1.

To pay the least income tax possible in periods of rising inventory costs, the company should use which

inventory costing method?

 

A.

FIFO

 

B.

LIFO

 

C.

Average cost

 

D.

Specific identification

 

2.

Which of the following is an incorrect statement if ending inventory is overstated?

 

A.

Net income is overstated.

 

B.

Gross profit is overstated.

 

C.

Cost of goods sold is overstated.

 

D.

Income tax is overstated.

 

3.

Meranda Corporation purchases $3,500 of inventory on account from Ashley Corporation. The journal

 

entry to record this purchase for Meranda under a perpetual inventory system is

 

A.

debit Accounts Payable-Ashley; credit Inventory.

 

B.

debit Inventory; credit Accounts Payable Meranda.

 

C.

debit Inventory; credit Accounts Payable Ashley.

 

D.

debit Inventory; credit Cash.

 

4.

Committing a fraud because the employee feels that it will be easy to do is indicative of which part of the fraud triangle?

 

A.

Perceived pressure

 

B.

Rationalization

 

C.

Perceived opportunity

 

D.

Realization

 

5.

Which items may not limit the effectiveness of internal control systems in an organization?

 

A.

Costs not worth benefits

 

B.

Collusion

 

C.

Overriding controls

 

D.

Properly designed controls

 

6.

Under a perpetual inventory system, the account to which transportation charges on incoming

merchandise is generally entered is

 

A.

inventory.

 

B.

FOB shipping.

 

C.

delivery expense.

 

D.

FOB destination.

 

7.

A company's current ratio increased from 1.23 to 1.45. What does this mean?

 

A.

This means that current assets decreased and current liabilities decreased.

 

B.

This means that current assets increased and current liabilities decreased.

 

C.

This means that current assets increased and current liabilities increased.

 

D.

There isn't enough information to explain the increase.

 

8.

Nick Company reports the following inventory information:

What is the total value of the merchandise under LCM (lower-of-cost or market)?

Inventory Number Inventory Quantity Unit Cost Unit Market Value

APD 4837 440 $51.29 $51.48

CPZ 2837 290 $76.59 $77.02

IXL 9291 310 $42.34 $42.47

EOD 1717 200 $22.19 $21.75

DKS 3088 180 $31.22 $31.17

 

A.

$67,864.70

 

B.

$67,961.70

 

C.

$68,210.30

 

D.

$68,113.30

 

9.

One of the biggest factors in implementing SOX was

 

A.

the cost of implementing the system.

 

B.

disclosing deficiencies in internal controls.

 

C.

establishing internal control procedures.

 

D.

reviewing the financial reports.

 

10.

Besides using an overstatement of earnings to inflate a company's stock price, overstating earnings may

also be used to

 

A.

avoid paying raises to employees.

 

B.

ensure larger bonuses to upper management at year-end.

 

C.

deflate the amount of taxes the corporation pays.

 

D.

avoid paying dividends to stockholders.

 

11.

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

Sept 11 Sold 22

Total Cost of Inventory $980

Ending inventory is 14 units.

 

A.

$308

 

B.

$801

 

C.

$264

 

D.

$784

 

12.

Physical inventory counts must be done

 

A.

when using the perpetual method of inventory.

 

B.

regardless of method inventory.

 

C.

when using the periodic method of inventory.

 

D.

when using bar-code scan technology.

 

13.

Goods available for sale are $118,000; beginning inventory is $37,000; ending inventory is $42,000;

and cost of goods sold is $77,000. The inventory turnover is

 

A.

1.53.

 

B.

1.95.

 

C.

1.83.

 

D.

2.99.

 

14.

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.

six months.

 

C.

year.

 

D.

90 days.

 

15.

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 Cash for $3569; credit to Sales for $3,569.

 

B.

debit to Cash for $3,569; credit to Cost of Goods Sold for $3,569.

 

C.

debit to Cost of Goods Sold for $1,888; credit to Sales of $1,888.

 

D.

debit to Cost of Goods Sold for $1,888; credit to Inventory for $1,888.

 

End of exam

 

16.

Which of the following would probably not cause inventory shrinkage?

 

A.

Spoilage of items

 

B.

Employee theft

 

C.

Spills of items

 

D.

Correct counting of all inventory

 

17.

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 $340; debit Inventory $10; credit Cash $350.

 

B.

debit Accounts Payable $350; credit Inventory $10.50, credit Cash $339.50.

 

C.

debit Accounts Payable $340; credit Cash $340.

 

D.

debit Accounts Payable $350; credit Cash $350.

 

18.

If current assets decrease and current liabilities increase, the current ratio

 

A.

will change based on the change in total assets.

 

B.

decreases.

 

C.

remains the same.

 

D.

increases.

 

19.

Which of the following may not limit the effectiveness of internal control systems in an organization?

 

A.

Duties not segregated

 

B.

Understanding of policies and procedures

 

C.

Poorly designed controls

 

D.

Costs not worth benefits

 

20.

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

 

A.

$6.00

 

B.

$6.63

 

C.

$6.55

 

D.

$7.40