Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1)
1)
Which of the following key principles for internal controls would require a company to use
prenumbered checks and purchase orders?
A)
Limit access to the accounting system
B)
Separation of duties
C)
Tracking of all assets
D)
Maintaining a proper paper trial
Answer:
D
A)
B)
C)
D)
2)
2)
On the committed cost worksheet, the total estimate would include which of the following costs?
A)
Original estimate
B)
Change orders
C)
Retention
D)
A and B
Answer:
D
A)
B)
C)
D)
3)
3)
On the committed cost worksheet, a fixed–price subcontract would be entered into which of the
following columns?
A)
Committed costs
B)
Committed costs invoiced
C)
Non–committed costs invoiced
D)
A and B
Answer:
A
A)
It would not be entered into the committed costs invoiced column until it was
billed.
B)
C)
D)
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4)
4)
On the committed cost worksheet, labor would be entered into which of the following columns?
A)
Committed costs
B)
Committed costs invoiced
C)
Non–committed costs invoiced
D)
A and B
Answer:
C
A)
B)
C)
Labor would not be a committed cost because the cost cannot be determined
before the work is performed.
D)
5)
5)
Which of the following key principles for internal controls would require a company to mark
equipment with identification tags?
A)
Separation of duties
B)
Limit access to the accounting system
C)
Maintaining a proper paper trial
D)
Tracking of all assets
Answer:
D
A)
B)
C)
D)
6)
6)
Good accounting procedures require that a copy of the accounting system be maintained. Where
should this copy be stored?
A)
In the office safe
B)
On the accounting computer
C)
In the accountant’s desk
D)
In a safe, off–site location
Answer:
D
A)
B)
C)
D)
7)
7)
On the committed cost worksheet, an invoice for progress on a fixed–price subcontract would be
entered into which of the following columns?
A)
Committed costs
B)
Committed costs invoiced
C)
Non–committed costs invoiced
D)
A and B
Answer:
B
A)
B)
C)
D)
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8)
8)
Which of the following accounting methods require companies to include over– and
under–billings on their balance sheet?
A)
Cash
B)
Completed contract
C)
Accrual
D)
Percentage of completion
Answer:
D
A)
B)
C)
D)
9)
9)
On the committed cost worksheet, costs would be grouped by which of the following?
A)
MasterFormat division
B)
Project
C)
Cost code
D)
Employee
Answer:
C
A)
B)
C)
D)
10)
10)
A work–on–hand worksheet is prepared for which of the following?
A)
Each employee
B)
The entire company
C)
Each job
D)
Each cost code
Answer:
B
A)
B)
C)
D)
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
11)
What may result in a project being underbilled?
Answer:
A company that is recording material, labor, and subcontractor costs throughout the month and not
billing the owner until the first week of the following month will have an understated profit at the end
of the month because the company is underbilled.
12)
What could change the value of a committed cost, such as a fixed–price subcontract?
Answer:
A change order.
13)
On the committed cost worksheet, what costs should be included in the estimated cost to complete?
Answer:
The estimated cost to complete should include any costs the company anticipates spending between
now and the completion of the project that the company has not already committed to.
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14)
What may result in a project being overbilled?
Answer:
Contractors who front–load a project (raise prices in the early part of the project and lower them in the
later part) are receiving payment early in the job for work they have not yet completed and are
overbilled.
15)
How should the estimated cost to complete be prepared?
Answer:
The estimated cost to complete is prepared using the same principles as were used to prepare the
original estimate.
16)
What is the purpose of internal controls?
Answer:
Internal controls to protect the company against internal theft and misappropriation of financial
resources.
17)
How are unbilled committed costs handled on the work–on–hand worksheet?
Answer:
Unbilled committed costs should not be included.
18)
Where does the total estimated cost at completion come from that are recorded on the work–on–hand
worksheet?
Answer:
The current total estimated cost at completion for the project comes from the committed cost worksheet
shown in Figure 4–1 in the text.
19)
Why should a company track unbilled committed costs?
Answer:
To get a more accurate picture of a construction project’s financial status, unbilled committed costs
must be included with the invoiced costs in the job cost ledger.
20)
Define committed costs.
Answer:
Committed costs are those costs that the company has committed to pay (e.g., a subcontract for a
known amount), which may or may not be recorded as an expense.
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Answer Key
Testname: C4
1)
D
2)
D
3)
A
4)
C
5)
D
6)
D
7)
B
8)
D
9)
C
10)
B
11)
A company that is recording material, labor, and subcontractor costs throughout the month and not billing the owner
until the first week of the following month will have an understated profit at the end of the month because the
company is underbilled.
12)
A change order.
13)
The estimated cost to complete should include any costs the company anticipates spending between now and the
completion of the project that the company has not already committed to.
14)
Contractors who front–load a project (raise prices in the early part of the project and lower them in the later part) are
receiving payment early in the job for work they have not yet completed and are overbilled.
15)
The estimated cost to complete is prepared using the same principles as were used to prepare the original estimate.
16)
Internal controls to protect the company against internal theft and misappropriation of financial resources.
17)
Unbilled committed costs should not be included.
18)
The current total estimated cost at completion for the project comes from the committed cost worksheet shown in
Figure 4–1 in the text.
19)
To get a more accurate picture of a construction project’s financial status, unbilled committed costs must be included
with the invoiced costs in the job cost ledger.
20)
Committed costs are those costs that the company has committed to pay (e.g., a subcontract for a known amount),
which may or may not be recorded as an expense.
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