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Multiple Choice Questions ( 2 points each ) Select the ONE, BEST Answer

1.

Managers place a high priority on internal control systems because the systems assist managers in the: 
 

A.

Prevention of avoidable losses.



B.

Planning of operations.


C.

Monitoring of company performance.

D.

Monitoring of employee performance.

E.

All of the above.





 

2.

The number of days' sales uncollected: 
 

A.

Is used to evaluate the liquidity of receivables.


B.

Is calculated by dividing accounts receivable by sales.

C.

Measures a company's ability to pay its bills on time.


D.

Measures a company's debt to income.




E.

Is calculated by dividing sales by accounts receivable.


 

3.

Internal control procedures for cash receipts require that: 
 

A.

The custody over cash be kept separate from its recordkeeping.




B.

In-store cash sales should be recorded on a cash register at the time of each sale.

C.

Clerks who have access to cash in a cash register should not have access to the register tape or file.

D.

An employee (with no access to cash receipts) should compare the total cash recorded by the register with the record of cash receipts reported by the cashier.

E.

All of the above.





 

4.

Sellers allow customers to use credit cards: 
 

A.

To avoid having to evaluate a customer's credit standing for each sale.

B.

To lessen the risk of extending credit to customers who cannot pay.


C.

To speed up receipt of cash from the credit sale.



D.

To increase total sales volume.




E.

All of the above.





 

5.

If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in: 
 

A.

An increase in the expenses of the current period.

B.

A reduction in current assets.


C.

A reduction in equity.



D.

No effect on the expenses of the current period.


E.

A reduction in current liabilities.



 

6.

An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period of the sales, and (2) reports accounts receivable at the amount of cash to be collected is the: 
 

A.

Allowance method of accounting for bad debts.


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