1: Which of the following statements is incorrect?

a. A major consideration in developing an accounting system is cost effectiveness.

b. When an accounting system is designed, no consideration needs to be given to the needs and knowledge of the various users.

c. The accounting system should be able to accommodate a variety of users and changing information needs.

d. To be useful, information must be understandable, relevant, reliable, timely, and accurate.

2: Flip is warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates

a. Documentation procedures are violated.

b. Independent internal verification is violated.

c. Segregation of duties is violated.

d. Establishment of responsibility is violated.

3: Cash equivalents include each of the following except

a. Bank certificates of deposit.

b. Money market funds.

c. Petty cash.

d. U.S. Treasury bills.

4: Flip Company is building a new plant that will take three years to construct. The construction will be financed in part by funds borrowed during the construction period. There are significant architect fees, excavation fees, and building permit fees. Which of the following statements is true?

a. Excavation fees are capitalized but building permit fees are not.

b. Architect fees are capitalized but building permit fees are not.

c. Interest is capitalized during the construction as part of the cost of the building.

d. The capitalized cost is equal to the contract price to build the plant less any interest on borrowed funds.

5: Depreciation is the process of allocating the cost of a plant asset over its service life in

a. An equal and equitable manner.

b. An accelerated and accurate manner.

c. A systematic and rational manner.

d. A conservative market-based manner.

6: Sales taxes collected by a retailer are expenses

a. Of the retailer.

b. Of the customers.

c. Of the government.

d. That are not recognized by the retailer until they are submitted to the government.

7: Flip’s Market recorded the following events involving a recent purchase of merchandise:

Received goods for $50,000, terms 2/10, n/30.

Returned $1,000 of the shipment for credit.

Paid $250 freight on the shipment.

Paid the invoice within the discount period.

As a result of these events, the company’s inventory increased by

a. $48,020.

b. $48,265.

c. $48,270.

d. $49,250.

8: A $100 petty cash fund has cash of $16 and receipts of $81. The journal entry to replenish the account would include a

a. Debit to Cash for $81.

b. Credit to Petty Cash for $84.

c. Debit to Cash Over and Short for $3.

d. Credit to Cash for $81.

Answer rating: 100% (QA)

1 b When an accounting system is designed no consideration needs to be give... View the full answer