Exam: 061580RR – Accounting for Merchandising
1. As it relates to accounting fraud, which of the following best describes perceived pressure?
A. Intentional misrepresentation of financial statements
B. A need to obtain cash or other assets
C. An employee’s justification of his or her actions
D. The opportunity to commit and conceal fraud
2. If a misstatement of inventory occurs, the net income for _______ periods will be misstated.
3. Which of the following is not part of the fraud triangle?
B. Perceived pressure
D. Perceived opportunity
4. Gordon the CPA says, “I am unable to give an opinion about the validity of this accounting information.” What kind of opinion is this?
5. When merchandise is sold under the perpetual system of inventory, the journal entry to record a sale of merchandise on account includes debiting _______ and crediting _______.
A. Cost of Goods Sold; Sales
B. Accounts Receivable; Inventory
C. Accounts Receivable; Cost of Goods Sold
D. Accounts Receivable; Sales
6. Fraudulent financial reporting typically involves
B. the stockholders.
C. the board of directors.
7. What does GAAS stand for?
A. Goals, accruals, audits, and standards
B. Generally accepted auditing standards
C. General accounts and statuses
D. Goals, assessment activities, and statuses
8. An employee believes that getting away with fraud without being detected is likely. This best relates to which element of the fraud triangle?
A. Perceived opportunity
C. Perceived pressure
9. Which type of audit opinion is also referred to as a clean opinion?
10. Give the correct example of a kickback.
A. Wyatt ate only cheap sandwiches during his business trip, but he claimed over $100 in food expenses to his company.
B. Marcy understates her company’s unearned revenue in order to make the total revenue look more impressive.
C. A customer buys a DVD player, but Courtney does not record the transaction. Later, Courtney keeps the money for herself.
D. Ben gives his hardware salesman tickets to the football game. In exchange, the salesman gives Ben an unfairly low price on
11. Under the average cost method, the flow of costs through the accounting records will _______ to the physical flow of goods through the business.
A. be nearly opposite
B. exactly match
C. have no relationship
D. match closely
12. Which of the following would probably not need to be disclosed in a footnote?
A. A material change in estimated shrinkage
B. A 10% increase in sales
C. Change of inventory methods
D. A change in depreciation method
13. The _______ method is used to estimate the cost of ending inventory.
A. average cost
B. gross profit
14. The major difference in the statement of retained earnings between a service business and a
merchandising business is
A. that the retained earnings statement of a service business includes Dividends.
B. that the retained earnings statement of a merchandising business shows the Cost of Goods Sold.
C. that the retained earnings statement of a merchandising business includes Dividends.
D. nothing. There are no differences between the two.
15. Goods available for sale are $350,000; beginning inventory is $24,000; ending inventory is $32,000; and cost of goods sold is $275,000. What is the inventory turnover?
16. Which of the following is not part of the control environment?
A. Having integrity and ethical values
B. Having a leadership philosophy
C. Having competent workers
D. Assessing chances of fraud
17. In order to attract investors and borrow on attractive terms, a company would use ________ in times when inventory costs are rising.
B. average costing
C. specific-identification costing
18. _______ occurs if a disgruntled employee convinces another to steal from the company.
A. The control environment
D. A control activity
19. A company has net sales of $126,000, cost of goods sold of $72,000, operating expenses of $38,000, and other expenses of $3,000. Approximately what is the company’s gross profit percentage?
20. If ending inventory in Period 1 is overstated, gross profit in Period 2 is
C. the same as in Period 1.
D. not affected.
Exam: 061582RR – Corporations
1. When a company sells off part of its business, this transaction is reported in a/ the
A. discontinued operations section.
B. retrospective application.
C. extraordinary items section.
D. continuing operations section.
2. Allied Industrial has net sales of $1,200,000, net income of $85,000, average current assets of $53,000, average fixed assets of $184,000, and average total assets of $237,000. What is Allied Industrial’s total asset turnover ratio?
3. The Coulter Corporation Stockholders’ Equity section includes the following information:
Preferred Stock $12,000
Paid-in Capital in Excess of Par-Preferred $2,700
Common Stock $15,000
Paid-in Capital in Excess of Par-Common $4,100
Retained Earnings $8,200
What is the total selling price of the common stock?
4. Cherry Corporation’s outstanding stock is 100 shares of $100 par, 11% cumulative preferred stock, and 2,000 shares of $12 par common stock. Cherry paid $1,600 in cash dividends during the year. No dividends are in arrears. Common stockholders received
5. Which is a value placed on a certificate for a share of the company’s stock?
A. Market value
B. Paid-in capital
C. Stated value
D. Additional paid-in capital
6. Of the following, which is not classified as an investing activity on the statement of cash flows?
A. Sale of equipment for cash
B. Purchasing land
C. Collecting the principal on loans
D. Selling goods and services
7. The debt ratio is the relationship between
A. current assets and total liabilities.
B. total assets and current liabilities.
C. total assets and total liabilities.
D. current assets and current liabilities.
8. The following information is available for Allsport Company:
Cost of goods sold $545,000
Merchandise inventory, 12/31/13 $105,000
Merchandise inventory, 12/31/14 $112,000
Accounts payable, 12/31/13 $98,500
Accounts payable, 12/31/14 $101,300
What amount was paid for merchandise during 2014?
9. A business wanting to incorporate must file articles of incorporation with
A. the state office dealing with incorporation.
B. the local government.
C. any state in which they will do business.
D. the federal government.
10. Hanna Industries has an inventory turnover of 112 days, an accounts payable turnover of 73 days, and an accounts receivable turnover of 82 days. Hanna’s cash conversion cycle is
A. 9 days.
B. 103 days.
C. 43 days.
D. 121 days.
11. A company sold an asset with a book value of $56,000 for $35,000 cash. Which of the following is a true statement?
A. Loss on sale equals $21,000 and Cash inflow equals $35,000.
B. Loss on sale equals $35,000 and Cash inflow equals $35,000.
C. Loss on sale equals $35,000 and Cash inflow equals $21,000.
D. Loss on sale equals $56,000 and Cash inflow equals $56,000.
12. A/ An _______ is added back to net income in the operating section of an indirect cash flow statement.
A. decrease in accounts payable
B. increase in accounts receivable
D. increase in inventory
13. Tucker, Inc.’s net sales decreased from $90,000 in year one to $45,000 in year two, and its cost of goods sold decreased from $30,000 in year one to $20,000 in year two. The vertical analysis based on sales for cost of goods sold for the two periods (rounded to nearest tenth of a percent) is
A. 33.3% and 44.4%.
B. 44.4% and 33.3%.
C. 225% and 300%.
D. 300% and 225%.
14. A journal entry for the sale of $10 par-common stock for $18 per share would include a
A. credit to Cash.
B. credit to Paid-In Capital in Excess of Par–Common Stock.
C. debit to Paid-In Capital in Excess of Par–Common Stock.
D. debit to Common Stock.
15. Eagle Ridge, Inc. issued 40 shares of $20 par value stock to its accountant in full payment for her $900 fee for assisting in setting up the new company. The entry for the issuance of the stock is a
A. credit to Common Stock for $800.
B. debit to Common Stock for $800.
C. debit to Paid-in Capital in Excess of Par–Common for $100.
D. credit to Common Stock for $900.
16. Tucker Enterprises’ Accounts Receivable increased by $48,000, and its Accounts Payable increased by $27,000. What is the net effect on cash from operations under the indirect method?
17. Operating activities are transactions and events associated with selling a product or providing a service related to the
A. revenues and expenses reported on the income statement.
B. net income reported on the statement of retained earnings.
C. retained earnings reported on the balance sheet.
D. assets and liabilities reported on the balance sheet.
18. Which of the following is not a part of financing activities?
A. Paying off loans
B. Buying land
C. Paying dividends
D. Issuing stock
19. Which is not included in paid-in capital?
A. Additional Paid-in Capital
C. Preferred Stock
D. Common Stock
20. Motor Works, Inc. has declared a $20,000 cash dividend to shareholders. The company has 5,000 shares of $15-par, 10% preferred stock and 10,000 shares of $20-par common stock. The preferred stock is cumulative. How much will be distributed to the preferred and common stockholders on the date of payment if the preferred stock is $8,000 in arrears?
A. $15,500 preferred, $4,500 common
B. $7,500 preferred, $12,500 common
C. $20,000 preferred, $0 common
D. $8,000 preferred, $12,000 common
Exam: 061581RR – The Value of Money
1. Import Auto reported interest expense of $5,200, income tax expense of $23,000, and net income of $78,000. What is Import Auto’s interest coverage ratio (rounded to two decimals)?
2. The processing of credit card and debit card transactions is generally done
A. over the Internet.
B. at the financial institution of the retailer.
C. by hired third parties.
D. at the retail site.
3. Skymaster, Inc. has cash of $33,000, net accounts receivable of $41,000, short-term investments of $15,000, and inventory of $25,000. It also has $30,000 in current liabilities and $50,000 in long term liabilities. What is the current ratio for Skymaster, Inc.?
4. The Premium on Bonds Payable account is added to the Bonds Payable account, so it’s called a/ an _______ account.
5. Bonds that can be exchanged for stock are called _______ bonds.
6. Under the allowance method, recording the receipt of cash after an account has been written off first requires that you
A. audit the customer’s account.
B. debit Bad Debt Expense.
C. reinstate the customer’s account.
D. debit Allowance for Doubtful Accounts.
7. Which of the following would be debited to the Equipment account?
A. In-transit insurance costs
B. Insurance to cover use of the machine
C. Training employees to use the equipment
D. Repairs and maintenance after start-up
8. After the mailroom employee opens the cash receipts, the remittance advices go to the
A. accounting department.
9. Subtracting accumulated depletion from the asset account coal mine yields the
A. net book value.
B. original cost.
C. current period’s depletion expense.
D. current market value.
10. ACME Corporation lent $25,000 to Hastings, Inc. for 75 days at 7% interest on November 22, 2014. How much interest will have accrued to ACME Corporation on December 31, 2014, assuming a 360-day year?
11. If a company has 90-day credit terms, its expected accounts receivable turnover is
12. Subway restaurants and the Seattle Mariners are both examples of
B. copyrighted companies.
D. trademarked entities.
13. The carrying amount equals Bonds Payable minus the discount amount or
A. minus the premium amount.
B. plus the premium amount.
C. plus half the discount amount.
D. minus the par amount.
14. Quick ratio is another name for the _______ ratio.
15. Which of the following would be included in the cost of land?
B. Unpaid property taxes
C. Required paving
D. In-ground sprinkler systems
16. Capital leases are most similar to
A. unearned revenue.
B. mortgage notes.
C. regular notes payable.
D. accounts payable.
17. The following is selected data for Allied Industries:
Allied Industries 2014 2013
Sales $1,642,000 $1,743,000
Net Income $173,000 $191,000
Total Current Assets $177,000 $163,000
Property, Plant, and Equipment $724,000 $644,000
What is the return on assets (rounded to the nearest tenth of a percent) for 2014?
18. A three-month note dated June 12 will mature on
A. September 30.
B. September 1.
C. September 12.
D. June 12.
19. If an asset produces more revenue in its early years, the depreciation method best suited for this asset is the
A. expense method.
B. double-declining balance method.
C. units-of-production method.
D. straight-line method.
20. Briggs Corp. will remove two small buildings from a newly-purchased piece of land. The expense required to do this is part of the
A. building cost.
B. land improvements total.
C. cost of land.
D. capitalized asset.