EXAM II

CATEGORY 1

100

NAME THE COMPONENTS OF INTERNAL CONTROL

1. Control environment

 

1. Risk assessment

 

1. Information system

 

1. Control procedures

 

1. Monitoring of controls

200

If a bookkeeper mistakenly recorded a $39 deposit as $93, the error would be shown on the bank reconciliation as a

• A. $54 addition to the book balance
• B. $93 deduction from the book balance
• C. $93 addition to the book balance
• D. $54 deduction from the book balance

• D. $54 deduction from the book balance

300

• 20. Winter Park Legal Association performs legal services for Rowland Construction for $ 1,000 on account with credit terms of 1/10, n/30. If Rowland pays the invoice within the discount period, Winter Park will record a debit to Cash in the amount of:
• A. $ 990
• B. $ 1000
• C. $ 10
• D. $ 1,010

• A. $ 990

400

28. If the adjusting entry to accrue interest on a note receivable is omitted, then

• A. liabilities are understated, net income is overstated, and stockholders' equity is overstated.
• B. assets, net income, and stockholders' equity are overstated.
• C. assets, net income, and stockholders' equity are understated.
• D. assets are overstated, net income is understated, and stockholders' equity is understated.

C. assets, net income, and stockholders' equity are understated.

500

38. Use the following data of Seaspray Company:

(KENNEDY PULLS UP THE CHART).

Seaspray's cost of goods sold using the LIFO method would be:

$ 6,450.

$ 6,465.

$ 6,410.

$ 5,590.

$ 6,465.

CATEGORY 2

100

WHAT ARE THE COMPONENTS OF THE FRAUD TRIANGLE?

oPPORTUNITY, mOTIVE, rATIONALIZATION

200

If a bank reconciliation included a deposit in transit of $790, the entry to record this reconciling item would include

• A. a credit to Prepaid insurance for $790
• B. a debit to cash for $790
• C. a credit for $790
• D. No entry is required

D. No entry is required

300

• 22. 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. $ 1,400

400

46. The following data come from the inventory records of Dapper Company:

Net sales revenue $626,000

Beginning inventory 62,000

Ending inventory 44,000

Cost of Goods Sold 488,000

Based on these facts, the gross profit for Dapper Company is

$ 138,000

$ 128,000

$ 130,000

$ 156,000

$ 138,000

500

47. Corporation reported the following data:

Ending inventory. . . . . . . . . ……… . .42,000  Purchases. . . . . . . . . . . . . . . . . . . . . . .224,600

Beginning inventory. . . . . . . .. . . . . . . . . . .52,000

Sales revenue. . . . . . . . . . . . . . . . . . . . . .300,000

Tulsa's gross profit percentage is (Round your answer to one decimal place, X.X%.)

21.8.

82.9.

20.8.

78.2.

21.8.

CATEGORY 3

100

Having a corporate code of ethics that prohibits employees from accepting gifts from customers or vendors is an example of which component of internal control?

Control environment

200

A nurse for the WeCare Family Practice performs a physical exam for a patient on August 1. The charge for the exam is $100; the patient’s insurance company is billed for the entire $100 on August 1. The insurance company receives the invoice on August 2 and enters the amount into its payment system on August 4. WeCare receives the $100 payment from the insurance company on August 20. On which date would WeCare recognize the revenue for the patient’s physical?

B. August 1

300

23. 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. $ 4,400.

400

44. 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?

$ 340,000

$ 278,000

$ 362,000

$ 490,000

$ 362,000

500

37. Use the following data of Matrel Company:

(KENNEDY PULL UP CHART)

Matrel's ending inventory using the FIFO method would be:

$ 1,950.

$ 2,025.

$ 7,305.

$ 5,280.

$ 2,025.

CATEGORY 4

100

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. Bank service charges

200

Fairmont Company has shipped goods to Willowcrook Recreation FOB shipping point. Fairmont will recognize revenue when

• A. the goods leave Fairmont’s shipping dock
• B. Fairmont and Willowcrook agree that the revenue should be recognized soon.
• C. Willowcrook has received the goods
• D. the customer has paid the invoice

A. the goods leave Fairmont’s shipping dock

300

25. 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. a credit to Interest Revenue for $ 21.

400

43. Software began January with $ 3,200 of merchandise inventory. During January, Waterside made the following entries for its inventory transactions:

Inventory  6,400

Accounts Payable 6,400

Accounts Receivable 7,500

Sales Revenue 7,500

Cost of Goods Sold  5,800

Inventory  5,800

What was Waterside's gross profit for January?

$ 0

$ 7,500

$ 5,800

$ 1,700

$ 1,700

500

32. Ravenna Candles recently purchased candleholders for resale in its shops. Which of the following costs would be part of the cost of the candleholder inventory?

A. Purchasing agent wages

B. Freight out

C. Freight in

D. Advertising costs

C. Freight in

CATEGORY 5

100

In a bank reconciliation, an outstanding check is

• A. deducted from the bank balance
• B. deducted from the book balance
• C. added to the bank balance
• D. added to the book balance

A. deducted from the bank balance

200

• Washington Products offers credit terms of 3/10, n/45. Which of the following statements is correct?
• A. No discount is offered for early payment.
• B. The total amount of the invoice must be paid within 10 days of the invoice date.
• C. A discount of 3% can be taken if the invoice is paid within 10 days of the invoice date.
• D. The customer can take a 3% discount if the bill is paid within 45 days of the invoice date.

• C. A discount of 3% can be taken if the invoice is paid within 10 days of the invoice date.

300

29. On August 1, 2018, Lotore, Inc., sold equipment and accepted a six-month, 9%, $ 10,000 note receivable. Lotore's year-end is December 31. How much interest revenue should Lotore accrue on December 31, 2018?

• A. $ 375
• B. $ 900
• C. $ 450
• D. $ 925

A. $ 375

400

40. In a period of rising prices,

gross profit under FIFO will be higher than under LIFO.

cost of goods sold under LIFO will be less than under FIFO.

net income under LIFO will be higher than under FIFO.

LIFO inventory will be greater than FIFO inventory

gross profit under FIFO will be higher than under LIFO.

500

35 AND 36. Use the following data of Seaside Company:

(KENNEDY PULL UP CHART)

Seaside's cost of goods sold using the average-cost method would be:

$ 6,200.

$ 4,950.

$ 620.

$ 5,580.

• Using the information above; Seaside's ending inventory using the average-cost method would be:

$ 6,200.

$ 4,950.

$ 620.

$ 5,580.

35. $ 5,580.

36. $ 620.