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SI Mock Exam Chapters 6-8Which of the following statements regarding inventory counts is (are) true?Only companies that use a periodic inventory system need to perform a physical count of their InventoryA periodic inventory system does not require a physical count to determine inventory levels during the accounting periodBoth a and b are trueNeither a nor b is trueAnswer is A periodic it automatically takes it out of the system!!!A store holding a "25% off" sale will probably experience ______________ gross profit than usual and _______________ sales volume.Higher, lowerLower, lowerHigher, lowerLower, higherThe internal control principle related to separating employees' duties so that the work of one person can be used to check the work of another person is called:Duplication of responsibilityIndependent internal verificationSegregation of dutiesRotation of dutiesWhich of the following is not a characteristic of a Merchandising company?A. Collect CashB. Have operating expensesC. Earn revenuesD. Make products to sell.A company buys footwear and clothing from manufacturers, which it resells to discount stores in a large urban area. This company is an example of a:Wholesale merchandising companyService companyRetail merchandising companySecondary service companyYour company writes a check for $857. Which of the following describes how this transaction should be accounted for?You add $857 to your recorded cash balance and the bank deducts $857 from your checking account balanceYou deduct $857 from your recorded cash balance and the bank deducts $857 from your checking account balanceYou add $857 to your recorded cash balance and the bank adds $857 to your checking account balance.You deduct $857 from your recorded cash balance and the bank adds $857 to your checking account balance.The following information was available to the accountant of Horton Company when preparing the monthly bank reconciliation:Outstanding checks:#643 for $502?#651 for $? 43Bank service charges$? 25Deposits in transit$190Interest received from bank$??? 5Customer check returned by bank as NSF$? 20Cash balance per bank statement$975Cash balance per books (prior to reconciliation)$660The amount of cash that should appear on the balance sheet following completion of the reconciliation and adjustment of the accounting records is:660640620305Books side 660 – 25 + 5 – 20 = 620 You subtract NSF b/c thought you were getting that but actually aren’t Deposits in transit:Have been recorded by the company but not yet by the bankHave been recorded by the bank, but not yet by the companyHave not been recorded by the bank or the companyAre customers’ checks that have not yet been received by the companyWhich bank reconciliation item would not result in an adjusting journal entry in the company's books?Service chargeOutstanding checksA customer’s check returned NSFInterest earned on depositsOn December 31, 2005, you count 300 tie clips in inventory. During the next quarter, you carefully record the effect of each purchase and sale transaction on inventory. You buy 128 tie clips during the next quarter. On March 31, 2006, you count 288 tie clips in inventory. Which of the following is true?Ending inventory would be 288 tie clips on March 31, 2006Your company uses the perpetual inventory methodYour company’s records would show that 140 tie clips were sold during the quarterAll of the aboveB-Mart inspects a $5,000 shipment of blue jeans and finds that $200 of them are defective. The purchase of the $5,000 of blue jeans on account has already been recorded. B-Mart agrees to keep the defective jeans in exchange for a $100 allowance. B-Mart will:Debit accounts payable for $100 and credit inventory for $100Debit inventory for $100 and credit accounts payable for $100Debit accounts payable for $4999 and credit inventory for 4000Debit inventory for 4900 and credit accounts payable for 4000When a company collects from a customer who pays within the discount period, the companyDebits a contra revenue accountDebits a liability accountCredits a liability accountDebits a revenue accountWhich of the following is a true statement for a company using a perpetual inventory system?Sales discounts is a contra account to revenuePurchase discounts is a contra account to revenuePurchase discounts is a contra account to inventorySales discounts is a contra account to inventoryA company has net sales of $612,850 and cost of goods sold of $441,252. The company's gross profit percentage is:723.57.38928A company sells $10,000 of goods to company B on credit terms 2/10,n/30. Which of the following journal entries would company B make when paying off the debt 9 days after the purchase.A. Accounts Payable10,000Cash10,000B. Accounts Payable10,000Cash9,800Revenue200C. Accounts Payable10,000Cash9,800Inventory200D. Accounts Payable10,000Cash9,800Purchase Discounts200Since we are looking at it from company B’s perspective it just accounts to inventory so the discounts would just be included in inventory From company A’s perspective Dr. CashDr. Sales Discount (xA+, A-)Cr. Accounts ReceivableCompany A sells high end computer systems. The following figures were determined for the inventory of company A. Inventory purchased during the year 2009$100,000Market value of the inventory on 12/31/2009$85,000Which of the following would be the inventory account's adjusting entry, using LCM?A. Inventory15,000Revenue15,000B. Depreciation15,000Depreciation Expense15,000C. Cost of Goods Sold15,000Inventory15,000D. Inventory Expense15,000Inventory return and allowance15,000The Amsterdam Corp. overstated its cost of goods sold by $10,000 As a result:Gross profit is overstated by $10,000 (no gross profit would be understated) is 5,000 but should be 7,000Net income is overstated by $10,000 (this is an expense so it would be understated)Retained earnings is overstated by $10,000 (should be understated)Stockholders’ equity is understated by $10,000Do an example net income is $5 and the COGS is $1So it is bigger than it should be this Gross profit = net income – COGSCost of goods sold is an expense so it decreases things Which of the following is not a cost flow assumption?FIFOWeighted averageSpecific IdentificationLIFO A company has the following sales and purchases records. DateUnitsPrice Per UnitBeginning Inventory1/1/2009100$10Sale1/3/200970$20Purchase1/8/2009150$12Purchase1/10/200950$16Sale1/12/200990$25Calculate the cost of goods sold under a periodic inventory system, using FIFOA. $1480B. $2230C. $1720D. $1920Perpetual system using LIFOA. $1720B. $1920C. $1480D. $1980Periodic system using Average CostA. $1920B. $1720C. $2230D. $1480Ignore the sale prices just add up all the sale ones If the company goals are to maximize net income, and the prices they pay their suppliers for inventory is rising, which of the following costing methods would they use?A. LIFOB. FIFOC. Average CostD. Cannot be determined from information givenSo cost of goods sold ignore the price next to sale that is the cost you actually sold it for but cost of goods sold use Which of the following is not a feature of good internal controls?A. Multiple persons involved in a complete transactionB. Establish responsibilities for employeesC. The manager that records the transaction takes the cash to the bankD. Pay suppliers with pre-numbered checks.Which of the following would be a warning sign of fraud incentives?A. Firing the lowest financially productive managers.B. Fixed annual bonuses for all employeesC. An anonymous tip line for employees to report questionable practices.D. Using a periodic inventory systemXYZ Corp. overstated its ending inventory for the year ended December 31, 2xx1. As a result its:Inventory turnover is greater than it should beInventory turnover is less than it should beDays to sell is unaffectedDays to sell is less than it should beWhich of the following is (are) true?All other things equal, a higher debt-to assets ratio indicates a riskier financing strategyA higher asset turnover ratio is a positive indicator of the efficiency of a companyBoth a and bNeither a nor bWhen auditors conclude that a company's financial statements conform to GAAP, the audit report is said to be:ValidatedQualifiedRelevantUnqualifiedIf a company negotiates a deal with creditors to exchange debt for stock, its:Net profit margin will increaseAsset turnover ratio will increaseDebt to assets will decreaseDebt to assets ratio will remain unchangedDEBTS TO ASSETS RATIO WE DID NOT LEARN #30, #28, #31On January 1, 2005, a company has assets of $16 billion and stockholders' equity of $8 billion. On January 1, 2006, the same company has assets of $20 billion and stockholders' equity of $9 billion. During 2005, the company had total sales revenue of $9 billion and total expenses of $7 billion. The company's asset turnover ratio for 2005 is:2.5.5.45.1All other things equal, in which of the following cases would an analyst rank the company most favorably?The company has the highest debt-to-assets ratio in the industry as well as the highest profit margin and asset turnover ratio.The company has the highest debt-to-assets ratio in the industry as well as the highest profit margin while its asset turnover ratio is the lowest.The company has the lowest debt-to-assets ratio in the industry as well as the lowest asset turnover ratio while its profit margin is the highest.The company has the lowest debt-to-assets ratio in the industry as well as the highest profit margin and asset turnover ratio.Which of the following accurately describes how expense incurred but not yet paid would affect the ratios indicated??Debt-to-AssetsAsset TurnoverNet Profit MarginA)No effectNo effectNo effectB)No effectDecreaseNo effectC)IncreaseNo effectDecreaseD)IncreaseDecreaseDecrease 32. Which of the following accurately describes how declaring but not yet paying dividends would affect the ratios indicated??Debt-to-AssetsAsset TurnoverNet Profit MarginA)No effectNo effectDecreaseB)No effectDecreaseNo effectC)IncreaseNo effectDecreaseD)IncreaseNo effectNo effect33. ABC Co. uses the allowance method. It estimated its bad debt expense to be $10,000 for the year 2xx9. As a result: A)There is no effect to assets. B)Net income is increased by $10,000. C)There is an impact on the income statement, only. D)The amount of current assets is decreased by $10,000.34. Samuel, Inc has accounts receivable of $200,000 and an allowance for doubtful accounts of $10,000. If it writes-off a $1,000 account, its net accounts receivable is: A)$199,000. B)$200,000. C)$190,000. D)$189,000.35. North Co. uses the aging of accounts receivable method. The following information comes from its accounting records: What is the amount of the bad debt expense for North? A)$5,000B)$9.000C)$14,000D)$19,00036. On September 1, 2xx8, General Cc. borrowed $100,000 by signing a promissory note agreeing to pay interest at the rate of 6%. The amount borrowed plus interest is due January 31, 2xx9. What is the amount of accrued interest as of December 31, 2xx8? A)$1,500B)$2,000C)$2,500D)$6,00037. Best, Inc. loaned $100,000 on November 1, 2xx8 to one of its customers at the rate of 6%. The principal amount of the loan plus interest is due on February 1, 2xx9. On December 31, 2xx8, it is required to make an adjusting journal entry accruing interest income. As a result of the adjusting journal entry on December 31, 2xx8: A)Gross profit and net income are increased. B)Operating income and net income are increased. C)Assets and stockholders equity are increased. D)Gross profit and stockholders' equity are increased.38. The Banner Co. overstated its sales revenue for the current year. As a result, its: A)Receivables turnover ratio is smaller and its days to collect is smaller. B)Receivables turnover ratio is smaller and its days to collect is bigger. C)Receivables turnover ratio is bigger and its days to collect is bigger. D)Receivables turnover ratio is bigger and its days to collect is smaller.On balance sheet chapter 8:Additionl stuff:Net receivables net receviables = account recievables – allowance for doubtful accounts 1% of credit sales uncollective percentage-income statemet they are pulling from 1% of receivables aging when someone pays in the doscount timedr. Cash (A+) 900dr. Sales Discount (xR+, SE-) 100CR. A/R (A-)1,000The A/R will be bigger be that is what they originally owed you but then they got the discount so you debit the sales discount Extra credit assignment-create how old your account’s receivable is -prior olumn…anything prior to april ................
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