1. Committing a fraud because the employee feels “I deserve a pay raise. The company owes this to me” is indicative of which part of the fraud triangle?
C. Perceived pressure
D. Perceived opportunity
2. Casey Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows: (Note: The company uses a perpetual system of inventory.)
What is the cost of goods sold for Casey Company for 2012 using LIFO?
Units Unit Price Total Cost
January 1—Beginning Inventory 20 $12 $240
March 8—Sold 14
April 2—Purchase 30 $13 $390
June 5—Sold 25
Aug 6—Purchase 25 $14 $350
Total Cost of Inventory $980
Ending inventory is 14 units.
3. The balance sheet format that lists assets above liabilities is the _______ form.
4. Isaiah Sporting Goods uses the perpetual average cost method of determining inventory costs. Below is the inventory record for Product C124:
What is the average cost per unit after the receipt of the May 17 inventory (rounded to the nearest cent)?
Date Received Sold Cost/Unit Balance
April 22 534 $6.58 $3,513.72
May 17 433 $6.70 $2,901.10
June 21 389 $6.76 $2,629.64
August 2 436 $6.44 $2,807.84
5. Bill’s Bikes had sales for the week of $3,569, of which $2,900 was on credit and $659 was in cash sales. The cost of the bikes sold was $1,888. The journal entries would include a
A. debit to Cost of Goods Sold for $1,888; credit to Sales of $1,888.
B. debit to Cash for $3,569; credit to Cost of Goods Sold for $3,569.
C. debit to Cash for $3569; credit to Sales for $3,569.
D. debit to Cost of Goods Sold for $1,888; credit to Inventory for $1,888.
6. ABC Corporation pays an invoice for $350 in time to take a 3% discount. The journal entry to record
the payment of this invoice is
A. debit Accounts Payable $350; credit Inventory $10.50, credit Cash $339.50.
B. debit Accounts Payable $350; credit Cash $350.
C. debit Accounts Payable $340; debit Inventory $10; credit Cash $350.
D. debit Accounts Payable $340; credit Cash $340.
7. Under Sarbanes-Oxley, those officers signing off on the reports must have evaluated the company’s
internal control within the previous
A. nine months.
B. 90 days.
D. six months.
8. Which of the following may not limit the effectiveness of internal control systems in an organization?
A. Poorly designed controls
B. Costs not worth benefits
C. Duties not segregated
D. Understanding of policies and procedures
9. To overstate earnings, a company can
A. overstate expenses and overstate revenue.
B. understate expenses and understate revenue.
C. overstate receivables and understate payables.
D. understate unearned revenue and understate property, plant, and equipment.
11. Which of the following is an incorrect statement if ending inventory is overstated?
A. Income tax is overstated.
B. Cost of goods sold is overstated.
C. Gross profit is overstated.
D. Net income is overstated.
12. Which of the following is an incorrect statement if ending inventory is understated?
A. Cost of goods sold is overstated.
B. Net income is understated.
C. Income tax is understated.
D. Gross profit is overstated.
13. Besides using an overstatement of earnings to inflate a company’s stock price, overstating earnings may also be used to
A. avoid paying dividends to stockholders.
B. deflate the amount of taxes the corporation pays.
C. avoid paying raises to employees.
D. ensure larger bonuses to upper management at year-end.
14. A low gross profit percentage means that
A. selling expenses are very low.
B. the cost of goods sold was relatively high.
C. the cost of goods sold was relatively low.
D. general and administrative expenses are very high.
15. Which items may not limit the effectiveness of internal control systems in an organization?
A. Properly designed controls
C. Costs not worth benefits
D. Overriding controls
16. New technology, like the latest cell phones and HDTV, would probably be costed using the
A. moving-average method of inventory costing.
B. FIFO method of inventory costing.
C. specific-identification method of inventory costing.
D. LIFO method of inventory costing.
17. Net sales times the historical gross profit percentage yields the estimated
A. ending inventory.
B. gross profit.
C. beginning inventory.
D. cost of goods sold.
18. Under a perpetual inventory system, the account to which transportation charges on incoming
merchandise is generally entered is
B. delivery expense.
C. FOB shipping.
D. FOB destination.
19. If current assets decrease and current liabilities increase, the current ratio
B. remains the same.
C. will change based on the change in total assets.
20. To pay the least income tax possible in periods of rising inventory costs, the company should use which inventory costing method?
A. Specific identification
B. Average cost