ABC Company records the following transactions during 2021:$200,000 of revenue, half is on account and half cash paymentsPays $15,000 for utilities in cashPays employees $50,000 in cashBuys a new machine worth $20,000 in cashPays a Dividend of $2,000 in cash to shareholdersPays Interest on a loan of $5,000 in cash

$30,000 INFLOW

Which of the following is the correct interpretation of the control of Separation of Duties?A. Accounting records must be accessible only to authorized personnel.B. Activities requiring authorization should be separated among employeesC. Verifying of assets periodically to see if they match accounting records.D. Actual performance must be measured against expected performance E. Employees must be appropriately trained for the job they perform

Activities requiring authorization should be separated among employees

The Sarbanes-Oxley ("SOX") Act of 2002 includes which of the following provisions?A. The PCAOB which establishes standards for auditing and other financial statement activities.B. The audit retention rule that auditors must retain workpapers for 5 years.C. Section 404 on Internal Controls stating companies must assess internal controls and external auditors must express opinions on management's assessment.D. All of the aboveE. Only A & C are provisions of SOX.Only A & C are provisions (not B because retention is for 7 years not 5)The Sarbanes-Oxley Act of 2002 includes which of the following provisions?A. It is unlawful for auditors of public companies to provide certain non-audit services to their public company audit clientsB. Lead Audit Partner Rotation must occur every 5 yearsC. Auditors are hired by Company Management and must be independent of managementD. All of the aboveE. Only A & B are provisions of SOX.Only A & B are provisions (not C because the AUDIT COMMITTEE hires auditors, not management)Which of the following is NOT included in the fraud triangle?A. Motivation - feeling a need to commit fraud such as financial distressB. Opportunity - a situation arises which allows for fraud to occurC. Collusion - committing fraud requires the assistance of a second partyD. Rationalization - perceived justification for the fraudulent act.E. All of the Above are included in the fraud triangle.Collusion - committing fraud requires assistance of a second partyParts of the Fraud Triangleopportunity, motivation, rationalizationWhich of the following is the correct entry for establishing the petty cash fund of $500?Petty Cash _____ $500 Cash ________$500Which of the following represent adjustments made to the bank during a bank reconciliation?A. Deposits OutstandingB. Interest EarnedC. Non-Sufficient Funds ChecksD. Cash Collections E. Checks CashedDeposits OutstandingCash balances per bank(+) Deposits outstanding (-) Checks outstandingCash balances per book(+) Interest earned(+) Cash collections(-) NSF ("bad") checks(-) Service chargeIf each is a cash transaction, which of the below is/are Financing Cash Outflow(s)?A. Payment of interest on a loanB. Lending money via a note to another companyC. Repayment of a note payableD. Taking out a note payable from the bankE. Both C & D are financing cash outflowsC. - Repayment of a note payableFinancing cash flowsaffect the long-term liabilities and equity sections of the balance sheetWashington Enterprises records the following cash transactions during 2021: Collects $120,000 of receivables Buys a new building for $250,000 Takes out a loan from MT Bank for $500,000 Purchases inventory worth $15,000 Sells an old bulldozer for $65,000 Purchases an equity stake in Pullman Products worth $50,000 Which is correct for Washington Enterprise's 2021 Investing cash flow?A. $235,000 OutflowB. $265,000 InflowC. $115,000 OutflowD. $385,000 InflowE. $185,000 OutflowSo: -250,000 + 65,000 - 50,000 = 235,000 OUTFLOWWhich of the following is/(are) attributes of the Statement of Cash Flow ("SCF")? A. SCF eliminates accruals used in creating the Income Statement and Balance Sheet. B. SCF allows investors to have greater insight into the potential future revenues and expenses a firm may have because items which would not yet be recorded in revenue are present in SCF. C. SCF gives insight into a firm's solvency and liquidity by demonstrating how much of a firms operations involve cash transactions and how much cash is being collected by the firm.D. Provides good comparability between firms as the use of Cash Accounting normalizes accounting procedures where accrual accounting involves management estimates and different management choices (such as different inventory methods) E. All of the above are attributes of the SCFE- all of the aboveINDIRECT METHOD1) Start with Net Income2) Add any non-cash Expenses (Losses or Depreciation Expense)3) Subtract any non-cash Revenues (Gains)4) Add the changes for Current Assets that are decreases 5) Subtract the changes for Current Assets that are increases 6) Add the changes for Current Liabilities that are increases7) Subtract the changes for Current Liabilities that are decreases5- Which of the following refers to the contra-revenue account for when a customer receives incorrect inventory, but keeps it for a discounted price?A. Cost of Goods SoldB. Sales AllowanceC. Sales ReturnsD. Sales DiscountE. Trade DiscountSales AllowanceSales Allowancereceives an incorrect or damaged product, but keeps it for a reduced priceSales Returnreceives an incorrect and damaged product and returns it for a refundSales Discounta customer purchases on account and pays within given terms for a reduced priceABC Company sells inventory to a customer with the following transactions relevant to the sale:• ABC Company purchased the 200 units of inventory for $10,000• The selling price of the inventory was $90 for 200 units• The sale was made on account with terms 5/7, n/20.Assuming the customer paid 10 days after the sale, what is the correct entry for the payment?Cash_____$18,000Accounts Receivable______$18,000Which of the following is NOT a reason a company would choose to sell on credit? A. Selling on credit is a more customer-friendly or buyer-friendly approach B. Customers always pay back 100% of what is owed C. Offering sales on credit can attract more customers D. The net gain of more sales outweighs the potential loss on uncollected receivables E. All of the above are reasons a company would choose to sell on creditB. Customers always pay back 100% of what is owedPer lecture, we know the following about why companies sell on credit:1) It is customer-friendly 2) This customer-friendly approach is expected to drive-up sales 3) The increased sales should benefit the company by outweighing any potential write-offs of receivablesWhich of the following is true about Allowance Method of calculating Bad Debt, but is NOT true of the Net Credit Sales Method? A. The Allowance Method uses a permanent account to estimate bad debt, which is a temporary account B. The Allowance Method uses a temporary account to estimate the allowance for uncollectible accounts, which is a permanent account. C. The Allowance Method utilizes the Net Realizable Value for estimating bad debt D. The Allowance Method calculates the ending balance of the allowance for uncollectible accounts E. Both A&D are true statements for the Allowance Method, but not the Net Credit Sales MethodE. Both A&D are true statements for the Allowance Method, but not the Net Credit Sales MethodNote: B & C are NOT true of the Allowance MethodAllowance Method:- Utilizes A/R to estimate bad debt - A/R is a permanent, Balance Sheet account - When making the estimate, we calculate the ENDING BALANCE of the allowance for uncollectible accounts. - We need to use the beginning balance of AUA to solve for the adjustment neededNet Credit Sales Method- Utilizes net credit sales to estimate bad debt - Sales Revenue and the contra -revenue accounts which we use to solve for Net Sales are temporary, income statement accounts - When making the estimate, we calculate the ANNUAL CHANGE for the allowance for uncollectible accounts, so we do not need to solve for it; instead, we add it to the beginning amount to get the ending balance.Calculating bad debt- allowance methodEnding Balance = % Estimated * A/R BalanceEnding Balance = 0.08 * 28,000Ending Balance = 2,240Calculating bad debt- net credit sales methodNet Credit Sales Method2021 Bad Debt = % Estimated * Net Credit Sales...2021 Bad Debt = 0.02 * (90,0000 - 10,000)...2021 Bad Debt = 1,600On May 1st, 2021, Wicked Works contracted with a customer to alter a $24,000 outstanding account receivable into a note receivable. The terms of the note were one-year at 5% interest. What is the amount of interest Wicked Works would accrue in 2021 on the note?A. $1,200B. $800C. $700D. $400E. $100B - $800Formula for accruing interestPrincipal * Rate * Time (PRT)Which of the following is NOT a manufacturing costs used to calculate the cost of goods manufactured? A. Common CostsB. Direct MaterialsC. Direct LaborD. Selling & AdministrativeE. All of the Above are manufacturing costsD. Selling & AdministrativeThree types of manufacturing costs1) Direct Materials, 2) Direct Labor, 3) Manufacturing OverheadOverheadconsists of various costs such as indirect materials, indirect labor, and common costsWhich of the following is not considered (i.e., added or subtracted) in the cost of inventory and, later, used for calculating the cost of goods sold?A. Freight-InB. Inventory PurchasesC. Purchase Returns & AllowancesD. Beginning InventoryE. Freight-OutE. Freight-OutConsiderations for Cost of Goods Sold includebeginning inventory, purchases, freight-in, purchase returns/allowances, purchase discounts, and ending inventory...NOT freight-out.Which of the following is not considered an operating expense?A. Cost of Good SoldB. Income Tax ExpenseC. Salaries ExpenseD. Utilities ExpenseE. Both A&B are NOT operating expensesE. Freight-OutOperatingOperating refers to revenues or expenses from running the businessOperating Revenues are often Service RevenuesOperating Expenses include:Selling and Administrative Expenses such as commissions and advertising expenseBetty DeRose Motor Warehouse sells luxury vehicles. Commonly, Betty sells less than a dozen cars each week with each vehicle selling for over $70,000 and costing Betty around $40,000 on average to add to its inventory. Which accounting method would be recommend for Betty due to its high accuracy and Betty's low volume?A. First-In, First-OutB. Last-In, First-OutC. Specific IdentificationD. Exact ItemE. Weighted AverageC. Specific IdentificationBuckeye Company recently began operations. To ensure greater cash on hand, Buckeye wants to increase its cost of goods sold through selecting the appropriate cost allocation method for its inventory. Currently, there is a running period of deflation in Buckeye Company's inventory costs. Which cost method should Buckeye Company choose to increase Cost of Goods Sold; thereby decreasing the ending inventory.A. First-In, First-OutBuckeye Company recently began operations. To ensure greater cash on hand, Buckeye wants to increase its cost of goods sold through selecting the appropriate cost allocation method for its inventory. Currently, there is a running period of deflation in Buckeye Company's inventory costs. Which cost method should Buckeye Company choose to increase Cost of Goods Sold; thereby decreasing the ending inventory.A. First-In, First-OutWest Ham Corporation purchased goods from its supplier. The stated terms of delivery were FOB Shipping Point. Which party had ownership of the goods while in transit?A. West Ham CorporationFOB Shipping PointPer Lecture:This means that the buyer has ownership as soon as the carrier takes possession; therefore, the buyer has ownership while in-transit.formula for Days in Inventory:DIR = 365/Inventory Turnover7- Which of the following would be a capitalized cost for a company's fixed assets?A. Repair of a machine's broken pieceB. Installation of an upgraded transmission in a truckC. Maintenance on a building's foundationD. Adding a sprinkler system to a plot of landE. None of the above are capitalized costsWhich of the following is true related to fixed assets?A. The cost of fixed assets is allocated over time using depreciation, other than landB. Fixed assets are long-term assets on the balance sheetC. Fixed assets are valued using the historical cost concept, where the dollar value it tied to the amount paid for the assetD. Fixed assets can appreciate where the market value is greater than its value on the balance sheet valueE. All of the Above are true related to fixed assetsBuckeye Company recently purchased a lakefront property to use for company retreats. Included in the purchase were a boat, land, a building, and a truck. The following are the market value of the various fixed assets: Boat = $90,000 Land = $140,000 Building = $120,000 Truck = $50,000If Buckeye paid $360,000 for the fixed assets above, what is the value of the building?A. $45,000B. $81,000C. $108,000D. $120,000E. $126,000Betty DeRose Inc. has four intangibles. Below are the value and registered life for each:Useful Life ValueTrademark 10 $20,000Goodwill indefinite $50,000Patent 15 $30,000Copyright 20 $80,000Using straight-line amortization, how much amortization should be recorded in year 1?A. $4,000B. $6,000C. $8,000D. $13,000E. $20,000XYZ Company recently purchased a new bulldozer for $40,000. The building is estimated to have a residual value of $8,000 and a 4-year useful life. XYZ chooses to depreciated using double-declining depreciation. How much depreciation expense should be recorded in year 4?A. $2,000B. $2,500C. $5,000D. $10,000E. $20,000Which of the following is a feature of MACRS depreciation?A. Congress approved MACRS and it is allowed by the IRSB. It results in high depreciation expense amounts in early years to lower income tax costs as it is a combination of double-declining and straight-line methods.C. It is acceptable for GAAP purposes and is commonly used in financial reportingD. All of the Above are features of MACRSE. Only A&B are features of MACRSHarbinger Inc. had the following financial data in 2021 Value Sales Revenue $3,015,000 Sales Allowance $135,000 Cost of Goods Sold $1,250,000 Assets at 1/1/2021 $1,850,000 Assets at 12/31/2021 $1,750,000 Operating Expenses $830,000 Income Tax Expense $80,000Profit Margin____ Asset Turnover_____ Return on Assets____

ACCTG 230 Exam 2

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