Ch. 7-10 Practice Questions

Question 1

The principles of internal control consist of all of the following except:

Answer 1

generally accepted accounting principles.

Question 2

The following measure is recommended to obtain maximum benefit from independent internal verification:

Answer 2

all of these answers are correct.

Question 3

The concept of reasonable assurance rests on the premise that:

Answer 3

the cost of establishing control procedures should not exceed their expected benefit.

Question 4

Cash consists of:

Answer 4

coins, currency, checks, money orders, money on hand or on deposit in a bank or similar depository.

Question 5

Internal control over cash disbursements is more effective when payments are made by:

Answer 5

check.

Question 6

The bank would debit the customer’s account for all of the following items except:

Answer 6

collection of a note receivable.

Question 7

Examples of cash equivalents include:

Answer 7

Treasury bills, commercial paper, and money market funds.

Question 8

A cash budget contains three sections:

Answer 8

cash receipts, cash disbursements, and financing.

Question 9

The cash receipts section of the cash budget contains:

Answer 9

all of these answers are correct.

Question 10

The cash disbursements section of the cash budget contains:

Answer 10

all of these answers are correct.

Question 11

To ensure receivables are not overstated on the balance sheet, they are reported:

Answer 11

both at their cash (net) realizable value and less estimated uncollectible receivables.

Question 12

Which of the following is the most liquid asset?

Answer 12

Receivables.

Question 13

Receivables are often classified as:

Answer 13

accounts, notes, other.

Question 14

All of the following are “other receivables” except:

Answer 14

petty cash.

Question 15

The method of accounting for bad debt expense, which conforms to GAAP is:

Answer 15

allowance method.

Question 16

An aging schedule of accounts receivable

Answer 16

arranges the accounts by the length of time they have been unpaid.

Question 17

When the allowance method is used and an account is subsequently written off as uncollectible, the following account is debited:

Answer 17

Allowance for Doubtful Accounts.

Question 18

When using the allowance method, the balance in the Allowance for Doubtful Accounts:

Answer 18

all of these answer choices are correct.

Question 19

Notes receivable:

Answer 19

all of these answer choices are correct.

Question 20

On May 1, Smith Company makes sales of $10,000 to Jones Company. Jones needs longer than the normal 30 days to pay and signs a 90 day 8% note. On May 1, Smith Company should

Answer 20

debit Notes Receivable for $10,000.

Question 21

The cost of an asset less its salvage value is referred to as:

Answer 21

depreciable cost.

Question 22

An exclusive right issued by the U.S. Patent Office that enables the recipient to manufacture, sell, or otherwise control an invention for a period of 20 years from the date of the grant is a:

Answer 22

patent.

Question 23

The most widely used method of depreciation is the:

Answer 23

straight-line method.

Question 24

The Blooming Miracles Flower Shop bought a delivery van on January 1, 2017. The van cost $18,000 and had an expected salvage value of $3,000. The life of the van was estimated to be 5 years or 150,000 miles.

4. The depreciable cost of the van is:

Answer 24

$15,000.

Question 25

The depreciation expense for 2017 using the straight-line method of depreciation is:

Answer 25

$3,000.

Question 26

Using the straight-line method of depreciation, the book value of the van at the beginning of the third year would be:

Answer 26

$12,000.

Question 27

The following method(s) is (are) accelerated method(s) of depreciation:

Answer 27

both the declining-balance method and MACRS.

Question 28

Depreciation is dependent on a number of estimates. When a change in an estimate is required, the change is made:

Answer 28

both in the current year and in the future years.

Question 29

All of the following are intangible assets except:

Answer 29

coal reserves.

Question 30

An exclusive right to reproduce and sell artistic or published work is a:

Answer 30

copyright.

Question 31

Liabilities are

Answer 31

all of these answer choices are correct.

Question 32

Notes payable provide the lender

Answer 32

both written documentation and interest income.

Question 33

Assume the tax rate in your state is 8%. Your cash register does not have a key for sales tax. However, the total amount of cash received for sales and sales tax during the month of June was $27,000. Sales for the month of June totaled

Answer 33

$25,000.

Question 34

All of the following would have unearned revenue except

Answer 34

the local Slurp and Burp.

Question 35

When the market rate of interest is greater than the contractual rate of interest

Answer 35

bonds will be issued at a discount.

Question 36

The cash inflows during the year that resulted from the principal portion of debt transactions is provided in the

Answer 36

Financing activities section of the cash flow statement.

Question 37

The times interest earned ratio uses income before interest expense and taxes because

Answer 37

this number best represents the amount available to pay interest.

Question 38

A bond issued at a premium

Answer 38

has a stated rate of interest that exceeds the market rate.

Question 39

Discount on Bonds Payable

Answer 39

both is a contra liability and is deducted from bonds payable on the balance sheet.

Question 40

Contingencies must be accrued as liabilities if

Answer 40

both the company can determine a reasonable estimate of the debt and it is probable the company will suffer a loss.