Q: Apple, Inc. sells 30,000 iPhones to AT&T Wireless for $100 each on account. What is the correct journal entry to record the sale?

$$ \begin{align*} \text{Accounts Receivable} & \quad 3,000,000 \\ \text{Sales Revenue} & \quad 3,000,000 \end{align*} $$

Q: If Apple’s cost to produce each iPhone is $60, what is the correct journal entry to record the cost of goods sold for the sale of 30,000 iPhones?

$$ \begin{align*} \text{Cost of Goods Sold} & \quad 1,800,000 \\ \text{Inventory} & \quad 1,800,000 \end{align*} $$

Q: Which formula correctly calculates the accounts receivable turnover ratio?

$$ \text{Accounts Receivable Turnover} = \frac{\text{Net Credit Sales}}{\text{Average Net Accounts Receivable}} $$

Q: A company’s inventory turnover ratio is calculated as:

$$ \text{Inventory Turnover} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}} $$

Question 1

Which of the following is NOT one of the three elements of the Fraud Triangle?

Accepted Answer

Collusion

Question 2

A company’s internal control system is primarily designed to protect assets from which of the following? (Select the best answer.)

Accepted Answer

Fraud, waste, and inefficiency

Question 3

Which of the following is a limitation of internal controls?

Accepted Answer

They can be circumvented by collusion

Question 4

Which of the following is NOT a component of an internal control system as depicted in the 'house' diagram?

Accepted Answer

Financial Leverage

Question 5

A company receives a check in the mail. According to best internal control practices, which department should be responsible for depositing the check?

Accepted Answer

Treasurer

Question 6

Which document is NOT typically included in a payment packet for internal control over purchases?

Accepted Answer

Bank Statement

Question 7

Under the revenue recognition principle, when should revenue be recognized?

Accepted Answer

When goods are delivered or services are performed

Question 8

Apple, Inc. sells 30,000 iPhones to AT&T Wireless for $100 each on account. What is the correct journal entry to record the sale?

Accepted Answer

$$
\begin{align*}
	ext{Accounts Receivable} & \quad 3,000,000 \
	ext{Sales Revenue} & \quad 3,000,000 
\end{align*}
$$

Question 9

If Apple’s cost to produce each iPhone is $60, what is the correct journal entry to record the cost of goods sold for the sale of 30,000 iPhones?

Accepted Answer

$$
\begin{align*}
	ext{Cost of Goods Sold} & \quad 1,800,000 \
	ext{Inventory} & \quad 1,800,000 
\end{align*}
$$

Question 10

A company estimates that 1% of its sales will be returned. If sales for June are $200 million, what is the estimated amount of sales returns?

Accepted Answer

$$2,000,000$$

Question 11

Which of the following best describes the allowance method for uncollectible accounts?

Accepted Answer

It estimates uncollectible accounts based on past experience and records an adjusting entry at year-end.

Question 12

Using the percent-of-sales method, if total revenues are $394,328 million and the estimated uncollectible rate is 0.0002, what is the uncollectible-account expense?

Accepted Answer

$$79$$ million

Question 13

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

Accepted Answer

LIFO

Question 14

If a company uses the FIFO method during a period of rising prices, which of the following is true?

Accepted Answer

Cost of goods sold will be lower and ending inventory will be higher.

Question 15

Which formula correctly calculates the accounts receivable turnover ratio?

Accepted Answer

$$
	ext{Accounts Receivable Turnover} = \frac{	ext{Net Credit Sales}}{	ext{Average Net Accounts Receivable}}
$$

Question 16

A company’s inventory turnover ratio is calculated as:

Accepted Answer

$$
	ext{Inventory Turnover} = \frac{	ext{Cost of Goods Sold}}{	ext{Average Inventory}}
$$

Question 17

Which of the following best describes the lower-of-cost-or-market (LCM) rule?

Accepted Answer

Inventory is reported at the lower of its historical cost or market value.

Question 18

Which of the following is a benefit of using the perpetual inventory system?

Accepted Answer

It provides a continuous record of inventory on hand.

Question 19

Which of the following is a key difference between the percent-of-sales and aging-of-receivables methods for estimating uncollectible accounts?

Accepted Answer

Percent-of-sales adjusts the allowance by the expense; aging-of-receivables adjusts the allowance to the required balance.

Internal Control, Revenue Recognition, Receivables, and Inventory: Exam 2 Review Study Notes

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