The collection of environmental factors that influence the effectiveness of control
procedures
Match the following terms with their correct definitions.
a. Accounting system e. Internal control system
b. Business process risks f. Safeguarding
c. Control activities g. Segregation of duties
d. Control environment h. Strategic risks
Refer to Rio Imports. The operating margin percentage for 2015 is an indicator that the
company has
Rio Imports
Information from the financial statements are provided below:
a. experienced setbacks concerning the effectiveness of its purchasing, production,
pricing, and marketing activities.
b. increased profits by $33,000.
c. improved profitability in relation to sales.
d. net income that is more than it would have been if dividends of $30,000 had been
paid.
(Cash + Marketable Securities) / Current Liabilities Match each of the ratios named
with the proper formula for computation.
a. Current Ratio
b. Quick Ratio
c. Cash Ratio
d. Operating Cash Flow Ratio
Which one of the following adjustments decreases net income for the period?
a. Recognition of depreciation on plant assets
b. Recognition of interest earned on a note receivable
c. Recognition of services that had been provided to customers but the cash has not yet
been received
d. Recognition of rent earned that had been received in advance from customers
Adjusting journal entries are made at the end of the period when
a. The cash basis of accounting is used for all accounting periods.
b. Cash receipts and payments occur before or after the point in time when revenues
and expenses should be recognized under the accrual basis of accounting.
c. Management reports its adjustments on the statement of cash flows.
d. The company reports revenue in the same period cash is collected.
The costs to pave a parking lot.
Select the account to which each of the following costs would be debited. (Choices may
be used more than once.)
a. Land
b. Land Improvements
c. Buildings
d. Machinery and Equipment
e. An Expense Account
Affinity Services Group received a 12%, 6-month promissory note with a principal
amount of $10,000 from a customer for the sale of merchandise on December 1, 2013.
A) How much interest revenue will the company recognize as of December 31, 2013?
B) How much interest revenue will the company recognize in 2014?
C) Determine the total amount of cash the company will collect on the date of the note’s
maturity.
Which of the following is not a sound internal control procedure for cash
disbursements?
a. paying with a check to provide a record of the payment
b. designating an authorized check-signer who has no cash record keeping
responsibilities
c. marking supporting documents when paid in order to prevent duplicate payment
d. paying with petty cash to expedite the payment process
Refer to Absolute Appliances. What amount should the company recognize as interest
revenue in 2013?
Absolute Appliances
The company sold merchandise to a customer on December 1, 2013, for $120,000. The
company accepted a promissory note as payment. The note has a term of three months
and an annual interest rate of 10%. The company’s accounting period ends on
December 31. a. $ -0-
b. $1,000
c. $2,000
d. $3,000
Refer to Beard Marine. What was the balance of Retained Earnings at January 1, 2013?
Beard Marine
The company reported the following information for the year ended December 31,
2013:
a. $ 21,000
b. $ 26,000
c. $106,000
d. $214,000
Amounts on deposit with financial institutions and investments primarily held in money
market accounts, with original maturities of less than 90 days
Match the following terms with their correct definition.
a. Cash equivalents c. Operating cycle
b. Cash over and short d. Petty cash
A company plans to distribute $134,000 in dividends. It has outstanding 200,000 shares
of 7% $10 par preferred stock (non-cumulative and non-participating) and 60,000
shares of $2 par common stock. How much will be distributed per share on preferred
and common stock? Preferred stockCommon stock
a. $0.52 $0.52
b. $0.67 $0.00
c. $0.00 $2.23
d. $0.60 $2.00
The following information is available for All-4-U Company for the year ending
December 31, 2013:
A) Compute the gross profit ratio for 2013.
B) Compute the operating margin ratio for 2013.
C) Compute the net profit margin ratio for 2013.
D) Compute the accounts receivable turnover for 2013.
When using the indirect method to determine operating cash flows, how is an increase
in accounts receivable during the year shown on the Statement of Cash Flows?
a. operating activity
b. investing activity
c. financing activity
d. noncash investing and financing activity
e. not reported on the statement of cash flows
A company borrowed $500,000 on a one-year, 10% note on October 1, 2013, with
interest and principal to be paid at maturity. How much interest should be reported on
the income statement for the year ending December 31, 2014?
a. $50,000
b. $75,000
c. $150,000
d. $37,500
____________________ represents the owners’ claims against the assets of a
corporation after deducting all liabilities.
Refer to Aardvark Resale. Determine the balance of Accounts Receivable at December
31, 2013.
Aardvark Resale
This company sells merchandise only on credit. For the year ended December 31, 2013,
the following data are available:
On January 1, 2012, Parent, Inc., purchased 80% of the outstanding common stock of
Sub Corporation for $750,000. Since Parent has control over Sub, a consolidated
balance sheet must be prepared from the individual balance sheets of both companies.
Complete the following worksheet to prepare the consolidated balance sheet on January
1, 2012.
Refer to Regency Lighting. Complete a common size vertical analysis of the current
assets section of the balance sheet for 2015. Your answers should be expressed as
percentages and rounded to one decimal place.
Regency Lighting
The current assets section of the company’s two most recent balance sheets are
presented below:
If the investor holds 50% or more of the investee’s outstanding common stock, then the
investor is referred to as the parent and the investee is called the subsidiary.
“You Decide” Essay
A customer has called complaining that he paid for a service call last week and is still
waiting for a serviceman to come out and repair his air conditioning unit. You are now
curious as to how much work your service team has been paid for but still remains
undone. You notice the bookkeeper has left the company’s general journal and general
ledger open on the desk so that he can do the monthly posting when he returns from
lunch. Using those two items, how can you satisfy your curiosity?