1) Match each of the following transactions with the applicable internal control
principle that is being violated listed.
A. Establish responsibility
B. Maintain adequate records
C. Insure assets and bond employees
D. Separate recordkeeping from custody of assets
E. Divide responsibility for related transactions
F. Apply technological controls
G. Perform regular and independent reviews
_____ 1> Cashiers have access to the cash register recorded tape or file.
_____ 2> A company uses a voucher system, but the cash disbursement clerk pays
directly from invoices received.
_____ 3> Only sales clerks use the cash registered, but they all share the same cash
drawer.
_____ 4> The bookkeeper prepares and signs checks and completes the bank
reconciliation.
_____ 5> A restaurant allows servers to keep cash collected in their aprons and ring in
all sales at the end of the night.
_____ 6> A company fails to hire a CPA to perform an annual audit.
_____ 7> A company does not bond its key cash-handling employees.
_____ 8> A company has a single department that handles purchasing, receiving, and
inventory management.
_____ 9> A large company has no internal auditor on staff.
_____ 10> A company manager keeps pre-signed checks in his desk drawer for
employees to hand write when the accountant is out of the office.
2) A company has advance subscription sales totaling $45,000 for the upcoming year
when four quarterly journals will mailed to customers. When the company mails the
first quarterly journal to customers, it should record:
A.Debit Prepaid Subscriptions $33,750; credit Unearned Revenue $33,750.
B.Debit Unearned Revenue $45,000; credit Cash $45,000.
C.Debit Cash $11,250, credit Sales $11,250.
D.Debit Unearned Revenue $11,250, credit Sales $11,250.
E.Debit Prepaid Subscriptions $11,250, credit Sales $11,250.
3) Use the following selected information from Wheeler, LLC to determine the 2015
and 2014 common size percentages for operating expenses using Net sales as the base.
A.36.4% for 2015 and 41.1% for 2014.
B.55.0% for 2015 and 56.0% for 2014.
C.23.9% for 2015 and 23.0% for 2014.
D.103.8% for 2015 and 100.0% for 2014.
E.20.0% for 2015 and 23.0% for 2014.
4) Fortune Company’s direct materials budget shows the following cost of materials to
be purchased for the coming three months:
Payments for purchases are expected to be made 50% in the month of purchase and
50% in the month following purchase. The December Accounts Payable balance is
$6,500. The expected January 30 Accounts Payable balance is:
A.$6,500.
B.$7,075.
C.$12,040.
D.$6,020.
E.$9,270.
5) Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000
shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The
journal entry to record the payment of the dividend is:
A.Debit Retained Earnings $104,500; credit Common Dividends Payable $104,500.
B.Debit Common Dividends Payable $104,500; credit Cash $104,500.
C.Debit Retained Earnings $100,100; credit Common Dividends Payable $100,100.
D.Debit Common Dividends Payable $100,100; credit Cash $100,100.
E.Debit Retained Earnings $110,000; credit Common Dividends Payable $110,000.
6) Peavey Enterprises purchased a depreciable asset for $22,000 on April 1, Year 1. The
asset will be depreciated using the straight-line method over its four-year useful life.
Assuming the asset’s salvage value is $2,000, what will be the amount of accumulated
depreciation on this asset on December 31, Year 3?
A.$5,000
B.$15,000
C.$15,125
D.$20,000
E.$13,750
7) The following information is available on PDC Enterprises, a partnership, for the
most recent fiscal year:
There are three partners in TGR Enterprises: Pearson, Darling and Cathay. At the end of
the year, the partners’ capital accounts were in the ratio of 2:2:1, respectively. Compute
the ending capital balances of Cathay.
A.$466,000.
B.$402,000.
C.$416,000.
D.$544,000.
E.$388,000.
8) Based on the unadjusted trial balance for Glow Styling and the adjusting information
given below, prepare the adjusting journal entries for Glow Styling. After completing
the adjusting entries, prepare the trial balance for Glow Styling.
Glow Styling unadjusted trial balance for the current year follows:
Additional information:
a. An insurance policy examination showed $1,240 of expired insurance.
b. An inventory count showed $210 of unused shop supplies still available.
c. Depreciation expense on shop equipment, $350.
d. Depreciation expense on the building, $2,220.
e. A beautician is behind on space rental payments, and this $200 of accrued revenues
was unrecorded at the time the trial balance was prepared.
f. $800 of the Unearned Rent account balance was earned by year-end.
g. The one employee, a receptionist, works a five-day workweek at $50 per day. The
employee was paid last week but has worked four days this week for which she has not
been paid.
h. Three months’ property taxes, totaling $450, have accrued. This additional amount of
property taxes expense has not been recorded.
i. One month’s interest on the note payable, $600, has accrued but is unrecorded.
Use the above information to prepare the adjusted trial balance for Glow Styling.
9) Funcycle Manufacturing’s budget includes the following credit sales for the current
year: September, $145,000; October, $136,000; November, $120,000; December,
$157,000. Experience has shown that payment for the credit sales is received as
follows: 15% in the month of sale, 50% in the first month after sale, and 35% in the
second month after sale. What are the cash collections of credit sales in the month of
December?
A.$23,550.
B.$107,600.
C.$83,550.
D.$157,000.
E.$131,150.
10) In the accounting records of a defendant, lawsuits:
A.Are estimated liabilities.
B.Should always be recorded.
C.Should always be disclosed.
D.Should be recorded if payment for damages is probable and the amount can be
reasonably estimated.
E.Should never be recorded.
11) When a company uses special journals, the general journal is used to record selected
transactions and events including:
A.Closing entries.
B.Sales on credit.
C.Cash payments.
D.Credit purchases.
E.Credit sales.
12) Regent, Inc. uses the following standard to produce a single unit of its product:
overhead $6 (2 hrs. @ $3/hr.). The flexible budget for overhead is $100,000 plus $1 per
direct labor hour. Actual data for the month show overhead costs of $150,000, and
24,000 units produced. The overhead volume variance is:
A.$10,000 favorable.
B.$12,000 favorable.
C.$4,000 unfavorable.
D.$16,000 unfavorable.
E.$36,000 unfavorable.
13) To compute equivalent units of production, one must be able to reasonably estimate:
A.The percentage of completion.
B.Units completed.
C.Units started and completed.
D.Direct labor cost.
E.Materials cost.
14) What is the cycle time for a manufacturer? What does it reveal about the
manufacturing process?
15) Kramer and Jones allow Sanders to purchase a 25% interest in their partnership for
$50,000 cash. Kramer and Jones both have capital balances of $55,000 each, and have
agreed to share income and loss equally. Prepare the journal entry to record the
admission of Sanders to the partnership.
16) The following current year information is available from a manufacturing company:
Calculate the company’s accounts receivable turnover and its days’ sales uncollected.
17) On January 1, a company borrowed $70,000 cash by signing a 9% installment note
that is to be repaid with 4 equal year-end payments of $21,607. The amount borrowed is
$70,000 and 4 years of interest at 9% equals $25,200, for a total of $95,200, yet the
total payments on the note amount to only $86,428. Explain.
18) ABC Company made a $2,500 payment on account, to satisfy a previously recorded
account payable. Set up the necessary T-accounts below and show how this transaction
would be recorded directly in those accounts.