 balance of $5,570. Included in the bank balance was an October 30 collection of $600 on account from a customer who pays the bank directly. The bank statement also showed a $30 service charge, $10 of interest revenue that Reese earned on its bank balance, and an NSF check for $50. Prepare a bank reconciliation to determine how much cash Reese actually had at Oct. 31.
A. 7070
B. 5000
C. 3900
D. 4070
D
Birchwood Corporation began 2018 with a balance in Accounts Receivable of $ 600,000. Service revenue, all on account, for the year totaled $ 1,600,000. The company ended the year with a balance in Accounts Receivable of $ 775,000. Birchwood's bad-debt write-offs are nonexistent. How much cash did the company collect from customers in 2018
A. $ 2,375,000
B. $ 1,600,000
C. $ 1,425,000
D. $ 1,775,000
C
600,000 + 1,600,000 – x = 775,000
In a period of rising prices,
A. gross profit under FIFO will be higher than under LIFO.
B. cost of goods sold under LIFO will be less than under FIFO.
C. net income under LIFO will be higher than under FIFO.
D. LIFO inventory will be greater than FIFO inventory
A
On August 1, 2018, Avonette, Inc., sold equipment and accepted a six-month, 9%, $50,000 note receivable. Avonette's year-end is December 31. If Avonette fails to make an adjusting entry for the accrued interest on December 31, 2018,
A. net income will be understated, and liabilities will be overstated.
B. net income will be understated, and assets will be understated.
C. net income will be overstated, and assets will be overstated.
D. net income will be overstated, and liabilities will be understated.
B