1  of 50
Sarbanes-Oxley was passed in response to which of the following?
 
The .com implosion
 
The savings and loan bailout
 
The implosion of WorldCom and Enron
 
None of the above
Question
2  of 50
Which of the following describes the internal control component “monitoring of controls”?
 
Internal auditors monitor company controls to safeguard assets, and external auditors evaluate the controls to ensure that the accounting records are accurate.
 
Monitoring of controls is the “tone at the top” of the business.
 
Monitoring of controls is designed to ensure that the business’s goals are achieved.
 
A company must identify its risks.
Question
3  of 50
Which of the following is a security procedure designed for e-commerce?
 
Burglar alarms
 
Firewalls
 
Fireproof vaults
 
None of the above
Question
4  of 50
Case 8.5
At December 31, 2008, McGovern Company overstated ending inventory by $50,000.
Refer to Case 8.5. How does this error affect cost of goods sold for 2008?
 
Has no effect on Cost of Goods Sold
 
Overstates Cost of Goods Sold by $50,000
 
Understates Cost of Goods Sold by $50,000
 
None of the above
Question
5  of 50
Gilkey Construction Company writes of the account of Arthur Blanks of $78,000. The journal entry to record this under the direct write off method is:
A) Bad Debts Expense   78,000 
  Accounts Receivable – Arthur Blanks     78,000
B) Allowance for doubtful accounts   78,000 
  Bad Debts Expense     78,000
C) Allowance for doubtful accounts   78,000 
  Accounts Receivable – Arthur Blanks     78,000
D) Accounts Receivable – Arthur Blanks   78,000 
  Allowance for doubtful accounts     78,000
 
A)
 
B)
 
C)
 
D)
Question
6  of 50
 
Refer to Case 7.11. What is the quick ratio for 2004?
 
.75
 
1.0
 
.61
 
.70
Question
7  of 50
Which of the following is the last step in the daily control over cash receipts by mail?
 
A mailroom employee sends all customer checks to the treasurer who has the cashier make the bank deposit.
 
A mailroom clerk opens the mail and sends the remittance advices to the accounting department.
 
The controller compares the records of the day’s bank deposit amount from the treasurer and the debit to Cash from the accounting department.
 
The accounting department prepares journal entries to Cash and the customers’ accounts.
Question
8  of 50
Case 7.4
Gilkey Security Systems has the following for year ended 12-31-09 before adjustments
Accounts receivable $130,000
Net Credit Sales $840,000
Allowance for doubtful accounts     $3,000 debit balance
Aging of accounts receivable $19,000
Refer to Case 7.4. The balance in the allowance for doubtful accounts after the adjustment is:
 
$22,000.
 
$19,000.
 
$28,200.
 
$84,000.
Question
9  of 50
An electronic fund transfer (EFT) for payment of a bill would be:
 
subtracted from the bank balance of a bank reconciliation.
 
added to the book balance of a bank reconciliation.
 
added to the bank balance of a bank reconciliation.
 
subtracted from the book balance of a bank reconciliation.
Question
10  of 50
Case 8.1
Emerson Electronics had the following information related to its September inventory.
    Number of Units Cost
Sept. 1 Beginning Inventory 100 Units $10
5 Purchase 200 Units $11
15 Sold 150 Units 
26 Purchase 100 Units $12
30 Sold 200 Units 
Sales were made at $20 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.1. The value of cost of goods sold under LIFO would be:
 
$3,900.
 
$4,200.
 
$4,000.
 
$3,800.
Question
11  of 50
For good internal control, the credit department should have no access to:
 
customer information.
 
customer credit applications.
 
computer systems.
 
cash.
Question
12  of 50
Accounts receivable minus the allowance for doubtful accounts equals:
 
net realizable value of accounts receivable.
 
market value of accounts receivable.
 
book value of accounts receivable.
 
historical costs of accounts receivable.
Question
13  of 50
By law, the provisions of Sarbanes-Oxley apply to:
 
all companies
 
private companies
 
public companies
 
public companies with sales greater than one billion dollars
Question
14  of 50
Case 8.5
At December 31, 2008, McGovern Company overstated ending inventory by $50,000.
Refer to Case 8.5. How does this error affect net income for 2009?
 
Has no effect on Net Income
 
Overstates Net Income by $50,000
 
Understates Net Income by $50,000
 
None of the above
Question
15  of 50
Rising interest rates, gas prices, declining profits and strong competition in the auto industry all would be factors impacting the __________ of General Motors.
 
control environment
 
segregation of duties
 
control activities
 
risk assessment
Question
16  of 50
Non sufficient funds (NSF) checks would be:
 
subtracted from the book balance of a bank reconciliation.
 
subtracted from the bank balance of a bank reconciliation.
 
added to the bank balance of a bank reconciliation.
 
added to the book balance of a bank reconciliation.
Question
17  of 50
Case 7.5
Gilkey Security Systems has the following for year ended 12-31-09 before adjustments
Accounts receivable $130,000
Net Credit Sales $840,000
Allowance for doubtful accounts     $3,000 debit balance
Aging of accounts receivable $19,000
Gilkey uses the aging method of estimating bad debt expense.
Refer to Case 7.5. The journal entry for estimating bad debt expense at year end is:
A) Allowance for doubtful accounts   19,000 
  Accounts Receivable     19,000
B) Bad Debts Expense   22,000 
  Allowance for doubtful accounts     22,000
C) Bad Debts Expense   19,000 
  Allowance for doubtful accounts     19,000
D) Allowance for doubtful accounts   22,000 
  Bad Debts Expense     22,000
 
A)
 
B)
 
C)
 
D)
Question
18  of 50
Open promises to pay by customers are called:
 
notes receivable.
 
other receivables.
 
accounts receivable.
 
none of the above.
Question
19  of 50
Which of the following is a control over petty cash?
 
Support all fund payments with a petty cash ticket.
 
Keep a specific amount of cash on hand in the fund.
 
Designate a custodian of the petty cash fund.
 
All of the above are controls.
Question
20  of 50
Which of the following is a requirement of the Sarbanes-Oxley Act?
 
The outside auditor must issue an internal control report for each public company, and the Public Company Oversight Board evaluates the client’s internal controls
 
The Public Company Oversight Board issues an internal control audit report for every publicly held company.
 
Accounting firms may not both audit a public client and also provide certain consulting services for the same client
 
Public companies oversee the work of auditors of other public companies.
Question
21  of 50
Case 7.2
Oddessy consulting has the following for year ended 12-31-09 before adjustments
Accounts receivable $330,000
Net Credit Sales $1,200,000
Allowance for doubtful accounts $4,700 credit balance
Estimated percentage of Bad debts on credit sales    2%
Oddessy uses the net credit sales method of estimating bad debt expense.
Refer to Case 7.2. The journal entry for estimating bad debt expense at year end is:
A) Allowance for doubtful accounts   24,000 
  Accounts Receivable     24,000
B) Allowance for doubtful accounts   28,700 
  Bad Debts Expense     28,700
C) Bad Debts Expense   28,700 
  Allowance for doubtful accounts     28,700
D) Bad Debts Expense   24,000 
  Allowance for doubtful accounts     24,000
 
A)
 
B)
 
C)
 
D)
Question
22  of 50
Which cost would be part of the cost of land?
 
Putting up fencing around a building
 
Removing an old building from the land
 
Installing lights in a parking lot
 
Installing a sprinkler system
Question
23  of 50
In dealing with cash receipts, the amount debited to cash should equal:
 
the amount of the deposit
 
the amount of total sales
 
the amount of cash sales
 
some other amount
Question
24  of 50
Chase Bank loans P+P Company $120,000 on a 1 year promissory note on July 1, 2009. The interest rate of this loan is 12%. The principle and interest are due in one year. The journal entry to accrue interest earned on12-31-09 is:
A) Cash   7,200 
  Interest revenue     7,200
B) Cash   14,400 
  Interest revenue     14,400
C) Interest receivable   7,200 
  Interest Revenue     7,200
D) Interest Receivable   14,400 
  Interest Revenue     14,400
 
A)
 
B)
 
C)
 
D)
Question
25  of 50
Case 8.1
Emerson Electronics had the following information related to its September inventory.
    Number of Units Cost
Sept. 1 Beginning Inventory 100 Units $10
5 Purchase 200 Units $11
15 Sold 150 Units 
26 Purchase 100 Units $12
30 Sold 200 Units 
Sales were made at $20 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.1. The value of ending inventory under FIFO would be:
 
$700.
 
$600.
 
$500.
 
$550.
Question
26  of 50
In a $500 imprest petty cash fund:
 
the currency minus coins plus tickets should equal $500.
 
the currency minus coins minus tickets should equal $500.
 
the currency plus coins plus tickets should equal $500.
 
the currency plus coins minus tickets should equal $500.
Question
27  of 50
Case 8.2
Emerson Electronics had the following information related to its September inventory.
    Number of Units Cost
Sept. 1 Beginning Inventory 200 Units $10
6 Purchase 200 Units $12
16 Sold 250 Units 
27 Purchase 200 Units $14
30 Sold 300 Units 
Sales were made at $15 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.2. Gross profit would be how much under FIFO?
 
$8,250
 
$1,550
 
$1,950
 
$1,750
Question
28  of 50
Which of the following demonstrates internal control over cash receipts?
 
A mailroom employee deposits all customer checks at the bank.
 
A mailroom employee sends remittance advices to the treasurer
 
A mailroom employee sends all customer checks to the treasurer who has the cashier make the bank deposit
 
All of the above demonstrate internal control over cash receipts
Question
29  of 50
A written promise to pay a specified amount of money at a particular future date by a customer is a(n):
 
accounts receivable.
 
mortgage payable.
 
notes payable.
 
notes receivable.
Question
30  of 50
Case 8.2
Emerson Electronics had the following information related to its September inventory.
    Number of Units Cost
Sept. 1 Beginning Inventory 200 Units $10
6 Purchase 200 Units $12
16 Sold 250 Units 
27 Purchase 200 Units $14
30 Sold 300 Units 
Sales were made at $15 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.2. Gross profit would be how much under LIFO?
 
$1,950
 
$8,250
 
$1,550
 
$1,750
Question
31  of 50
Which of the following describes the internal control component “control procedures”?
 
A company must identify its risks.
 
Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate.
 
Control procedures are the “tone at the top” of the business.
 
Control procedures are designed to ensure that the business’s goals are achieved.
Question
32  of 50
Mary is a warehouse worker who fills orders for shipment, receives new shipments of inventory in the warehouse and also records all inventory transactions into the accounting records. Mary is violating which of the following?
 
Independent checks
 
Physical safe guards
 
Segregation of duties
 
None of the above
Question
33  of 50
A(n) __________ is an internal control tool that reconciles the differences between a depositor’s cash records and the depositor’s cash balance in its bank account.
 
checking account
 
bank statement
 
bank reconciliation
 
imprest petty cash fund
Question
34  of 50
The direct write off method of accounting for bad debts violates which of the following accounting principles?
 
Entity concept
 
Going concern
 
Historical cost
 
Matching principle
Question
35  of 50
The intentional misrepresentation of financial information on the financial statements is called:
 
lack of internal controls.
 
theft.
 
fraudulent financial reporting.
 
employee fraud.
Question
36  of 50
Case 8.1
Emerson Electronics had the following information related to its September inventory.
    Number of Units Cost
Sept. 1 Beginning Inventory 100 Units $10
5 Purchase 200 Units $11
15 Sold 150 Units 
26 Purchase 100 Units $12
30 Sold 200 Units 
Sales were made at $20 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.1. The value of cost of goods sold under FIFO would be:
 
$2,800.
 
$3,100.
 
$2,900.
 
$3,800.
Question
37  of 50
Case 8.6
At December 31, 2008, McGovern Company understated ending inventory by $50,000.
Refer to Case 8.6. How does this error affect net income for 2008?
 
Understates Net Income by $50,000
 
Overstates Net Income by $50,000
 
Has no effect on Net Income
 
None of the above
Question
38  of 50
The journal entry to set up a $500 imprest petty cash fund would be:
A) Miscellaneous Expense   500 
  Cash in bank     500
B) Cash in bank   500 
  Petty Cash     500
C) Petty Cash   500 
  Cash in bank     500
D) Accounts Receivable   500 
  Cash in bank     500
 
A)
 
B)
 
C)
 
D)
Question
39  of 50
Which of the following is the first step in the purchasing and payment process?
 
The supplier ships the goods and sends an invoice to the purchaser.
 
The purchaser sends a check to the supplier.
 
The purchaser sends a purchase order to the supplier.
 
The purchase receives the inventory and prepares a receiving report.
Question
40  of 50
Which inventory method would use the most current costs to determine costs of goods sold?
 
LIFO
 
Specific Identification
 
Weighted average
 
FIFO
Question
41  of 50
Which of the following is considered a long term asset?
 
Inventory
 
Accounts receivable
 
Land
 
Cash
Question
42  of 50
Which of the following is NOT one of the components of internal control?
 
Control procedures
 
Risk assessment
 
Theft management
 
Control environment
Question
43  of 50
With good internal controls, the person who handles cash can also:
 
issue credits to customers for merchandise returned to us.
 
account for cash receipts from customers.
 
account for cash payments.
 
do none of the above.
Question
44  of 50
Which inventory method would use the oldest costs to value ending inventory?
 
LIFO
 
Weighted average
 
Specific Identification
 
FIFO
Question
45  of 50
Which of the following describes the internal control component “control environment”?
 
Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate.
 
The control environment is the “tone at the top” of the business.
 
The control environment is designed to ensure that the business’s goals are achieved
 
A company must identify its risks.
Question
46  of 50
Case 8.4
Emerson Electronics had the following information related to its September inventory.
    Number of Units Cost
Sept. 1 Beginning Inventory 200 Units $10
8 Purchase 200 Units $12
29 Sold 200 Units $14
200 units were sold @ $15 per unit and Emerson uses the perpetual inventory system.
Refer to Case 8.4. Emerson has how many units in Ending Inventory?
 
200 units
 
50 units
 
100 units
 
300 units
Question
47  of 50
Case 7.6
Chase Bank loans P+P Company $120,000 on a 1 year promissory note on January 1, 2009. The interest rate of this loan is 12%. The principle and interest are due on 12-31-2009.
Refer to Case 7.6. The amount of interest revenue that Chase will earn on this loan is:
 
$1,200.
 
$120,000.
 
$14,400.
 
$1,000.
Question
48  of 50
Which of the following is TRUE of internal control?
 
A company’s outside auditor is responsible for the company’s internal control system.
 
One of the major purposes of internal control is to ensure accurate, reliable accounting records.
 
Internal control procedures tend to diminish the importance of operational efficiency.
 
Public companies generally had no internal control systems prior to the enactment of the Sarbanes-Oxley Act
Question
49  of 50
Case 9.3
Leah, Inc. has machinery with a cost of $100,000. The machinery has an estimated useful life of 10 years, and an estimated salvage value of $10,000. The machinery is expected to be able to produce a total of 1,000,000 units during its estimated life.
Refer to Case 9.3. The amount of deprecation expense in the second year under straight line depreciation would be:
 
$1,000.
 
$10,000.
 
$9,000.
 
$5,000.
Question
50  of 50
Inventory should be shown on the balance sheet at:
 
market value.
 
cost.
 
the higher of cost or market value.
 
the lower of cost or market value.

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