Question 1

The internal document prepared to notify the appropriate persons that goods ordered have been received,describing the quantities and condition of the goods is the
A)Purchase requisition.
B)Purchase order.
C)Invoice.
D)Receiving report.
E)Invoice approval.

Accepted Answer

A receiving report is a document prepared internally to notify appropriate persons that goods ordered have been received, describing the quantities and condition of the goods. It is an essential part of the receiving process and is necessary to ensure that the goods have been received as ordered and in good condition before payment is made. The other options (purchase requisition, purchase order, invoice, and invoice approval) are all documents that are involved in the purchasing process but are not specifically related to the receipt of goods.

Question 2

In the process of reconciling its bank statement for January,Maxi's Clothing's accountant compiles the following information:  The adjusted cash balance per the books on January 31 is:
A)$5,855
B)$5,335
C)$4,055
D)$4,815
E)$4,585

Accepted Answer

The answer of In the process of reconciling its bank...

Question 3

In the process of reconciling its bank statement for April,Donahue Enterprises' accountant compiles the following information:  The adjusted cash balance per the books on April 30 is:
A)$6,900
B)$8,160
C)$4,600
D)$6,520
E)$5,840

Accepted Answer

The answer of In the process of reconciling its bank...

Question 4

An expense resulting from failing to take advantage of cash discounts when using the net method of recording purchases is called:
A)Sales discounts.
B)Trade discounts.
C)Purchases discounts.
D)Discounts lost.
E)Discounts earned.

Accepted Answer

When using the net method of recording purchases, the buyer pays the full invoice amount within the credit period, and no sales discounts are given by the seller. However, if the buyer fails to take advantage of the cash discount offered by the seller, they will end up paying more than the net amount due, resulting in a loss of discounts. Hence, the correct answer is D) Discounts lost.

Question 5

A seller (or provider)of goods or services to a business organization,usually a manufacturer or wholesaler,is known as a:
A)Vendor.
B)Payee.
C)Vendee.
D)Creditor.
E)Debtor.

Accepted Answer

A vendor is a person or company that sells goods or services to a business organization, usually a manufacturer or wholesaler. The other options, Payee, Vendee, Creditor, and Debtor, refer to different roles in financial transactions but are not specific to selling goods or services to a business.

Question 6

A company using the net method of recording purchases failed to take advantage of a discount available.When they pay the full (gross)amount of an invoice at the end of the credit period the journal entry will include a debit to:
A)Merchandise Inventory.
B)Sales Discounts.
C)Discounts Lost.
D)Cash.
E)Accounts Receivable.

Accepted Answer

The company failed to take advantage of the discount, so they lost it. Therefore, the journal entry would include a debit to "Discounts Lost."

Question 7

The internal document prepared by a department manager that informs the purchasing department of its merchandise needs and requests that the merchandise be purchased is the
A)Purchase requisition.
B)Purchase order.
C)Invoice.
D)Receiving report.
E)Invoice approval.

Accepted Answer

A purchase requisition is an internal document prepared by a department manager to request that merchandise be purchased. The requisition informs the purchasing department of its merchandise needs, including the quantity and description of the merchandise, and is the first step in initiating the purchasing process.

Question 8

During the month of July,Clanton Industries issued a check in the amount of $845 to a supplier on account.The check did not clear the bank during July.In preparing the July 31 bank reconciliation,the company should:
A)Deduct the check amount from the book balance of cash.
B)Add the check amount to the book balance of cash.
C)Deduct the check amount from the bank balance.
D)Add the check amount to the bank balance.
E)Make a journal entry in the company records for an error.

Accepted Answer

The answer of During the month of July,Clanton Industries issued...

Question 9

A voucher system is a set of procedures and approvals:
A)Designed to eliminate the need for subsidiary ledgers.
B)Designed to determine if the company is operating profitably.
C)Used almost exclusively by small companies.
D)Used to ensure that the company sells on credit only to creditworthy customers.
E)Designed to control cash disbursements and the acceptance of obligations.

Accepted Answer

A voucher system is used to control cash disbursements and the acceptance of obligations. It involves a series of procedures and approvals that ensure that each payment made by a company is properly authorized and supported by relevant documentation. This helps to prevent errors and fraud, and ensures that the company has a complete record of all its financial transactions.

Question 10

A company that uses the net method of recording purchases made a purchase of $400 with terms of 2/10,n/30.The entry to record the purchase would be:
A)Debit Merchandise Inventory $392;credit Accounts Payable $392.
B)Debit Merchandise Inventory $400;credit Discounts Lost $8;credit Accounts Payable $392.
C)Debit Merchandise Inventory $392;credit Cash for $392.
D)Debit Merchandise Inventory $392;debit Discounts Lost $8;credit Accounts Payable $400.
E)Debit Accounts Payable $400;credit Discounts Lost $8;credit Cash $392.

Accepted Answer

The net method of recording purchases means that the purchase is recorded at the net amount, which is the invoice price minus any discounts. In this case, the invoice price is $400 and the discount is 2%, so the net amount is $392. The entry to record the purchase would therefore be:Debit Merchandise Inventory $392Credit Accounts Payable $392

Question 11

Which of the following events would cause a bank to debit a depositor's account?
A)The depositor orders new checks through the bank at a cost of $50.
B)The bank collects a note receivable and related interest on the depositor's behalf.
C)There are outstanding checks drawn on the account at month-end.
D)There are deposits in transit on the account at month-end.
E)The bank corrects an error from previous month by adding $75 to the depositor account.

Accepted Answer

When a depositor orders new checks, the bank charges the depositor's account for the cost, resulting in a debit to the account.

Question 12

All of the following are considered effective cash management principles except:
A)Encouraging collection of receivables by offering discounts for early payments.
B)Keeping only necessary levels of assets.
C)Planning expenditures.
D)Retaining excess cash for unexpected expenditures.
E)Delaying payment of liabilities until the last possible day.

Accepted Answer

Retaining excess cash for unexpected expenditures is not considered an effective cash management principle because it can lead to opportunity costs and inefficient use of resources. Instead, businesses should aim to optimize cash flow and invest excess cash in short-term, liquid investments.

Question 13

A company records purchases using the net method.On February 1,they purchased merchandise inventory on account for $7,300 with terms of 1/10,n/30.The February 1 journal entry to record this transaction would include a:
A)Debit to Merchandise Inventory of $7,300.
B)Debit to Merchandise Inventory of $7,227.
C)Debit to Merchandise Inventory of $73.
D)Credit to Merchandise Inventory of $73.
E)Credit to Accounts Payable of $7,300.

Accepted Answer

The net method records purchases at their net amount, which is the purchase price minus any discounts. The terms are 1/10, n/30 which means that the company can receive a 1% discount if they pay within 10 days, otherwise the full amount is due within 30 days. To calculate the net amount, we subtract the discount from the purchase price: $7,300 - ($7,300 x 0.01) = $7,227. Therefore, the journal entry to record this transaction would include a debit to Merchandise Inventory of $7,227.

Question 14

The gross method of recording purchases refers to recording:
A)Purchases at the invoice price less any cash discounts.
B)Specified amounts and timing of payments that a buyer agrees to in return for being granted credit.
C)Purchases at the full invoice price,without deducting any cash discounts.
D)Inventory at its selling price.
E)Inventory at the lower of cost or market.

Accepted Answer

The gross method of recording purchases involves recording purchases at their full invoice price without deducting any cash discounts. This method is used when a company does not take advantage of cash discounts offered by suppliers, and instead pays the full invoice amount.

Question 15

The checklist of steps necessary for approving an invoice for recording and payment,also known as the check authorization,is the
A)Purchase requisition.
B)Purchase order.
C)Invoice.
D)Receiving report.
E)Invoice approval.

Accepted Answer

Invoice approval is the process that ensures an invoice is verified and authorized for recording and payment.

Question 16

The itemized statement of goods prepared by a vendor listing the customer's name,items sold,sales prices,and terms of the sale is called the
A)Purchase requisition.
B)Purchase order.
C)Invoice.
D)Receiving report.
E)Invoice approval.

Accepted Answer

An invoice is a document prepared by a vendor which itemizes the goods sold to a customer and specifies the sales price and terms of the sale. It is sent to the customer as a request for payment. The other options mentioned are different types of documents used in the purchasing process but do not match the description of an invoice.

Question 17

The document that the purchasing department prepares and sends to the vendor to place an order is called the
A)Purchase requisition.
B)Purchase order.
C)Invoice.
D)Receiving report.
E)Invoice approval.

Accepted Answer

The document that the purchasing department prepares and sends to the vendor to place an order is called a purchase order. A purchase requisition is a document used within a company to request the purchase of goods or services. An invoice is a document sent by the vendor to the buyer requesting payment for goods or services that have been delivered. A receiving report is a document used to confirm the receipt of goods or services. Invoice approval is the process of reviewing and approving an invoice for payment.

Question 18

Internal controls are crucial to companies that convert from U.S.GAAP to IFRS because of all of the following risks except:
A)Possible misstatement of financial information.
B)Possible fraud.
C)Controls are significantly different across the globe.
D)Ineffective communication of the change to investors,creditors,and others.
E)Management's inability to certify the effectiveness of the controls.

Accepted Answer

While it is true that different countries have different internal control requirements, this risk does not necessarily pertain specifically to companies converting from US GAAP to IFRS. The other risks listed are all potential issues that may arise when transitioning to IFRS and highlight the importance of strong internal controls during this process.

Question 19

Merchandise with an invoice price of $2,000 was purchased on February 3,terms 2/15,n/60.The company uses the net method to record purchases.The entry to record the cash payment of this purchase obligation on February 27 is:
A)Debit Accounts Payable $1,960;credit Cash $1,960.
B)Debit Accounts Payable $2,000;credit Cash $2,000.
C)Debit Accounts Payable $1,960;debit Discounts Lost $40;credit Cash $2,000.
D)Debit Accounts Payable $2,000;credit Merchandise Inventory $40;credit Cash $1,960.
E)Debit Accounts Payable $2,000;credit Discounts Lost $40;credit Cash $1,960.

Accepted Answer

The net method records purchases at the net amount after discounts. The invoice was recorded at $1,960 ($2,000 - 2% discount). Since the payment was made after the discount period, the discount is lost, requiring an additional $40 to be recorded as Discounts Lost.

Question 20

Merchandise with an invoice price of $2,000 was purchased on February 3,terms 2/15,n/60.The company uses the net method to record purchases.The entry to record the cash payment of this purchase obligation on February 17 is:
A)Debit Accounts Payable $1,960;credit Cash $1,960.
B)Debit Accounts Payable $2,000;credit Cash $2,000.
C)Debit Accounts Payable $1,960;debit Discounts Lost $40;credit Cash $2,000.
D)Debit Accounts Payable $2,000;credit Merchandise Inventory $40;credit Cash $1,960.
E)Debit Accounts Payable $2,000;credit Discounts Lost $40;credit Cash $1,960.

Accepted Answer

The company uses the net method to record purchases, so the initial entry to record the purchase on February 3 would have been:Debit: Merchandise Inventory $2,000Credit: Accounts Payable $2,000Since the company paid the invoice within the discount period, it is entitled to a 2% discount. The amount of the discount is $2,000 x 2% = $40.Therefore, the entry to record the cash payment of this purchase obligation on February 17 would be:Debit: Accounts Payable $1,960Credit: Cash $1,960

Quiz 8: Cash and Internal Controls

The internal document prepared to notify the appropriate persons that goods ordered have been received,describing the quantities and condition of the goods is the

In the process of reconciling its bank statement for January,Maxi's Clothing's accountant compiles the following information: The adjusted cash balance per the books on January 31 is:

In the process of reconciling its bank statement for April,Donahue Enterprises' accountant compiles the following information: The adjusted cash balance per the books on April 30 is:

An expense resulting from failing to take advantage of cash discounts when using the net method of recording purchases is called:

A seller (or provider) of goods or services to a business organization,usually a manufacturer or wholesaler,is known as a:

A company using the net method of recording purchases failed to take advantage of a discount available.When they pay the full (gross) amount of an invoice at the end of the credit period the journal entry will include a debit to:

The internal document prepared by a department manager that informs the purchasing department of its merchandise needs and requests that the merchandise be purchased is the

During the month of July,Clanton Industries issued a check in the amount of $845 to a supplier on account.The check did not clear the bank during July.In preparing the July 31 bank reconciliation,the company should:

A voucher system is a set of procedures and approvals:

A company that uses the net method of recording purchases made a purchase of $400 with terms of 2/10,n/30.The entry to record the purchase would be:

Which of the following events would cause a bank to debit a depositor's account?

All of the following are considered effective cash management principles except:

A company records purchases using the net method.On February 1,they purchased merchandise inventory on account for $7,300 with terms of 1/10,n/30.The February 1 journal entry to record this transaction would include a:

The gross method of recording purchases refers to recording:

The checklist of steps necessary for approving an invoice for recording and payment,also known as the check authorization,is the

The itemized statement of goods prepared by a vendor listing the customer's name,items sold,sales prices,and terms of the sale is called the

The document that the purchasing department prepares and sends to the vendor to place an order is called the

Internal controls are crucial to companies that convert from U.S.GAAP to IFRS because of all of the following risks except:

Merchandise with an invoice price of $2,000 was purchased on February 3,terms 2/15,n/60.The company uses the net method to record purchases.The entry to record the cash payment of this purchase obligation on February 27 is:

Merchandise with an invoice price of $2,000 was purchased on February 3,terms 2/15,n/60.The company uses the net method to record purchases.The entry to record the cash payment of this purchase obligation on February 17 is: