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1) which one of the following is not an objective of a system of internal controls?
a.safeguard company assets
b.overstate liabilities in order to be conservative
c.enhance the accuracy and reliability of accounting records
d.reduce the risks of errors
2) ramos company has a 90-day note that carries an annual interest rate of 8%. if the
amount of the total interest on the note is equal to $800, then what is the principal of the
note?
a.$10,000
b.$40,000
c.$57,600
d.$25,600
3) sales revenue less cost of goods sold is called
a.gross profit
b.net profit
c.net income
d.marginal income
4) interest is usually associated with
a.accounts receivable
b.notes receivable
c.doubtful accounts
d.bad debts
5) comparisons of financial data made within a company are called
a.intracompany comparisons
b.interior comparisons
c.intercompany comparisons
d.industry comparisons
6) the sale of bonds above face value
a.is a rare occurrence
b.will cause the total cost of borrowing to be less than the bond interest paid
c.will cause the total cost of borrowing to be more than the bond interest paid
d.will have no net effect on interest expense by the time the bonds mature
7) morales company issued $600,000 of 8%, 5-year bonds at 106, which pays interest
annually. assuming straight-line amortization, what is the carrying value of the bonds
after one year?
a.$636,000
b.$632,400
c.$628,800
d.$639,600
8) a net loss
a.occurs if operating expenses exceed cost of goods sold
b.is not closed to retained earnings if it would result in a debit balance
c.is closed to retained earnings even if it would result in a debit balance
d.is closed to the paid-in capital account of the stockholders equity section of the
balance sheet
9) when an account is written off using the allowance method, the
a.cash realizable value of total accounts receivable will increase
b.net accounts receivable will decrease
c.allowance account will increase
d.net accounts receivable will stay the same
10) a local retail shop has been operating as a sole proprietorship. the business is
growing and now the owner wants to incorporate. which of the following is not a reason
for this owner to incorporate?
a.ability to raise capital for expansion
b.desire to limit the owners personal liability
c.the prestige of operating as a corporation
d.the ease in transferring shares of the corporations stock
11) garrison company prepares quarterly reports, which it distributes to all stockholders
and other entities that rely on its accounting information. which of the following is the
best term for the key assumption in financial reporting that garrison is following?
a.monetary unit assumption
b.going concern assumption
c.economic entity assumption
d.periodicity assumption.
