Devry Cincinnati ACCT 212 Exam Part 2

1. All of the following are purposes of internal control except:
           
to safeguard assets.     
         
to ensure accurate and reliable accounts records.     
         
to encourage adherence to company policies.     
         
to ensure the company makes a profit.    
  
2. Who has the primary responsibility for establishing and maintaining a company's system of internal control?
           
the company's top management     
         
the company's internal auditors     
         
the company's external auditors     
         
the company's stockholders     
 
3. For effective internal control in an organization, who should keep the inventory records?
          
Accountant     
         
Treasurer    
         
sales persons     
         
inventory warehouse supervisor     
 
4. Which of the following is a limitation of internal control?
           
safeguarding company assets     
         
accurate and reliable accounting records     
         
operational efficiency     
         
employee collusion     
  
5. An Internet hacker may sometimes succeed in defeating a company's firewall system and burrow into the company's Web site. Which layer of the onion model of e-commerce system security would the hacker be likely to encounter next?
           
an encryption device     
         
an incident response procedure     
         
an intrusion detection device     
         
another firewall     
  
6. When preparing a bank reconciliation, which of the following items would be subtracted from the bank balance?
           
deposits in transit     
         
bank service charges     
         
EFT cash payments     
         
outstanding checks     
 
7. Securities include:
           
only debt instruments.     
         
only equity instruments.    
         
may be debt or equity instruments.     
         
represent Accounts Receivable and Notes Receivable on the balance sheet.     
  
8. A ledger that contains a separate account for each customer is called an accounts receivable:
           
control ledger    
         
current ledger    
         
trade ledger    
         
subsidiary ledger    
 
9. A critical element of internal control over collections of accounts receivables is:
           
depositing the cash from the cash register on a daily basis    
         
setting up a petty cash account    
         
using a check writing machine    
         
the separation of cash-handling and cash-accounting duties    
 
10. The two accepted methods of recording bad debts are the
           
allowance method and the aging method    
         
receivables method and the aging method    
         
allowance method and the direct write-off method    
         
direct write-off method and the percentage-of-sales method    
 

11. Net accounts receivable is calculated as:
          
sales less sales returns and allowances    
         
accounts receivable less uncollectible-account expense    
         
accounts receivable less allowance for uncollectible accounts    
         
accounts receivable plus allowance for uncollectible accounts    
 
12. Which principle of accounting prescribes the use of the allowance method of accounting for bad debts?
           
full disclosure principle     
           
historical cost principle     
         
revenue recognition principle     
         
matching principle      
  
13. The formula for computing interest expense is equal to:
           
principal x interest rate x time.     
         
(interest rate x principal) / time    
         
(principal x time) / interest rate    
         
principal / (interest rate + time).     
 
14. The number of days it takes to collect the average amount of receivables is called:
           
the quick ratio    
         
the acid-test ratio    
         
the current ratio    
         
days' sales in receivables    
 
15. Which of the following ratios is considered to be a more stringent measure of a company's ability to pay its current liabilities than the current ratio?
           
acid-test ratio     
         
equity ratio     
         
debt ratio     
         
days' sales in receivables   

1. The largest expense category on the income statement of most merchandising companies is:
           
cost of goods sold    
         
other expenses    
         
selling expenses    
         
administrative expenses    
  
2. In a merchandising business, gross profit is equal to sales revenue minus:
           
the sum of cost of goods sold, operating expenses, and prepaid expenses    
         
the sum of cost of goods sold and operating expenses    
         
cost of goods sold    
         
the sum of cost of goods sold and sales commissions    
  
3. Technological advances in computers and inventory tracking have:
           
made perpetual inventory records less expensive to maintain     
           
completely eliminated the need to physically count inventory    
         
made journal entries unnecessary for inventory purchases    
         
made perpetual inventory records more expensive to maintain    
  
4. Given the following data, what is the cost of goods sold?
Sales revenue               $1,980,000
Beginning inventory         380,000
Ending inventory               340,000
Purchases                       1,250,000
          
$690,000     
         
$770,000     
         
$1,290,000     
         
$1,210,000     
 
5. Given the following data, what is the cost of ending inventory?
 Sales revenue                                $1,450,000
Cost of goods sold                              845,000
Beginning inventory                          310,000
Purchases                                           950,000
          
$1,485,000     
         
$415,000     
         
$1,035,000     
         
$205,000     
 

6. When the LIFO method is used, ending inventory is assumed to consist of:
           
the oldest units    
         
the most recently purchased units    
         
the units with the highest per unit cost    
         
the units with the lowest per unit cost    
 
7. When the FIFO method is used, cost of goods sold is assumed to consist of:
           
the most recently purchased units    
         
the units with the lowest per unit cost    
         
the units with the highest per unit cost    
         
the oldest units     
 
8. The lower-of-cost-or-market rule is an application of:
           
accounting conservatism    
         
the disclosure principle    
         
the consistency principle    
         
the materiality concept    
  
9. Treating a capital expenditure as a immediate expense:
           
understates expenses and overstates owners' equity    
         
understates expenses and understates assets    
           
overstates assets and overstates owner's equity    
         
overstates expenses and understates net income     
  
10. Which of the following depreciation methods best fits those assets that tend to wear out before they become obsolete?
           
depletion method     
         
straight-line method     
           
double-declining-balance method     
         
units-of-production method      
  
11. Depreciable cost is defined as:
           
book value    
         
estimated residual value    
         
cost minus accumulated depreciation    
         
cost minus estimated residual value    
 

12. In which of the following depreciation methods is annual depreciation calculated as the difference between the asset's historical cost and its residual value, divided by the asset's useful life in years?
           
double-declining-balance     
         
straight-line      
           
units-of-production    
         
MACRS    
 
13. Book value is defined as:
           
cost less salvage value    
         
cost less accumulated depreciation    
         
current market value less salvage value    
         
current market value less accumulated depreciation    
  
14. All of the following are intangible assets except:
          
trademarks    
         
natural gas    
         
goodwill    
         
copyrights    
 
15. Most intangible assets are:
          
amortized over a period of 40 years or less    
         
amortized over a period of 20 years or less     
         
amortized over a period greater than 40 years    
           
expensed immediately on the income statement