Question 1

Inventory on hand is considered

		a current asset.
		a current liability.
		a long-term asset.
		an expense.

7 points

Question 2

Which of the following attributes of internal control would be violated if the purchasing department wrote checks to pay accounts payable?

		Adequate design of documents
		Sound personnel procedures
		Periodic independent verification
		Separation of duties

7 points

Question 3

Which of the following is an appropriate internal control activity for cash?

		Recordkeeping and custodianship over cash should be performed by the same person.
		The amount of cash on hand should be kept to a minimum.
		Banking facilities should be used as little as possible.
		All payments should be made with currency, not checks.

7 points

Question 4

The general ledger account for Accounts Receivable shows a debit balance of $50,000. Allowance for Uncollectible Accounts has a credit balance of $1,000. Net sales for the year were $494,000. In the past, 2 percent of sales have proved uncollectible, and an aging of accounts receivable accounts results in an estimate of $13,500 of uncollectible accounts.

Using the percentage of net sales method, the Allowance for Uncollectible Accounts balance (after adjustment) would be:

		$8,880
		$9,880
		$10,880
		$1,000

7 points

Question 5

You have just received notice that Agnes Fisher, a customer of yours with an Accounts Receivable balance of $200, has gone bankrupt and will not be making any future payments. Assuming you use the allowance method, the journal entry you make is to

		debit Uncollectible Accounts Expense and credit Accounts Receivable.
		debit Allowance for Uncollectible Accounts and credit Uncollectible Accounts Expense
		debit Uncollectible Accounts Expense and credit Allowance for Uncollectible Accounts.
		debit Allowance for Uncollectible Accounts and credit Accounts Receivable.

7 points

Question 6

The term used to describe the allocation of the cost of an intangible asset to the periods it benefits is:

		depletion.
		apportionment.
		amortization.
		depreciation.

7 points

Question 7

Which of the following is not classified properly as property, plant, and equipment?

		Land improvements, such as parking lots and fences
		Natural resources
		Land used in ordinary business operations
		A truck held for resale by an automobile dealership