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ACC400 FINAL EXAM
Please submit your answer to each of the following questions in an Excel spreadsheet numbered 1 through 40.
1. A traditional definition of internal control specifically includes all of the following features except
a. adherence to prescribed managerial policies.
b. promotion of operational efficiency.
c. reliability of accounting data.
d. insistence that employees not take earned vacations.
2. A consequence of separation of duties is that
a. theft by employees becomes impossible.
b. operations become extremely inefficient because of constant training of employees.
c. more employees will need to be bonded.
d. theft is still possible when several employees are involved.
3. A very small company would have the most difficulty in implementing which of the following internal control activities?
a. Separation of duties
b. Limited access to assets
c. Periodic independent verification
d. Sound personnel procedures
4. The principle of establishing responsibility does not include
a. one person being responsible for one task.
b. authorization of transactions.
c. independent internal verification.
d. approval of transactions.
5. The control principle related to not having the same person authorize and pay for goods is known as
a. establishment of responsibility.
b. independent internal verification.
c. separation of duties.
d. rotation of duties.
6. Two individuals at a retail store work the same cash register. You evaluate this situation as
a. a violation of establishment of responsibility.
b. a violation of separation of duties.
c. supporting the establishment of responsibility.
d. supporting internal independent verification.
7. The receivable that is usually evidenced by a formal instrument of credit is a(n)
a. trade receivable.
b. note receivable.
c. accounts receivable.
d. income tax receivable.
8. Which of the following receivables would not be classified as an "other receivable”?
a. Advance to an employee
b. Refundable income tax
c. Notes receivable
d. Interest receivable
9. Notes or accounts receivables that result from sales transactions are often called
a. sales receivables.
b. non-trade receivables.
c. trade receivables.
d. merchandise receivables.
10. The term "receivables" refers to
a. amounts due from individuals or companies.
b. merchandise to be collected from individuals or companies.
c. cash to be paid to creditors.
d. cash to be paid to debtors.
11. Receivables are
- a. One of the most liquid assets and thus are always considered current assets.
- b. Claims that are expected to be collected in cash.
- c. Shown on the Income Statement at cash realizable value.
- d. Always the result of revenue recognition.
12. Non-trade receivables should be reported separately from trade receivables. Why is this statement either true or false?
- a. It is true because trade receivables are current assets and non-trade receivables are long term.
- b. It is false because all current receivables must be grouped together in one account.
- c. It is true because non-trade receivables do no result from business operations and should not be included with accounts receivable.
- d. It is false because management can decide how to report receivables.
13. Dee Elle is a corporation that sells breakfast cereal. Based on the accounts listed below, what are Dee Elle’s total trade receivables?
Income tax refund due $ 500
Advance due to the company from
the company president 300
3-month note due from Dee Elle’s main customer 2,000
Interest due this month on the above note 100
Due and unpaid from this months sales 3,000
Due and unpaid from last months sales 1,000
14. Which one of the following would be classified as an extraordinary item?
a. Expropriation of property by a foreign government
b. Losses attributed to a labor strike
c. Write-down of inventories
d. Gains or losses from sales of equipment
15. When a change in accounting principle occurs
a. prior years' financial statements should not be changed to reflect the newly adopted principle.
b. the new principle should be used in reporting the results of operations of the current year.
c. the cumulative effect of the change in principle should be reflected on the income statement as of the beginning of the next year.
d. the cumulative effect of the change in accounting principle should be classified as an extraordinary item on the income statement.
16. If an item meets one (but not both) of the criteria for an extraordinary item, it
a. only needs to be disclosed in the footnotes of the financial statements.
b. may be treated as sales revenue (if it is a gain) and as an operating expense (if it is a loss).
c. is reported as an "other revenue or gain" or "other expense and loss," net of tax.
d. is reported at its gross amount as an "other revenue or gain" or "other expense or loss."
17. The order of presentation of items that may appear on the income statement is
a. Extraordinary items, Discontinued operations, Income before income taxes.
b. Discontinued operations, Extraordinary items, Income before income taxes.
c. Income before income taxes, Discontinued operations, Extraordinary items.
d. Income before income taxes, Extraordinary items, Discontinued operations.
18. Which of the following items appears on the income statement before income before irregular items?
a. Other comprehensive income
b. Extraordinary items
c. Income tax expense
d. Discontinued operations
19. Which of the following items should be classified as an extraordinary item on an income statement?
a. Gain on the sale of property, plant or equipment
b. Loss due to expropriation of property by a foreign government
c. Loss due to discontinued operations
d. Excess of the selling price over the cost of treasury stock
20. When a company changes from one acceptable accounting method to another, the cumulative effect of the change is disclosed
a. in the retained earnings statement, as a correction to the opening balance.
b. as a footnote.
c. in the income statement, above income from continuing operations.
d. in the income statement, below income from continuing operations.
21. Liabilities are classified on the balance sheet as current or
22. Most companies pay current liabilities
a. out of current assets.
b. by issuing interest-bearing notes payable.
c. by issuing stock.
d. by creating long-term liabilities.
23. A current liability is a debt that can reasonably be expected to be paid
a. within one year, or the operating cycle, whichever is longer.
b. between 6 months and 18 months.
c. out of currently recognized revenues.
d. out of cash currently on hand.
24. Which of the following most likely would be classified as a current liability?
a. Dividends payable
b. Bonds payable in 5 years
c. Three-year notes payable
d. Mortgage payable as a single payment in 10 years
25. Failure to record a liability will probably
a. result in an overstated net income.
b. result in overstated total liabilities and owner’s equity.
c. have no effect on net income.
d. result in understated total assets.
26. Very often, failure to record a liability means failure to record a(n)
b. asset conversion.
27. The term legal capital is a descriptive term for
a. stockholders’ equity.
b. par value.
c. residual equity.
d. market value.
28. A corporation has the following account balances: Common Stock, $1 par value, $40,000; Paid-in Capital in Excess of Par Value, $1,800,000. Based on this information, the
a. legal capital is $1,840,000.
b. number of shares issued is 40,000.
c. number of shares outstanding is 1,840,000.
d. average price per share issued is $4.60.
29. The authorized stock of a corporation
a. only reflects the initial capital needs of the company.
b. is indicated in its by-laws.
c. is indicated in its charter.
d. must be recorded in a formal accounting entry.
30. The amount of stock that may be issued according to the corporation’s charter is referred to as the
a. authorized stock.
b. issued stock.
c. unissued stock.
d. outstanding stock.
31. If Morgan Company issues 2,000 shares of $5 par value common stock for $140,000, the account
a. Common Stock will be credited for $140,000.
b. Paid-in Capital in Excess of Par Value will be credited for $10,000.
c. Paid-in Capital in Excess of Par Value will be credited for $130,000.
d. Cash will be debited for $130,000.
32. New Corp. issues 1,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to:
a. Common Stock $10,000 and Paid-in Capital in Excess of Stated Value $4,000.
b. Common Stock $14,000.
c. Common Stock $10,000 and Paid-in Capital in Excess of Par Value $4,000.
d. Common Stock $10,000 and Retained Earnings $4,000.