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1 | |
The term "accounting controls" refers to which of the following internal controls?(LO 1) |
| | A) | Safeguard assets and ensure records contain reliable information |
| | B) | Guarantee accurate information |
| | C) | Are designed to evaluate performance of employees |
| | D) | Safeguard assets and assure compliance with laws and regulations |
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2 | |
Which of the following internal controls are concerned with administrative controls? (LO 1) |
| | A) | Ensuring employee accuracy |
| | B) | Promoting employee honesty |
| | C) | Evaluating employee performance |
| | D) | Preventing employees from divulging confidential information |
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3 | |
Which of the following internal control procedures is least likely to be used in a restaurant? (LO 1) |
| | A) | Every customer is provided with a prenumbered receipt. |
| | B) | Cash registers are balanced weekly. |
| | C) | Only one person is allowed to use the cash register. |
| | D) | Employees working the cash registers are bonded. |
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4 | |
A company receives numerous checks in the mail every day. Which of the following would be a weak internal control procedure for this company? (LO 1) |
| | A) | All employees are required to take vacations |
| | B) | The person opening the mail prepares a duplicate deposit slip. |
| | C) | The person opening the mail records the cash receipts to the customer account receivables. |
| | D) | The person who makes the bank deposit does not perform the bank account reconciliation. |
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5 | |
Which of the following related to internal controls is FALSE? (LO 1) |
| | A) | A business should prepare an authority manual that guides both specific and general authorizations. |
| | B) | A good system of internal control is designed to eliminate all errors and fraud. |
| | C) | Employees should be properly trained to perform their jobs. |
| | D) | Unannounced physical counts should be conducted to verify the presence of company-owned equipment. |
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6 | |
For financial reporting purposes, which of the following is NOT generally included in cash? (LO 2) |
| | A) | Currency |
| | B) | Bank drafts |
| | C) | Money orders |
| | D) | Certificates of deposit |
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7 | |
Which of the following procedures is NOT usually associated with the protection of cash? (LO 2) |
| | A) | Making all disbursements using checks rather than cash |
| | B) | Marking "paid" on all supporting documents when the check is signed |
| | C) | Using prenumbered checks |
| | D) | Having one person approve, sign, and record checks |
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8 | |
Which of the following items is added to a company's unadjusted book balance to determine the true cash balance? (LO 3) |
| | A) | Deposits in transit |
| | B) | Outstanding checks |
| | C) | Debit memo for the monthly bank service charge |
| | D) | Credit memo for the collection of the company's accounts receivable by the bank |
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9 | |
Which of the following items is subtracted from the unadjusted bank balance to determine the company's true cash balance? (LO 3) |
| | A) | Deposits in transit |
| | B) | Outstanding checks |
| | C) | Debit memo for the monthly bank service charge |
| | D) | Credit memo for the collection of the company's accounts receivable by the bank |
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10 | |
Which of the following items is subtracted from a company's unadjusted book balance to determine the true cash balance? (LO 3) |
| | A) | Interest earned on the company's checking account |
| | B) | A check deducted from the company's bank account by the bank in error |
| | C) | A customer NSF check |
| | D) | All of the above are subtracted to arrive at the true cash balance |
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11 | |
Thompson Company had the following information related to its bank and book balances at November 30, 2005. What is the company's true cash balance on this date? (LO 3)
 <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/sites/dl/free/0072846003/310572/chap6_11.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (3.0K)</a>]]> |
| | A) | $6,840 |
| | B) | $7,395 |
| | C) | $7,420 |
| | D) | $8,000 |
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12 | |
Hardy Company's accountant accidentally transposed two numbers when recording a check for a cash purchase of merchandise inventory. The check was written for $425 but was recorded as $452. What entry is required to correct this recording error? (LO 3)
 <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/sites/dl/free/0072846003/310572/chap6_112.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (2.0K)</a>]]> |
| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
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13 | |
Jackson Company accepted a check for $1,813 from a customer for a cash purchase of merchandise. The customer did not have sufficient funds to cover the check and the bank adjusted the company's account for the amount of the returned check. What entry is required to record this NSF check? (LO 3)
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| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
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14 | |
Which of the following regarding a petty cash fund is FALSE? (LO 4) |
| | A) | A petty cash fund is controlled by a petty cash custodian. |
| | B) | Petty cash funds are maintained on an imprest basis. |
| | C) | A petty cash fund is often used for small cash disbursements. |
| | D) | A journal entry is made in the accounting records each time the petty cash funds are disbursed. |
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15 | |
Walker Company established a petty cash fund with $500 cash. Which of the following choices accurately reflects how this event would affect the company's financial statements? (LO 4)
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| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
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16 | |
On September 1, Rickman Company established a petty cash fund with $300 cash. A physical count of the petty cash fund on September 30 disclosed $93 in currency and coins. The petty cash vouchers are sorted as follows:  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/sites/dl/free/0072846003/310572/chap6_16.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (1.0K)</a>]]>What is the amount of the petty cash fund replenishment on September 30? (LO 4) |
| | A) | $ 93 |
| | B) | $207 |
| | C) | $210 |
| | D) | $300 |
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17 | |
Johnson Company replenished its petty cash fund with $425. Which of the following choices accurately reflects how this event would affect the company's financial statements? (LO 4)
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| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
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18 | |
A CPA conducts an audit on a company's financial statements and finds that the statements are materially correct and are in compliance with GAAP without reservation or exception. What form of opinion will the CPA firm issue on these statements? (LO 5) |
| | A) | Unqualified opinion |
| | B) | Qualified opinion |
| | C) | Adverse opinion |
| | D) | Disclaimer of audit opinion |
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19 | |
Hoffman Company purchased six staplers that it expects to use for three years. The company expensed the total $24.00 (6 @ $4.00) at the time of purchase. Which of the following concepts best describes the expensing of the staplers? (LO 5) |
| | A) | Historical cost |
| | B) | Matching concept |
| | C) | Materiality |
| | D) | GAAP |
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20 | |
Which of the following is TRUE about materiality? (LO 5) |
| | A) | Materiality is a very objective concept. |
| | B) | Auditors determine if financial statements are absolutely correct. |
| | C) | An error in the financial statements would be material if a potential investor would decide not to invest in the company if the error was known. |
| | D) | The concept of materiality is based on the knowledge of the most sophisticated investor. |
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21 | |
What type of audit opinion will an auditor issue if the financial statements do not present a fair picture of a company's financial situation? (LO 5) |
| | A) | Unqualified |
| | B) | Adverse |
| | C) | Disclaimer of opinion |
| | D) | Qualified |
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22 | |
Which of the following explains why cash is highly susceptible to theft? (LO 2) |
| | A) | Small quantities of high-denomination currency can have significant value. |
| | B) | The rightful owner of currency is difficult to prove. |
| | C) | Cash can be quickly converted into another asset. |
| | D) | All of the above explain why cash is susceptible to theft. |
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23 | |
Which of the following statements is FALSE? (LO 2) |
| | A) | A company should minimize the amount of cash on hand. |
| | B) | A company should use prenumbered checks when making payments. |
| | C) | The responsibilities of approving payments, signing checks and recording the payment in the accounting records should be separated. |
| | D) | A voided check should be defaced and then thrown away. |
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24 | |
What is collusion? (LO 1) |
| | A) | Employees working together to steal from a company. |
| | B) | A form of insurance that protects a company from employee theft. |
| | C) | Two or more employees working on the same assignment. |
| | D) | The act of stealing trade secrets from another company. |
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25 | |
Ace Company provided the following information as of March 31, 2006: (LO 3)  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/sites/dl/free/0072846003/310572/chap6_25.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (2.0K)</a>]]>What is the true cash balance for Ace Company as of March 31, 2006? |
| | A) | $10,720 |
| | B) | $ 9,780 |
| | C) | $ 9,480 |
| | D) | $ 9,630 |
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