The recognition of cost of goods sold expense in the same period that sales revenue is
recognized from the sale of merchandise is a good example of the
a. matching principle
b. full disclosure principle
c. revenue realization principle
d. historical cost principle
Independent auditors (CPAs) render an opinion that the financial statements do or do
not fairly present a company’s financial position, operating results, and cash flows.
a. True
b. False
Which of the following statements regarding contingencies is true?
a. Contingencies that are probable and not estimable appear on the balance sheet.
b. Contingencies that are probable and not estimable are disclosed in the notes to the
financial statements.
c. Contingencies that are remote but estimable are disclosed in the notes to the financial
statements.
d. Contingent assets are recorded on the balance sheet, but not in the notes to the
financial statements.
Match the following terms with the best definitions for questions 212 through 219. a.
Purchase requisition.
b. Receiving Report.
c. Vendor Invoice.
d. Check.
e. Control procedures.
f. Inventory count.
g. Segregation of duties.
h. Source document control.
Used to prepare a purchase order.
The primary purpose of the statement of cash flows is to provide information about
a. the financial position of the company.
b. the profitability of the company.
c. the investing and financing activities of the company.
d. the cash inflows and outflows of the company.
Match the terms with the descriptions related to merchandise sales and purchases.
a. Transportation-in
b. Perpetual inventory system
c. Net purchases
d. FOB Destination
e. Cost of goods available for sale
f. Periodic inventory system
g. FOB Shipping point
h. Delivery expense
The seller is responsible for the cost of delivering the merchandise to the buyer.
If a company purchases $3,200 worth of inventory with terms of 2/10, n/30 on March 3
and pays April 2, then the amount paid to the seller would be
a. $3,136
b. $3,150
c. $3,168
d. $3,200
What is the name of the branch of accounting concerned with providing managers and
administrators with information to facilitate the planning and control of business
operations?
a. Management accounting
b. Auditing
c. Financial accounting
d. Bookkeeping
If two companies in the same industry use different methods to value inventory, this
makes comparisons more difficult but not impossible.
a. True
b. False
Provided below is a list of important users of accounting information.Below the list are
descriptions of a major need of each of the various users. Fill in the blank with the one
user group that is most likely to have the need described to the right of the blank. Some
user groups may be used more than once or not at all.
a. Capital stock
b. Asset
c. Owners’ equity
d. Time period
e. Dividends
f. Economic entity concept
g. Expense
h. Retained earnings
i. Cost principle
j. Creditor
k. Liability
l. Revenue
m. Going concern
n. Monetary unit
o. Corporation
An artificial segment on the calendar used as a basis for preparing financial statements.
The statement of cash flows emphasizes explanations for the change in net income.
a. True
b. False
Audit committees are required to consist of only directors who are key officers of the
company.
a. True
b. False
Presented below are selected data from the financial statements of Hospital Supply
Company for 2016, 2015, and 2014.
A) Calculate Hospital Supply’s number of days’ sales in receivables for 2016 and 2015.
Assume 360 days in a year.B) What is the meaning of your answer in part A?
No special internal control procedures are necessary with a petty cash account because
the amount is usually so small.
a. True
b. False
Match the action with the category of internal control procedures
a. One department should check on another
b. Internal audit staff ensure all is working as intended
c. Accounting and cash collection is properly separated
d. Blank checks are locked at all times when not in use
e. Origination of initial entry into accounting system
f. Specific authority is given by management for the performance of activities.
Safeguarding assets
During 2016, the accounts payable balance of Andreas Corp. decreased. Which of the
following statements is true?
a. This decrease indicates that Andreas paid less during the period than it recognized as
expenses on the income statement.
b. This decrease is added to net income in the operating activities section of a statement
of cash flows prepared under the indirect method.
c. This decrease is deducted from net income in the operating activities section of a
statement of cash flows prepared under the indirect method.
d. This decrease is considered only when the operating activities section of a statement
of cash flows is prepared under the direct method.