1. An income statement would not include A) other revenue and gains. B) extraordinary items. C) discontinued operations. D) dividends paid.
2. The reconciliation of the cash register tape with the cash in the register is an example of A) other controls. B) independent internal verification. C) establishment of responsibility. D) segregation of duties.
3. The direct write-off method of accounting for uncollectible accounts A) emphasizes the matching of expenses with revenues. B) emphasizes balance sheet relationships. C) emphasizes cash realizable value. D) is not generally accepted as a basis for estimating bad debts.
4. 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.
5. A dishonored note receivable A) Is no longer negotiable. B) Must be written off by the lender. C) Creates a claim against the maker for the amount of principal only. D) Is one that is not paid in full within 10 days of maturity.
6. Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $19,000. If the balance of the Allowance for Doubtful Accounts is $6,000 debit before adjustment what is the amount of bad debt expense for that period? A) $19,000 B) $ 6,000 C) $25,000 D) $13,000
7. Selling the bonds at a premium has the effect of A) causing the total cost of borrowing to be higher than the bond interest paid. B) causing the total cost of borrowing to be lower than the bond interest paid. C) raising the effective interest rate above the state interest rate. D) increasing the amount of cash paid for interest each 6 months.
8. Which one of the following is not an objective of a system of internal controls? A) Safeguard company assets B) Enhance the accuracy and reliability of accounting records C) Fairness of the financial statements. D) Reduce the risks of errors
9. A retailer that collects sales taxes is acting as an agent for the A) wholesaler. B) customer. C) taxing authority. D) chamber of commerce.
10. The present value of a bond is also known as its A) face value. B) market price. C) future value. D) deferred value.
11. The current portion of long-term debt should A) be paid immediately. B) be reclassified as a current liability. C) be classified as a long-term liability. D) not be separated from the long-term portion of debt.
12. The matching principle A) requires that all credit losses be recorded when an individual customer cannot pay. B) necessitates the recording of an estimated amount for bad debts. C) results in the recording of a known amount for bad debt losses. D) is not involved in the decision of when to expense a credit loss.
13. The ability of a corporation to obtain capital is A) enhanced because of limited liability and ease of share transferability. B) less than a partnership. C) restricted because of the limited life of the corporation. D) about the same as a partnership.
14. 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.
15. Comparative balance sheets are usually prepared for A) one year. B) two years. C) three years. D) four years.
16. A bank statement A) lets a depositor know the financial position of the bank as of a certain date. B) is a credit reference letter written by the depositor's bank. C) is a bill from the bank for services rendered. D) shows the activities that increased or decreased the depositor's account balance.
17. Secured bonds are bonds that A) are in the possession of a bank. B) can be converted into common stock. C) have specific assets of the issuer pledged as collateral. D) mature in installments.
18. A cash register tape shows cash sales of $3,000 and sales taxes of $150. The journal entry to record this information is A) Cash 3,000 Sales 3,000 B) Cash 3,150 Sales Tax Revenue 150 Sales 3,000 C) Cash 3,000 Sales Tax Expense 150 Sales 3,150 D) Cash 3,150 Sales 3,000 Sales Taxes Payable 150
19. A disadvantage of the corporate form of organization is A) professional management. B) tax treatment. C) ease of transfer of ownership. D) lack of mutual agency.
20. 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.
21. If bonds are issued at a premium, the stated interest rate is A) higher than the market rate of interest. B) lower than the market rate of interest. C) too low to attract investors. D) adjusted to a higher rate of interest.
22. Which one of the following is not an ownership right of a stockholder in a corporation? A) To vote in the election of directors B) To declare dividends on the common stock C) To share in assets upon liquidation D) To share in corporate earnings
23. Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry: A) Accounts Receivable - Cash B) Cash - Accounts Receivable C) Miscellaneous Expense - Accounts Receivable D) No adjusting entry is necessary.
24. Horizontal analysis is a technique for evaluating financial statement data A) within a period of time. B) over a period of time. C) on a certain date. D) as it may appear in the future.
25. When a company receives an interest-bearing note receivable, it will A) debit Notes Receivable for the maturity value of the note. B) credit Notes Receivable for the maturity value of the note. C) debit Notes Receivable for the face value of the note. D) credit Notes Receivable for the face value of the note.
26. Internal auditors A) are hired by CPA firms to audit business firms. B) are employees of the IRS who evaluate the internal controls of companies filing tax returns. C) evaluate the system of internal controls for the companies that employ them. D) cannot evaluate the system of internal controls of the company that employs them because they are not independent.
27. 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.
28. Which of the following is not a limitation of internal control? A) Cost of establishing control procedures should not exceed their benefit B) The human element C) Collusion D) The size of the company
29. Bonds that may be exchanged for common stock at the option of the bondholders are called A) options. B) stock bonds. C) convertible bonds. D) callable bonds.
The questions I am unsure of are (with my answers in parenthesis):
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