Q: If Apple sells 30,000 iPhones at $100 each on account, what is the correct journal entry to record the sale?

$$\text{Accounts Receivable} \quad 3,000,000$$ $$\text{Sales Revenue} \quad 3,000,000$$

Q: Which of the following formulas correctly calculates the Accounts Receivable Turnover ratio?

$$\text{Net credit sales} \div \text{Average net accounts receivable}$$

Question 1

Which of the following is NOT one of the three elements of the Fraud Triangle as depicted in Exhibit 4-1?

Accepted Answer

Accountability

Question 2

According to Exhibit 4-3, what is the primary function of an internal control system?

Accepted Answer

To prevent fraud, waste, and inefficiency

Question 3

Which of the following is an example of a control procedure designed to separate duties?

Accepted Answer

Assigning different employees to approve transactions and to handle assets

Question 4

A company receives checks by mail. According to Exhibit 4-6, which department should prepare the deposit ticket?

Accepted Answer

Treasurer

Question 5

Which of the following best describes the imprest system for petty cash?

Accepted Answer

The sum of cash on hand plus vouchers paid should always equal the specified balance

Question 6

Which of the following is a limitation of internal controls?

Accepted Answer

They can be circumvented by collusion or management override

Question 7

When preparing a bank reconciliation, which of the following would be added to the book balance?

Accepted Answer

Bank collections

Question 8

According to GAAP, when should revenue be recognized?

Accepted Answer

When goods are delivered or services performed

Question 9

If Apple sells 30,000 iPhones at $100 each on account, what is the correct journal entry to record the sale?

Accepted Answer

$$	ext{Accounts Receivable} \quad 3,000,000$$ 
$$	ext{Sales Revenue} \quad 3,000,000$$

Question 10

A company estimates that 0.0002 of its total revenues will be uncollectible. If total revenues are $$394,328$$ million, what is the estimated uncollectible-account expense?

Accepted Answer

$$\ 79$ million

Question 11

Which inventory costing method results in the lowest taxable income when costs are rising?

Accepted Answer

LIFO

Question 12

If a company uses the aging-of-receivables method, what does the year-end adjusting entry accomplish?

Accepted Answer

It brings the Allowance for Uncollectible Accounts to the needed balance

Question 13

Which of the following formulas correctly calculates the Accounts Receivable Turnover ratio?

Accepted Answer

$$	ext{Net credit sales} \div 	ext{Average net accounts receivable}$$

Question 14

A company’s inventory cost is $$10,000$$, but the market value is $$8,000. $$According to the lower-of-cost-or-market rule, at what amount should inventory be reported?

Accepted Answer

$$\ 8$$,000$

Question 15

Which of the following is a result of a LIFO liquidation?

Accepted Answer

Older, lower costs are shifted into cost of goods sold

Question 16

Which of the following is NOT a component of the internal control system as shown in Exhibit 4-4?

Accepted Answer

Financial Statement Analysis

Question 17

If a company’s cost of goods sold is $$540$$ and average inventory is $$300$$, what is the inventory turnover ratio?

Accepted Answer

$$1.8$$

Question 18

Which of the following best describes the effect of using FIFO during a period of rising prices?

Accepted Answer

Cost of goods sold is lowest, gross profit is highest

Question 19

Which of the following is a key principle of U.S. GAAP for inventory reporting?

Accepted Answer

Consistency in inventory methods from period to period

Question 20

A company offers terms 2/10, n/30. If a customer purchases $$1,000 of $$goods and pays within 10 days, how much do they pay?

Accepted Answer

$$\ 980$

Internal Control, Revenue Recognition, Receivables, and Inventory: Study Notes for Financial Accounting

Study Guide - Practice Questions

Study Guide - Flashcards