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University of Texas, El Paso *

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2010

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Accounting

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Jan 9, 2024

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ACCT 2010 Exam 2 review 1. Requiring that an employee with no access to cash do the accounting is an example of which characteristic of internal control A. separation of duties B. assignment of responsibility C. competent and reliable personnel D. monitoring of controls 2. Which of the following items is not true about fraud? A. Its damages must exceed a threshold of $150,000. B. It is an intentional misrepresentation of facts. C. It is designed to persuade another party to act in a way that causes injury or damage to that party. D. It can cause injury or damage to another party. 3. All of these make up the fraud triangle except A. Motive B. Rationalization C. Planning D. Opportunity 4. Which of the following is an example of misappropriation of assets A. A manager makes a journal entry to a secret company account that they have set up to spend on personal expenses B. An employee takes a bribe from a contractor to ensure they get the company’s business C. To seem like the company is in better standing to investors a manager edits the journal entries to understate the company’s liabilities D. In order to reach the quota to get his bonus a manager makes a few extra journal entries for some extra sales that were never really made 5. Each of the following represents an internal control procedure except for: A. separation of duties. B. clear lines of authority and communication. C. compliance monitoring. D. limited access to both assets and records. 6. As part of a strong internal control system, which of the following accounting duties need to be separated from cash handling? A. Record keeping B. Filing C. Transaction approval D. Both A and C need to be separated from cash handling.

7. Having a corporate code of ethics that prohibits employees from accepting gifts from customers or vendors is an example of which component of internal control? A. Risk assessment B. Control environment C. Information system D. Control procedures 8. Which of the following is an example of poor internal control in an organization? A. The company rotates employees through various jobs. B. Employees must take vacations. C. The mailroom clerk records daily cash receipts in the journal. D. The accounting department compares goods received with the related purchase order. 9. All of the following are controls for cash received over the counter except A. the salesclerk must have access to the cash register tape. B. the customer should be able to see the amounts entered into the cash register. C. a printed receipt must be given to the customer. D. the cash drawer should open only when the salesclerk enters an amount on the keys. 10. Companies make most payments by check or EFT wire due to which reason A. Provides record of payment B. Must be signed by authorized official C. Payment supported by evidence D. All of the above 11. A journal entry would need to be made for which of the following adjustments on a bank reconciliation? A. Outstanding checks B. Bank service charges C. Deposits in transit D. Bank error to be corrected by the bank 12. The Cash account of Reese Corporation had a balance of $3,540 at October 31, 2018. Included were outstanding checks totaling $1,800 and an October 31 deposit of $300 that did not appear on the bank statement. The bank statement, which came from Turnstone State Bank, listen an October 31 balance of $5,570. Included in the bank balance was an October 30 collection of $600 on account from a customer who pays the bank directly. The bank statement also showed a $30 service charge, $10 of interest revenue that Reese earned on its bank balance, and an NSF check for $50. Prepare a bank reconciliation to determine how much cash Reese actually had at Oct. 31. A. 7,070 B. 5,000 C. 3,900 D. 4,070

13. If a bank reconciliation included a deposit in transit of $790, the entry to record this reconciling item would include a A. debit to Cash for $790. B. credit to Cash for $790. C. credit to Prepaid insurance for $790. D. No entry is required. 14. On March 15, Maxwell Plush sold and shipped merchandise on account for $6,000 to Kittson Amusement Park, terms FOB shipping point, n/30. Maxwell's cost of goods sold is 40% of sales. How is Maxwell impacted by this sale on March 15? A. Its assets will remain the same, while its equity decreases. B. Its assets will increase, while its equity remains the same. C. Its assets will increase, as will its equity. D. Its assets will remain the same, while its equity increases. 15. Which of the following statements regarding contracts is incorrect? A. A contract must be written to be valid. B. A contract is an agreement between two parties that creates enforceable rights or performance obligations. C. Identifying the contract with the customer is the first step of the revenue recognition model. D. For a business that provides services, the performance obligation is generally satisfied when the service provider has substantially completed the service for the customer. 16. Washington Products offers credit terms of 3/10, n/45. Which of the following statements is correct? A. No discount is offered for early payment. B. The total amount of the invoice must be paid within 10 days of the invoice date. C. A discount of 3% can be taken if the invoice is paid within 10 days of the invoice date. D. The customer can take a 3% discount if the bill is paid within 45 days of the invoice date. 17. Which of the following statements is true? A. Collections on account decrease receivables. B. Write-offs of accounts decrease receivables. C. Credit sales increase receivables. D. All of these statements are true. 18. Winter Park Legal Association performs legal services for Rowland Construction for $ 1,000 on account with credit terms of 1/10, n/30. If Rowland pays the invoice within the discount period, Winter Park will record a debit to Cash in the amount of: A. $ 990 B. $ 1000 C. $ 10 D. $ 1,010

19. Birchwood Corporation began 2018 with a balance in Accounts Receivable of $ 600,000. Service revenue, all on account, for the year totaled $ 1,600,000. The company ended the year with a balance in Accounts Receivable of $ 775,000. Birchwood's bad-debt write-offs are nonexistent. How much cash did the company collect from customers in 2018? A. $ 2,375,000 B. $ 1,600,000 C. $ 1,425,000 D. $ 1,775,000 20. Accounts Receivable has a debit balance of $ 2,000, and the Allowance for Uncollectible Accounts has a credit balance of $ 600. A $ 110 account receivable is written off. What is the amount of net receivables (net realizable value) after the write-off? A. $ 1,510 B. $ 1,400 C. $ 1,890 D. $ 1,290 21. Linus Company uses the percent-of-sales method to estimate uncollectible. Net credit sales for the current year amount to $ 110,000, and management estimates 4% will be uncollectible. The Allowance for Uncollectible Accounts prior to adjustment has a credit balance of $ 3,000. The amount of expense to report on the income statement will be A. $ 6,600. B. $ 7,400. C. $ 4,400. D. $ 1,500. 22. Company had the following information in 2018: Accounts receivable 12/31/18 $14,000 Allowance for uncollectible-accounts credit balance12/31/18 (before adjustment) 750 Credit service revenue during 2018 35,000 Cash service revenue during 2018 15,000 Collections from customers on account during 2018 44,000 Uncollectible account expense for 2018 is $ 1,415. What is the adjusted balance in the Allowance account at year-end for 2018? A. $ 1,415 B. $ 1,400 C. $750 D. $ 2,165 23. Carey Corporation received a four-month 9%, $ 2,800 note receivable on March 1. The adjusting entry on March 31 will include A. a credit to Interest Revenue for $ 21. B. a debit to Interest Receivable for $ 84. C. a debit to Cash for $ 252. D. a debit to Interest Receivable for $ 252.

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