error in the present period?
A. Overstatement of total assets and cost of goods sold.
B. Understatement of total assets and gross margin.
C. Understatement of liabilities and retained earnings.
D. Overstatement of cost of goods sold and retained earnings.
10. Trainer Co. had beginning inventory of $400 and ending inventory of $600. Trainer Co. had cost of goods sold amounting to $1,800. Based on this information, Trainer Co. must have purchased inventory amounting to:
11. The average number of days to sell inventory for Company Z is:
12. Inventory turnover is calculated by dividing:
A. cost of goods sold by inventory.
B. accounts receivable by inventory.
C. beginning inventory by the ending inventory.
D. inventory by cost-of-goods-sold.
13. Conrad Corporation is a merchandiser of specialized fly fishing gear. Its cost of goods sold for 2011 was $195,000, and sales were $390,000. The amount of merchandise on hand was $39,000, and total assets amounted to $312,000. Using this information, which of the following answers correctly states the average days in inventory ratio? Round to the nearest day.
A. 73 days
B. 37 days
C. 46 days
D. 5 days
14. Which of the following statements is correct in regard to the importance of inventory turnover to a company’s profitability?
A. Most companies prefer to have a low inventory turnover than a high inventory turnover.
B. It is sometimes more desirable to sell a large amount of merchandise with a small amount of gross margin than a small amount of merchandise with a large amount of gross margin.
C. A company’s profitability is affected by how rapidly inventory sells as well as by the spread between cost and selling price.
D. Both B and C are correct.
15. In establishing a strong internal control system at Hook Company, management is concerned with administrative controls. Administrative controls include:
A. the reconciliation of the bank statement.
B. accuracy of the recording procedures.
C. performance evaluation.
D. maintenance of accurate inventory records.
16. Hydra Company has established internal control policies and procedures in order to achieve the following objectives:
1) Safeguard the company’s assets.
2) Assure that the accounting records contain reliable information.
3) Effective evaluation of management performance.
4) Assure that employees comply with company policy.
Which of these objectives are achieved by accounting controls?
A. Objectives 1 and 2
B. Objectives 2 and 3
C. Objectives 3 and 4
D. All four objectives
17. Which of the following statements accurately describes a fidelity bond?
A. Insurance that the company buys to protect itself from loss due to employee dishonesty.
B. Proper procedures for processing transactions.
C. Procedures to provide reasonable assurance that the objectives of a company are accomplished.
D. Guidelines or policies that limit the actions of different levels of management.
18. The accountant for Barb’s Bookstore balanced out the cash register for the day. The register indicates $1,031.50 in sales, the change fund at the beginning of the day was $125 and the actual cash in the register is $1,150.25 (including the change fund, previously accounted for). What is the effect on the financial statements of the entry to record the day’s sales and any related overage or shortage?
19. Which of the following is an internal control procedure used to safeguard a company’s assets?
A. Timely deposits of cash receipts into a checking account.
B. Separation of duties.
C. Reconciliation of the bank statement.
D. All of these.
20. A customer paid $16.50 for merchandise with a twenty dollar bill. The sales person gave incorrect change of $4.50 to the customer. At the end of the day the cash register showed total sales receipts of $285. Based on this information, the journal entry to record sales and correct the error would be: