Practice Exam #4 SOLUTIONS

 Question 1
0 out of 0 points
Chester Company has established internal control policies and procedures in order to achieve the
following objectives:
1) Effective evaluation of management performance.
2) Assure that the accounting records contain reliable information.
3) Safeguard the company's assets.
4) Assure that employees comply with company policy.
Which of these objectives are achieved by accounting controls?
Selected Answer:
Objectives 2 and 3
Answers: Objectives 1 and 2

Objectives 2 and 3
Objectives 3 and 4
All four objectives
Response correct
Feedback:

MC Qu. 4-30 Chester Company has established internal control...
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
AICPA: BB Critical Thinking
AICPA: BB Resource Management
AICPA: FN Risk Analysis
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 04-01 Identify the key elements of a strong
system of internal control.
Topic: Key Features of Internal Control Systems
 Question 2
0 out of 0 points
Which internal control procedure addresses the idea that the likelihood of employee fraud or theft is
reduced if collusion is required to accomplish it?
Selected Answer:
Separation of duties
Answers:
Separation of duties
Physical controls
Fidelity bonding
Use of prenumbered documents
Response correct
Feedback:

MC Qu. 4-35 Which internal control procedure addresses the...
AACSB: Ethics
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 04-01 Identify the key elements of a strong
system of internal control.
Topic: Key Features of Internal Control Systems
 Question 3
0 out of 0 points
While preparing its bank reconciliation, Maynard Company determined that its bank had collected a $650
account receivable for the company and deducted a $25 collection fee. Which of the following shows the
effect of this transaction on the financial statements?
Assets = Liab. + Equity Rev. − Expenses = Net Inc.

A. (25) = NA + (25) NA − 25 = (25)
B. 625 = NA + 625 650 − 25 = 625
C. (25) = NA + (25) NA − 25 = (25)
D. 625 = NA + 625 650 − 25 = 625
Selected Answer:
Option D
Answers:
Option A
Option B
Option C
Option D
Response Feedback: incorrect

MC Qu. 4-50 While preparing its bank reconciliation, Maynard...
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 04-03 Prepare a bank reconciliation.
Topic: Reconciling the Bank Account
 Question 4
0 out of 0 points
Keatts Company's bank statement included an NSF check written by one of its customers. What effect will
the entry to recognize the NSF check have on the company's financial statements?
Assets = Liab. + Equity Rev. − Expenses.

A. +/– = NA + NA + – NA
B. +/– = NA + NA NA – NA
C. +/– = NA + NA NA – NA
D. – = NA + – NA – +
Selected Answer:
Option B
Answers: Option A

Option B
Option C
Option D
Response Feedback: correct

MC Qu. 4-65 Keatts Company's bank statement included an...
Blooms: Analyze
 Question 5
0 out of 0 points
While performing its monthly bank reconciliation, the bookkeeper for the Mosaic Company discovered
that a check written for $421 for advertising expense was recorded in the firm's books as $241. Which of
the following shows the effect of the correcting entry on the financial statements?
Assets = Liab. + Equity Rev. − Expenses = Net Inc. Cash Flow

A. 180 = NA + 180 NA − (180) = 180 180
B. (180) = NA + (180) NA − 180 = (180) (180
C. (421) = NA + (421) NA − 421 = (421) (421
D. (180) = NA + (180) NA − 180 = (180) (421
Selected Answer:
Option B
Answers: Option A

Option B
Option C
Option D

MC Qu. 4-51 While performing its monthly bank reconciliation,...
Blooms: Analyze
 Question 6
0 out of 0 points
Which of the following is not a motive for the embezzlement of cash by employees?
Selected Answer:
Cash is the common unit of measurement.
Answers:
Cash is the common unit of measurement.
Ownership of cash is difficult to prove.
Cash has universal appeal.
Small quantities of high denomination can represent significant amounts of value.

MC Qu. 4-38 Which of the following is not...
AACSB: Ethics
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 04-02 Identify special internal controls for cash.
Topic: Accounting for Cash
 Question 7
0 out of 0 points
In a bank reconciliation, a customer's NSF check included with the bank statement is:
Selected Answer:
deducted from the bank's cash balance to get the true cash balance.
Answers:
deducted from the company's cash balance to get the true cash balance.
added to the bank's cash balance to get the true cash balance.
deducted from the bank's cash balance to get the true cash balance.
added to the company's cash balance to get the true cash balance.
Response Feedback: incorrect

MC Qu. 4-55 In a bank reconciliation, a customer's...
Blooms: Understand
 Question 8
0 out of 0 points
The bank statement for Tetra Company contained the following items: a bank service charge of $10; a
credit memo for interest earned, $15; and a $50 NSF check from a customer. The company had
outstanding checks of $100 and a deposit in transit of $300.
The entry to record the customer's NSF check will:
Selected Answer:
increase the Accounts Receivable balance and decrease the Cash account balance.
Answers: increase the Accounts Receivable balance.
decrease the Cash account.
decrease equity.

increase the Accounts Receivable balance and decrease the Cash account balance.

MC Qu. 4-64 The bank statement for Tetra...
Blooms: Analyze
 Question 9
0 out of 0 points
Owen Company's unadjusted book balance at June 30 is $9,700. The company's bank statement reveals
bank service charges of $45. Two credit memos are included in the bank statement: one for $900, which
represents a collection that the bank made for Owen, and one for $50, which represents the amount of
interest that Owen had earned on its interest-bearing account in June. Based on this information, Owen's
true cash balance is:
Selected Answer:
$10,605.
Answers: $9,700.
$10,695.
$10,550.

$10,605.

MC Qu. 4-60 Owen Company's unadjusted book balance at...
AACSB: Knowledge Application
Blooms: Apply
Difficulty: 1 Easy
 Question 10
0 out of 0 points
Policies and procedures designed to reduce the opportunities for fraud are often called:
Selected Answer:
Internal controls.
Answers:
Internal controls.
Asset source transactions.
Accounting standards.
Financial systems.
Response correct
Feedback:

MC Qu. 4-75 Policies and procedures designed to reduce...
AACSB: Ethics
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 04-04 Identify the role of ethics in the accounting
profession.
Topic: Importance of Ethics

Practice Exam #4 SOLUTIONS

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Practice Exam #4 SOLUTIONS

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 Question 1

1) Effective evaluation of management performance.

2) Assure that the accounting records contain reliable information.

3) Safeguard the company's assets.

4) Assure that employees comply with company policy.

Which of these objectives are achieved by accounting controls?

Assets = Liab. + Equity Rev. − Expenses = Net Inc.

Assets = Liab. + Equity Rev. − Expenses.

Assets = Liab. + Equity Rev. − Expenses = Net Inc. Cash Flow

The entry to record the customer's NSF check will:

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