30. A company just starting in business purchased three merchandise
inventory items at the following prices. First purchase $80; second
purchase $95; Third purchase $85. If the company sold two units for
a total of $250 and used FIFO costing, the gross profit for the
period would be
A company just starting business made the following four inventory
purchases in June:
June 1 150 units $ 770
June 10 200 units 1,180
June 15 200 units 1,260
June 28 150 units 990
&nbs p; ——————
&nbs p; $4,200
A physical count of merchandise inventory on June 30 reveals that
there are 200 units on hand.
31. Using the LIFO inventory method, the value of the ending inventory
on June 30 is
32. The cost of goods available for sale is allocated between
a. beginning inventory and ending inventory.
b. beginning inventory and cost of goods on hand.
c. ending inventory and cost of goods sold.
d. beginning inventory and cost of goods purchased.
33. The managers of Tong Company receive performance bonuses based on
the net income of the firm. Which inventory costing method are they
likely to favor in periods of declining prices?
b. Average Cost
d. Physical inventory method
34. The accountant at Lloyd Company is figuring out the difference in
income taxes the company will pay depending on the choice of either
FIFO or LIFO as an inventory costing method. The tax rate is 30%
and the FIFO method will result in income before taxes of $5,244.
The LIFO method will result in income before taxes of $4,740. What
is the difference in tax that would be paid between the two
d. Cannot be determined from the information provided.
35. Which one of the following is not an objective of financial
reporting according to the conceptual framework?
a. To provide information that will increase the value of the
b. To provide information in assessing future cash flow
c. To provide information that is useful for making investment and
d. To provide information that identifies economic resources, the
claims to those resources, and the changes in those resources and
36. Expenses are recognized when
a. cash is paid.
b. the work is performed.
c. the product is produced.
d. they make their contribution to revenue.
37. Internal controls are not designed to safeguard assets from
a. natural disasters.
b. employee theft.
d. unauthorized use.
38. An accounts payable clerk also has access to the approved supplier
master file for purchases. The control principle of
a. establishment of responsibility is violated.
b. independent internal verification is violated.
c. documentation procedures is violated.
d. separation of duties is violated.
39. For accounting purposes, postdated checks (checks payable in the
future) are considered to be
a. money orders.
c. petty cash.
d. accounts receivable.
40. An employee authorized to sign checks should not record
a. owner cash contributions.
b. mail receipts.
c. cash disbursement transactions.
d. sales transactions.
41. Which one of the following would not cause a bank to debit a
a. Bank service charge
b. Collection of a note receivable
c. wiring of funds to other locations
d. Checks marked NSF
42. A company maintains the asset account, Cash in Bank, on its books,
while the bank maintains a reciprocal account which is
a. a contra-asset account.
b. a liability account.
c. also an asset account.
d. an owner's equity account.
43. Deposits in transit
a. have been recorded on the company's books but not yet by the
b. have been recorded by the bank but not yet by the company.
c. have not been recorded by the bank or the company.
d. are checks from customers which have not yet been received by the
44. In preparing a bank reconciliation, outstanding checks is
a. added to the balance per bank.
b. deducted from the balance per books.
c. added to the balance per books.
d. deducted from the balance per bank.
45. Notification by the bank that a deposited customer check was
returned NSF requires that the company make the following adjusting
a. Accounts Receivable
c. Miscellaneous Expense
d. No adjusting entry is necessary.
46. Eaton Company had checks outstanding totaling $4,400 on its June
bank reconciliation. In July, Eaton Company issued checks totaling
$38,900. The July bank statement shows that $28,300 in checks
cleared the bank in July. A check from one of Eaton Company's
customers in the amount of $300 was also returned marked "NSF." The
amount of outstanding checks on Eaton Company's July bank
reconciliation should be
47. Gagne Company gathered the following reconciling information in
preparing its July bank reconciliation:
Cash balance per books, 7/31 $3,000
Notes receivable and interest collected by bank 850
Bank charge for check printing 20
Outstanding checks 2,000
NSF check 170
The adjusted cash balance per books on July 31 is
48. An adjusting entry is not required for
a. outstanding checks.
b. collection of a note by the bank.
c. NSF checks.
d. bank service charges.
49. Weber Company developed the following reconciling information in
preparing its September bank reconciliation:
Cash balance per bank, 9/30 $15,000
Note receivable collected by bank 6,000
Outstanding checks 9,000
Bank service charge 75
NSF check 1,200
Using the above information, determine the cash balance per books
(before adjustments) for the Weber Company.
50. A system of internal control
a. is infallible.
b. can be rendered ineffective by employee collusion.
c. invariably will have costs exceeding benefits.
d. is premised on the concept of absolute assurance.