1. NBC Company had $32,000 in net sales, $15,000 in cost of merchandise sold, $18,000 in operating expenses, and $2,000 in other income. What is NBC Company's gross profit?
$17,000
$3,000
$1,000
($1,000)
Question 2. An element of internal control is _______.
generally accepted accounting principles
control procedures
concepts
principles
Question 3. A firm's internal control environment is influenced by _______.
management's operating style
organizational structure
personnel policies
all of these
Question 4. A credit memorandum from the bank _______.
decreases a bank customer's account
Is used to show a bank service charge
shows that a company has deposited a customer's NSF check
shows the bank has collected a note receivable for the customer
Question 5. Requiring employees to take annual vacations is part of which element of internal control?
The control environment
Risk assessment
Control procedures
Monitoring
Question 6. A bank reconciliation should be prepared periodically because _______.
the depositor's records and the bank's records are in agreement
the bank has not recorded all of its transactions
any differences between the depositor's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected
the bank must make sure that its records are correct
Question 7.Cash equivalents include _______.
checks
coins and currency
money market accounts and commercial paper
stocks and short-term bonds
Question 8. Orange Co. sells merchandise on credit to Zea Co. in the amount of $9,000. The invoice is dated on September 15 with terms of 1/15, net 45. What is the amount of the discount, and up to what date must the invoice be paid in order for the buyer to take advantage of the discount?
$180, September 30
$180, September 25
$90, September 30
$90, September 25
Question 9. On the bank's accounting records, customers' accounts are normally shown as _______.
revenue
a liability
an asset
expenses
Question 10. Generally, the revenue account for a merchandising business is entitled
Sales
Net Sales
Gross Sales
Gross Profit
Question 11. Which expenses are subtracted from gross profit to arrive at income from operations?
All expenses
Cost of merchandise sold
Operating expenses
Sales expenses
Question 12. A special cash fund used to make small payments that occur frequently is called a (n) _______.
operating expenses fund
change fund
market fund
petty cash fund
Question 13. Which of the following would be added to the balance per books on a bank reconciliation?
Service charges
Outstanding checks
Deposits in transit
Notes collected by the bank
Question 14. The amount of the outstanding checks is included on the bank reconciliation as a(n)
deduction from the balance per depositor's records.
addition to the balance per bank statement.
deduction from the balance per bank statement.
addition to the balance per depositor's records
Question 15.Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as
selling expenses
general expenses
other expenses
administrative expenses
Question 16. In credit terms of 1/10, n/30, the "1" represents the
number of days in the discount period
full amount of the invoice
number of days when the entire amount is due
percent of the cash discount
Question 17.The business's organizational structure influences which of the following elements of
internal control?
Control procedures
Risk assessment
The control environment
Information and communication
Question 18. The credit terms of a sale are normally indicated on a(n)
purchase order
invoice
bill of lading
account receivable
Question 19.What is subtracted from sales to arrive at net sales?
Sales returns and allowances
Sales discounts
Both sales discounts and sales returns and allowances
Neither sales discounts nor sales returns and allowances
Question 20.The Sarbanes-Oxley Act of 2002 requires companies and their independent accountants to _______.
report on the effectiveness of the company's internal controls
report on any fraud and theft detected in the company
report on the state of the economy and likelihood of fraud
report on the financial activities of the company