{"type":"doc","content":[{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q1. Requiring that an employee with no access to cash do the accounting is an example of which characteristic of internal control?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Internal Controls"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of the principles of internal control systems, specifically how duties are separated to prevent fraud and errors."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Separation of Duties: Dividing responsibilities among different people to reduce risk of error or fraud."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Assignment of Responsibility: Designating specific tasks to individuals."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Competent and Reliable Personnel: Ensuring employees are qualified and trustworthy."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Monitoring of Controls: Regularly reviewing internal controls for effectiveness."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Consider why an employee with no access to cash is assigned accounting duties. What risk is being mitigated?"}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review the definitions of each answer choice and relate them to the scenario."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Think about which internal control principle is most directly related to preventing one person from both handling cash and recording transactions."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: A. separation of duties"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This is a classic example of separation of duties, which helps prevent fraud and errors by ensuring no single employee has control over all aspects of a financial transaction."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q2. Which of the following items is not true about fraud?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Fraud in Accounting"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of the definition and characteristics of fraud in a business context."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Fraud: Intentional misrepresentation of facts to persuade another party to act in a way that causes injury or damage."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Threshold: A minimum amount required for something to be considered."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review each statement and compare it to the definition of fraud."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Consider whether fraud requires a minimum dollar amount to be considered fraud."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Think about the intent and consequences of fraud as described in accounting standards."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: A. Its damages must exceed a threshold of $150,000."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Fraud does not require damages to exceed a specific dollar threshold; it is defined by intent and misrepresentation."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q3. All of these make up the fraud triangle except:"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Fraud Triangle"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your knowledge of the three elements that contribute to fraud: motive, opportunity, and rationalization."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Fraud Triangle: The three factors that must be present for fraud to occur."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Motive: The reason for committing fraud."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Opportunity: The situation that allows fraud to occur."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Rationalization: The justification for the fraudulent act."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall the three components of the fraud triangle."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Compare each answer choice to the fraud triangle elements."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which option is not part of the fraud triangle."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: C. Planning"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Planning is not one of the three elements of the fraud triangle; the correct elements are motive, opportunity, and rationalization."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q4. Which of the following is an example of misappropriation of assets?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Types of Fraud"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to distinguish between misappropriation of assets and other types of fraud, such as fraudulent financial reporting."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Misappropriation of Assets: Theft of company assets by employees."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Fraudulent Financial Reporting: Manipulating financial statements to mislead users."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review each scenario and determine whether it involves theft or misuse of company assets."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Distinguish between actions that involve manipulating records versus stealing assets."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which option best fits the definition of misappropriation of assets."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: A. A manager makes a journal entry to a secret company account that they have set up to spend on personal expenses"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This scenario describes the theft or misuse of company assets for personal gain, which is misappropriation of assets."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q5. Each of the following represents an internal control procedure except for:"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Internal Control Procedures"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your knowledge of common internal control procedures used to safeguard assets and ensure accurate financial reporting."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Internal Control Procedure: Policies and practices to protect assets and ensure reliable accounting."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Separation of Duties, Authority, Compliance Monitoring, Limited Access: Examples of control procedures."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review each answer choice and determine if it is a recognized internal control procedure."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Consider whether \"clear lines of authority and communication\" is typically listed as a control procedure."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Compare each option to standard internal control practices."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: B. clear lines of authority and communication"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"While important for organizational structure, clear lines of authority and communication are not considered an internal control procedure."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q6. As part of a strong internal control system, which of the following accounting duties need to be separated from cash handling?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Internal Controls - Separation of Duties"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of which accounting functions should be kept separate from cash handling to prevent fraud."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Record Keeping: Maintaining financial records."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Transaction Approval: Authorizing transactions."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Cash Handling: Physical custody of cash."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which duties involve recording or approving transactions."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Consider why these duties should be separated from cash handling."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review the answer choices to see which duties are most critical to separate."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: D. Both A and C need to be separated from cash handling."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Record keeping and transaction approval should be separated from cash handling to prevent fraud and errors."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q7. Having a corporate code of ethics that prohibits employees from accepting gifts from customers or vendors is an example of which component of internal control?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Internal Control Components"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your knowledge of the five components of internal control, specifically the control environment."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Control Environment: The overall attitude, awareness, and actions of management and employees regarding internal controls."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Risk Assessment, Information System, Control Procedures: Other components of internal control."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall the five components of internal control."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Consider which component relates to ethical standards and company culture."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Match the scenario to the appropriate internal control component."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: B. Control environment"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"The control environment sets the tone for the organization and includes ethical standards and policies."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q8. Which of the following is an example of poor internal control in an organization?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Internal Control Practices"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to identify practices that weaken internal controls."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Poor Internal Control: Practices that increase risk of fraud or error."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Examples: Lack of separation of duties, inadequate supervision, etc."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review each scenario and consider whether it strengthens or weakens internal controls."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which scenario allows for potential fraud or errors."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Compare each option to best practices in internal control."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: C. The mailroom clerk records daily cash receipts in the journal."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This practice allows one person to both handle cash and record transactions, which is poor internal control."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q9. Which law or regulation requires that public companies must maintain strong internal control systems?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Regulatory Requirements"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your knowledge of laws that govern internal controls for public companies."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Sarbanes-Oxley Act: U.S. law requiring public companies to maintain strong internal controls."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Other Acts: Securities and Exchange Act, Dodd-Frank Act, Treadway Commission."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall which law was enacted in response to major corporate scandals."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review the requirements of each law listed."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which law specifically addresses internal controls for public companies."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: C. Sarbanes-Oxley Act"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"The Sarbanes-Oxley Act requires public companies to maintain strong internal control systems."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q10. Each of the following documents is a control for a bank account except:"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Bank Account Controls"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your knowledge of documents used to control and monitor bank accounts."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Bank Statement: Record of transactions and balances."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Signature Card: Identifies authorized signers."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Bank Reconciliation: Process of matching company records to bank statement."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Geographic Location of ATMs: Not a control document."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review each document and its purpose in controlling bank accounts."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which item does not serve as a control document."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Compare the options to standard bank account controls."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: A. geographic location of ATMs"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"The geographic location of ATMs is not a control document for a bank account."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q11. All of the following are controls for cash received over the counter except:"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Cash Controls"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your knowledge of procedures used to control cash received in retail settings."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Cash Register Tape: Record of sales."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Printed Receipt: Proof of transaction for customer."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Cash Drawer Controls: Ensures proper handling of cash."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review each control and its purpose in safeguarding cash."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which control does not directly protect cash received over the counter."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Compare the options to best practices in cash handling."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: A. the salesclerk must have access to the cash register tape"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Access to the cash register tape is not a control for cash received over the counter."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q12. Companies make most payments by check or EFT wire due to which reason?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Payment Controls"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of why companies use checks or electronic funds transfer (EFT) for payments."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Check: Written order to pay money."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"EFT: Electronic transfer of funds."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Payment Evidence: Documentation supporting payment."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review the advantages of using checks or EFT for payments."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Consider which reasons are most important for internal control."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify if all reasons listed are valid."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: D. All of the above"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Checks and EFTs provide a record of payment, require authorization, and are supported by evidence."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q13. A journal entry would need to be made for which of the following adjustments on a bank reconciliation?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Bank Reconciliation Adjustments"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your knowledge of which items on a bank reconciliation require a journal entry in the accounting records."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Outstanding Checks: Checks written but not yet cleared by the bank."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Bank Service Charges: Fees charged by the bank."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Deposits in Transit: Deposits made but not yet recorded by the bank."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Bank Error: Mistakes made by the bank."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review which items affect the company's books and require adjustment."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Consider whether the item is already recorded in the company's books or only in the bank statement."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which adjustment needs a journal entry."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: B. Bank service charges"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Bank service charges are not recorded in the company's books until the bank reconciliation, so a journal entry is needed."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q14. Prepare a bank reconciliation to determine how much cash Reese actually had at Oct. 31."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Bank Reconciliation"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to prepare a bank reconciliation and determine the correct cash balance."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms and Formula:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Bank Reconciliation: Process of matching company records to bank statement."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Outstanding Checks: Subtracted from bank balance."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Deposits in Transit: Added to bank balance."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Bank Service Charges, Interest Revenue, NSF Check: Adjustments to book balance."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Start with the bank statement balance: $5,570."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Add deposits in transit ($300) and subtract outstanding checks ($1,800) to adjust the bank balance."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Adjust the book balance for items not yet recorded: add collections ($600), subtract service charges ($30), add interest revenue ($10), and subtract NSF check ($50)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Set up the reconciliation formula:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"inlineMath","attrs":{"latex":"\\text{Adjusted Bank Balance} = \\text{Bank Statement Balance} + \\text{Deposits in Transit} - \\text{Outstanding Checks}"}}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"inlineMath","attrs":{"latex":"\\text{Adjusted Book Balance} = \\text{Book Balance} + \\text{Collections} + \\text{Interest Revenue} - \\text{Service Charges} - \\text{NSF Check}"}}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate the adjusted balances and compare them to determine the correct cash balance."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: D. $4,070"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"After adjusting for all reconciling items, Reese's actual cash balance at October 31 is $4,070."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q15. If a bank reconciliation included a deposit in transit of $790, the entry to record this reconciling item would include:"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Bank Reconciliation Journal Entries"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of which reconciling items require a journal entry."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Deposit in Transit: Deposit made but not yet recorded by the bank."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Journal Entry: Record in the accounting system."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Consider whether a deposit in transit is already recorded in the company's books."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Determine if a journal entry is needed for this item."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review the answer choices for the correct accounting treatment."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: D. No entry is required."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"A deposit in transit is already recorded in the company's books; no journal entry is needed."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q16. On March 15, Maxwell Plush sold and shipped merchandise on account for $6,000 to Kittson Amusement Park, terms FOB shipping point, n/30. Maxwell's cost of goods sold is 40% of sales. How is Maxwell impacted by this sale on March 15?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Sales Transactions and Impact on Financial Statements"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how sales and cost of goods sold affect assets and equity."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"FOB Shipping Point: Buyer takes ownership when goods leave seller's premises."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Cost of Goods Sold (COGS): Expense representing the cost of inventory sold."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Assets: Resources owned by the company."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Equity: Owner's interest in the company."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate the cost of goods sold: "},{"type":"inlineMath","attrs":{"latex":"6,000 \\times 0.40"}},{"type":"text","text":"."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Determine the impact on assets: Accounts receivable increases, inventory decreases."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Determine the impact on equity: Sales increase revenue, COGS decreases equity."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review the answer choices to see which best describes the net effect."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: C. Its assets will increase, as will its equity."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Assets increase due to accounts receivable, and equity increases due to net income from the sale."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q17. Which of the following statements regarding contracts is incorrect?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Revenue Recognition and Contracts"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of contract requirements and revenue recognition principles."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Contract: Agreement creating enforceable rights or obligations."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Revenue Recognition Model: Steps for recognizing revenue."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review each statement and compare it to contract law and revenue recognition standards."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Consider whether a contract must be written to be valid."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which statement is not correct based on accounting principles."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: A. A contract must be written to be valid."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Contracts can be oral or implied; they do not have to be written to be valid."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q18. Washington Products offers credit terms of 3/10, n/45. Which of the following statements is correct?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Credit Terms"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how credit terms work and what discounts are available for early payment."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"3/10, n/45: 3% discount if paid within 10 days; net amount due in 45 days."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Discount Period: Time frame for early payment discount."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Interpret the credit terms \"3/10, n/45\"."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Determine which statement accurately describes the terms."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review the answer choices for the correct interpretation."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: C. A discount of 3% can be taken if the invoice is paid within 10 days of the invoice date."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"The customer can take a 3% discount if payment is made within 10 days."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q19. Which of the following statements is true?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Accounts Receivable"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how various transactions affect accounts receivable."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Collections on Account: Decrease receivables."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Write-offs: Decrease receivables."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Credit Sales: Increase receivables."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review each statement and consider its effect on accounts receivable."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Determine if all statements are true."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Compare the answer choices to your understanding of receivables."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: D. All of these statements are true."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"All statements accurately describe the effects on accounts receivable."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q20. Winter Park Legal Association performs legal services for Rowland Construction for $1,000 on account with credit terms of 1/10, n/30. If Rowland pays the invoice within the discount period, Winter Park will record a debit to Cash in the amount of:"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Sales Discounts"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how sales discounts affect cash received and accounting entries."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms and Formula:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Sales Discount: Reduction in price for early payment."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Credit Terms: 1/10, n/30 means 1% discount if paid within 10 days."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Cash Received Formula: "},{"type":"inlineMath","attrs":{"latex":"\\text{Cash} = \\text{Invoice Amount} - \\text{Discount}"}}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate the discount: "},{"type":"inlineMath","attrs":{"latex":"1,000 \\times 0.01"}},{"type":"text","text":"."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Subtract the discount from the invoice amount to determine cash received."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review the answer choices for the correct amount."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: A. $990"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Winter Park will record a debit to Cash for $990, reflecting the 1% discount taken by Rowland."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q21. Birchwood Corporation began 2018 with a balance in Accounts Receivable of $600,000. Service revenue, all on account, for the year totaled $1,600,000. The company ended the year with a balance in Accounts Receivable of $775,000. Birchwood's bad-debt write-offs are nonexistent. How much cash did the company collect from customers in 2018?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Accounts Receivable and Cash Collections"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to calculate cash collections using changes in accounts receivable."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Formula:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"inlineMath","attrs":{"latex":"\\text{Beginning AR} + \\text{Sales} - \\text{Collections} = \\text{Ending AR}"}}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Rearrange to solve for collections:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"inlineMath","attrs":{"latex":"\\text{Collections} = \\text{Beginning AR} + \\text{Sales} - \\text{Ending AR}"}}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Write down the beginning and ending balances of accounts receivable."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Note the total sales on account for the year."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Set up the formula to solve for cash collections."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Plug in the values and prepare to solve for collections."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: C. $1,425,000"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Birchwood collected $1,425,000 in cash from customers during 2018."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q22. Accounts Receivable has a debit balance of $2,000, and the Allowance for Uncollectible Accounts has a credit balance of $600. A $110 account receivable is written off. What is the amount of net receivables (net realizable value) after the write-off?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Net Realizable Value of Receivables"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how write-offs affect accounts receivable and the allowance for uncollectible accounts."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Formula:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"inlineMath","attrs":{"latex":"\\text{Net Receivables} = \\text{Accounts Receivable} - \\text{Allowance for Uncollectible Accounts}"}}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Subtract the written-off amount from both Accounts Receivable and Allowance for Uncollectible Accounts."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate the new balances for both accounts."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Set up the formula for net receivables."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Plug in the new balances to prepare for the final calculation."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: C. $1,890"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"After the write-off, net receivables are $1,890."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q23. Linus Company uses the percent-of-sales method to estimate uncollectible. Net credit sales for the current year amount to $110,000, and management estimates 4% will be uncollectible. The Allowance for Uncollectible Accounts prior to adjustment has a credit balance of $3,000. The amount of expense to report on the income statement will be:"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Estimating Uncollectible Accounts"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to calculate bad debt expense using the percent-of-sales method."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Formula:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"inlineMath","attrs":{"latex":"\\text{Bad Debt Expense} = \\text{Net Credit Sales} \\times \\text{Percent Estimated Uncollectible}"}}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate the estimated uncollectible amount: "},{"type":"inlineMath","attrs":{"latex":"110,000 \\times 0.04"}},{"type":"text","text":"."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Determine if the prior balance in the allowance account affects the expense reported."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review the answer choices for the correct expense amount."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer: A. $4,400"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"The percent-of-sales method reports $4,400 as bad debt expense on the income statement."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q24. What is the adjusted balance in the Allowance account at year-end for 2018?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Allowance for Uncollectible Accounts"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to calculate the adjusted balance in the allowance account after recording uncollectible account expense."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Formula:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"inlineMath","attrs":{"latex":"\\text{Adjusted Allowance} = \\text{Prior Balance} + \\text{Uncollectible Account Expense}"}}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify the prior balance in the allowance account ($750)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Add the uncollectible account expense for the year ($1,415)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Set up the formula to calculate the adjusted balance."}]}]},{"type":"li