Exam 3

Question 1

ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller

Answer 1

FOB shipping point

Question 2

ownership of the goods remains with the seller until the goods reach the buyer

Answer 2

FOB destination

Question 3

who pays shipping charges in FOB shipping point?

Answer 3

buyer pays freight costs

Question 4

who pays shipping charges in FOB destination?

Answer 4

seller pays freight costs

Question 5

holding the goods of other parties and trying to sell the goods for them for a fee, but without taking ownership of the goods

Answer 5

consigned goods

Question 6

how consigned goods affect inventory

Answer 6

not included in seller’s inventory because seller does not own it

Question 7

goods in transit affect on inventory

Answer 7

should be included in the inventory of the company that has legal title to the goods

Question 8

inventory turnover ratio

Answer 8

cost of goods sold / average inventory (beginning + ending / 2)

Question 9

days in inventory

Answer 9

365 / inventory turnover ratio

Question 10

what causes inventory turnover to increase?

Answer 10

low days in inventory, minimal amount of inventory on hand at any one time, means they have minimal funds tied up in inventory, there is such a thing as having too low of an inventory

Question 11

lowest cost of goods sold

Answer 11

FIFO

Question 12

highest cost of goods sold

Answer 12

LIFO

Question 13

highest ending inventory

Answer 13

FIFO

Question 14

lowest ending inventory

Answer 14

LIFO

Question 15

Which situation requires a departure from the cost basis of accounting to the lower-of-cost-or-market basis in valuing inventory?

Answer 15

a decline in the value of inventory

Question 16

company employees who continuously evaluate the effectiveness of the company’s internal control systems

Answer 16

internal auditors

Question 17

the costs of establishing controls should not exceed their expected benefit

Answer 17

reasonable assurance

Question 18

For what purpose are physical controls used in a business?

Answer 18

To enhance the accuracy and reliability of its accounting records and to safeguard its assets

Question 19

requires all publicly traded U.S. companies to maintain an adequte system of internal controls

Answer 19

the sarbanes-oxley act

Question 20

different individuals are responsible for related activities

Answer 20

segregation of duties

Question 21

What is an authorization form called which is prepared for each expenditure in most medium and large organizations?

Answer 21

voucher

Question 22

When is the petty cash fund replenished?

Answer 22

Both at the end of an accounting period and when there is not enough cash to cover future withdrawals

Question 23

A check is written to replenish a $100 petty cash fund when the fund contains $3 of cash and $94 of receipts. Which of the following is one part of the entry to be used in recording the check to replenish?

Answer 23

cash over and short will be debited for $3

Question 24

What does IFRS require as it relates to internal controls of foreign companies listed on U.S. stock exchanges?

Answer 24

There are no internal controls required for foreign companies listed on U.S. stock exchanges.

Question 25

There are no internal controls required for foreign companies listed on U.S. stock exchanges.

Answer 25

close to 50%

Question 26

In the PWC study conducted in 2005, what are the average losses by companies impacted by fraud?

Answer 26

losses that average 1,700,000