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1. An audit opinion in which the auditors are taking exception to a specific treatment of accounting information is the
A. adverse opinion.
B. unqualified opinion.
C. qualified opinion.
D. disclaimer of opinion.
2. Land is an example of a
A. long-term asset.
B. current liability.
C. long-term liability.
D. current asset.
3. The _______ method is used to estimate the cost of ending inventory.
A. average cost
C. gross profit
4. Which of the following would probably not need to be disclosed in a footnote?
A. Change of inventory methods
B. A material change in estimated shrinkage
C. A 10% increase in sales
D. A change in depreciation method
5. Which element of internal control deals with a company having large amounts of cash on hand?
A. Information and communication
B. Risk assessment
C. Control environment
D. Control activities
6. A new car lot would probably cost its inventory using the _______ method of inventory costing.
A. moving average
7. In a FOB destination agreement, when will ownership transfer to the buyer?
A. When the buyer physically touches the goods
B. When the buyer has paid for the goods in full
C. When the goods leave the seller’s location
D. When the goods arrive at the delivery location
8. ABC Corporation pays an invoice for $350 in time to receive a 3% discount. The journal entry for the payment of this invoice is debit Accounts Payable
A. $340 and credit Cash $340.
B. $340, debit Inventory $10, and credit Cash for $350.
C. $350 and credit Cash $350.
D. $350, credit Inventory $10.50, and credit Cash for $339.50.
9. When merchandise is sold under the perpetual system of inventory, the journal entry to record a sale of merchandise on account includes debiting _______ and crediting _______.
A. Accounts Receivable; Cost of Goods Sold
B. Accounts Receivable; Sales
C. Accounts Receivable; Inventory
D. Cost of Goods Sold; Sales
10. Michelle, a customer of Regal Company, returned $45 of goods that were purchased on account. Under the perpetual inventory system, Regal will record a debit to _______ and a credit to _______ for $45.
A. Sales; Accounts Receivable (Michelle)
B. Sales; Cost of Goods Sold
C. Sales Returns and Allowances; Accounts Receivable (Michelle)
D. Cost of Goods Sold; Inventory
11. A company has net sales of $126,000, cost of goods sold of $72,000, operating expenses of $38,000, and other expenses of $3,000. Approximately what is the company’s gross profit percentage?
12. Under a perpetual inventory system, transportation charges on incoming merchandise are generally entered to the _______ account.
A. FOB shipping
C. FOB destination
D. Delivery Expense
13. If the replacement cost of inventory is less than its historical cost, the company will write down the inventory by
A. increasing inventory and decreasing cost of goods sold.
B. increasing cost of goods sold and decreasing inventory.
C. increasing inventory for replacement cost and decreasing inventory for historical cost.
D. making a note in the financial statements only.
14. _______ occurs if a disgruntled employee convinces another to steal from the company.
B. The control environment
C. A control activity
15. Under a perpetual inventory system, when goods are returned to a retailer from a customer, _______ is debited and _______ is credited.
A. Inventory; Sales
B. Sales; Cost Goods Sold
C. Cost of Goods Sold; Sales Returns and Allowances
D. Sales Returns and Allowances; Cost of Goods Sold
16. An employee believes that getting away with fraud without being detected is likely. This best relates to which element of the fraud triangle?
C. Perceived pressure
D. Perceived opportunity
17. A method of valuing inventory based on the average of units is called the
A. LIFO method.
B. specific cost method.
C. FIFO method.
D. average cost method.
18. Under the perpetual inventory method, purchased goods are recorded to the
A. Inventory account as a debit.
B. Purchases account as a debit.
C. Cost of Goods Sold account as a debit.
D. Purchases account as a credit.
19. Which of the following is not part of the fraud triangle?
C. Perceived pressure
D. Perceived opportunity
20. If net sales decrease and cost of goods sold increases, the gross profit percentage
A. will change based upon the change in total assets.
C. remains the same.
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