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CH7 – 8 QUESTIONS 41. Which one of the following is

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41.          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
42.            All of the following are examples of internal control procedures except
a.     using prenumbered documents.
b.     reconciling the bank statement.
c.     customer satisfaction surveys.
d.     insistence that employees take vacations.

44.           Each of the following is a feature of internal control except
a.     limited access to assets.
b.     independent internal verifications.
c.     authorization of transactions.
d.     generic design of documents.

47.         Internal control is defined, in part, as a plan that safeguards
          a.     all balance sheet accounts.
          b.     assets.
          c.     liabilities.
          d.     capital stock.

     74.     Joe’s Grocery Store has the following policy. ‘Only one cashier can have access to a cash    drawer.’ Which internal control principle supports this policy?
a.     Documentation procedures
b.     Segregation of duties
c.     Physical, mechanical, and electronic controls
d.     Establishment of responsibilities

     81.     Which of the following is not an internal control activity for cash?
a.     The number of persons who have access to cash should be limited.
b.     The functions of record keeping and maintaining custody of cash should be combined.
c.     Surprise audits of cash on hand should be made occasionally.
d.     All cash receipts should be recorded promptly.

     83.     Which of the following is not an internal control procedure for cash?
a.     Only designated personnel are authorized to handle cash.
b.     The same individual receives the cash and pays the bills.
c.     Surprise audits of cash on hand should be made occasionally.
              d.      Access to cash is limited.

86.               Which of the following is not a suggested procedure to establish internal control over cash     disbursements?
a.     Anyone can sign the checks.
b.     Different individuals approve and make the payments.
c.     Blank checks are stored with limited access.
d.     The bank statement is reconciled monthly.


57.       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.

     60.     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.

     61.     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.

90.               Bad Debts Expense is considered
          a.     an avoidable cost in doing business on a credit basis.
          b.     an internal control weakness.
          c.     a necessary risk of doing business on a credit basis.
       d.    avoidable unless there is a recession.
     91.     Two methods of accounting for uncollectible accounts are the
          a.     allowance method and the accrual method.
          b.     allowance method and the net realizable method.
          c.     direct write-off method and the accrual method.
          d.     direct write-off method and the allowance method.

     92.     The allowance method of accounting for uncollectible accounts is required if
          a.     the company makes any credit sales.
          b.     bad debts are significant in amount.
          c.     the company is a retailer.
          d.     the company charges interest on accounts receivable.

     93.     Bad Debts Expense is reported on the income statement as
          a.     part of cost of goods sold.
          b.     an expense subtracted from net sales to determine gross profit.
          c.     an operating expense.
          d.     a contra revenue account.


48.             Which of the following is not properly classified as property, plant, and equipment?
a.      Building used as a factory
b.      Land used in ordinary business operations
c.      A truck held for resale by an automobile dealership
d.      Land improvement, such as parking lots and fences

     49.     A characteristic of a plant asset is that it is
a.      intangible.
b.      used in the operations of a business.
c.      held for sale in the ordinary course of the business.
d.      not currently used in the business but held for future use.

     50.     Which one of the following items is not considered a part of the cost of a truck purchased for business use?
          a.     Sales tax
          b.     Truck license
          c.     Freight charges
d.      Cost of lettering on side of truck

     51.     Which of the following would not be included in the Equipment account?
a.      Installation costs
b.      Freight costs
c.      Cost of trial runs
d.      Electricity used by the machine

     52.     Which of the following assets does not decline in service potential over the course of its useful life?
          a.     Equipment
          b.     Furnishings
          c.     Land
          d.     Fixtures

     53.     The four subdivisions for plant assets are
          a.     land, land improvements, buildings, and equipment.
          b.     intangibles, land, buildings, and equipment.
          c.     furnishings and fixtures, land, buildings, and equipment.
          d.     property, plant, equipment, and land.


67.          Liabilities are classified on the balance sheet as current or
          a.     deferred.
          b.     unearned.
          c.     long-term.
          d.     accrued.

     69.     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.
     71.     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.
     73.     Current liabilities are due
          a.     but not receivable for more than one year.
          b.     but not payable for more than one year.
          c.     and receivable within one year.
          d.     and payable within one year.

134.           Bonds that are secured by real estate are termed
          a.     mortgage bonds.
          b.     serial bonds.
          c.     debentures.
          d.     convertible bonds.

135.            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.

136.             Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called
          a.     callable bonds.
          b.     early retirement bonds.
          c.     options.
          d.     debentures.

137.            Bonds that are issued against the general credit of the borrower are called
          a.     callable bonds.
          b.     debenture bonds.
          c.     secured bonds.
          d.     term bonds.


51.             Which one of the following would not be considered an advantage of the corporate form of organization?
          a.     Limited liability of stockholders
          b.     Separate legal existence
          c.     Continuous life
          d.     Government regulation
     54.     Which of the following would not be true of a privately held corporation?
          a.     It is sometimes called a closely held corporation.
          b.     Its shares are regularly traded on the New York Stock Exchange.
          c.     It does not offer its shares for sale to the general public.
          d.     It is usually smaller than a publicly held company.

     55.     Which of the following is not true of a corporation?
          a.     It may buy, own, and sell property.
          b.     It may sue and be sued.
          c.     The acts of its owners bind the corporation.
          d.     It may enter into binding legal contracts in its own name.

91.             Treasury stock is
          a.     stock issued by the U.S. Treasury Department.
          b.     stock purchased by a corporation and held as an investment in its treasury.
          c.     corporate stock issued by the treasurer of a company.
          d.     a corporation’s own stock, which has been reacquired and held for future use.

112.            The date on which a cash dividend becomes a binding legal obligation is on the
          a.     declaration date.
          b.     date of record.
          c.     payment date.
          d.     last day of the fiscal year end.


46.             Which of the following income statement figures would probably be the best indicator of a company’s future performance?
          a.     Total revenues
          b.     Income from operations
          c.     Net income
          d.     Gross profit

     47.     An income statement would not include
          a.     other revenue and gains.
          b.     extraordinary items.
          c.     discontinued operations.
          d.     dividends paid.

     48.     The discontinued operations section of the income statement refers to
          a.     discontinuance of a product line.
          b.     the income or loss on products that have been completed and sold.
          c.     obsolete equipment and discontinued inventory items.
          d.     the disposal of a significant segment of a business.

     49.     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

     50.     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.

     52.     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.
Submitted: 8 years ago.
Category: Homework