CHAPTER 4 3.

Which statement is NOT correct for an expenditure system

with proper internal controls?
1. Which document is NOT prepared by the sales department! a. Cash disbursements maintain the check register.
a. packing slip c. bill of lading b. Accounts payable maintains the accounts payable subsidiary
b. shipping notice d. stock release ledger.
c. Accounts payable is responsible for paying invoices.
2. Which document triggers the update of the inventory d. Accounts payable is responsible for authorizing invoices.
subsidiary ledger
a. bill of lading c. sales order 4. Which duties should be segregated?
b. stock release d. shipping notice a. matching purchase requisitions, receiving reports, and invoices
and authorizing payment
3. Which function should the billing department b. authorizing payment and maintaining the check register
NOT perform? c. writing checks and maintaining the check register
a. record the sales in the sales lournal d. authorizing payment and maintaining the accounts payable
b. send the ledger copy of the sales order to accounts receivable subsidiary ledger
c. send the stock release document and the ship pine notice to the
billing department as proo of shipment 5. Which documents would an auditor most likely choose to
d. send the stock release documenc co inventory control examine closely to ascertain that all expenditures incurred
during the accounting period have been recorded as a
4. When will a credit check approval most likely require liability?
specific authorization by the credit department? a. invoices c. purchase requisitions
a. when verifying that the current transaction does not exceed the b. purchase orders d. . receiving reports
customer’s credit limit
b. when verifying that the current transaction is with a valid 6. Which task must still require human intervention in an
customer automated purchases/cash disbursements system?
c. when a valid customer places a materially large order a. determination of inventory requirements
d. whenavalidcustomerreturnsgoods b. preparation of a purchase order
c. preparation of a receiving report
5. Which type of control is considered a compensat- ing d. preparation of a check register
control?
a. segregation of duties c. supervision 7. Which one of the following departments does not have a
b. access control d. accounting records copy of the purchase order?
a. the purchasing department c. accounts payable
6. Which of the following is NOT an independent verification b. the receiving department d. general ledger
control?
a. The shipping department verifies that the goods sent from the 8. Which document typically triggers the process of recording
warehouse are correct in type and quantity. a liability?
b. General ledger clerks reconcile journal vouchers that were a. purchase requisition c. receiving report
independently prepared in vari- ous departments. b. purchase order d. supplier's invoice
c. The use of prenumbered sales orders.
d. Thebillingdepartmentreconcilestheshipping notice with the 9. Which of the following tasks should the cash disbursement
sales invoice to ensure that customers are billed for only the clerk NOT perform?
quantities shipped. a. review the supporting documents for completeness and
accuracy
7. Which function or department below records the b. prepare checks
decrease in inventory due to a sale? c. approve the liability
a. warehouse c. billing department d. mark the supporting documents paid
b. sales department d. inventory control
10. Which of the following is true?
8. Which situation indicates a weak internal control a. The cash disbursement function is part of accounts payable.
structure? b. Cash disbursements is an independent accounting function.
a. the AR clerk authorizes the write-off of bad debts c. Cash disbursements is a treasury function.
b. therecord-keeping clerk maintains both AR and AP subsidiary d. The cash disbursement function is part of the general ledger
ledgers department.
c. the inventory control clerk authorizes inventory purchases
d. the AR clerk prepares customer statements every month CHAPTER 6
I. The document that captures the total amount of time that
9. The bill of lading is prepared by the individual workers spend on each production job is called a
a. salesclerk. c. shipping clerk. a. time card. c. personnel action form.
b. warehouse clerk. d. billing clerk. b. job ticket. d. labor distribution form.

2. An important reconciliation in the payroll system is when

10. Which of following functions should be segregated? a. the general ledger department compares the labor distribution
a. opening the mail and recording cash receipts in summary from cost accounting to the disbursement voucher from
the journal accounts payable.
b. authorizing credit and determining reorder quantities b. the personnel department compares the number of employees
c. shipping goods and preparing the bill of lading authorized to receive a paycheck to the number of paychecks
d. providinginformationoninventorylevelsand reconciling the prepared.
bank statement c. the production department compares the number of hours
reported on job tickets to the number of hours reported on time
CHAPTER 5 cards.
1. Which document helps to ensure that the receiving clerks d. the payroll department compares the labor distribution
actually count the number of goods received? summary to the hours reported on time cards.
a. packing list
b. blind copy of purchase order 3. Which internal control is not an important part of the
c. shipping notice payroll system?
d. invoice a. supervisors verify the accuracy of employee time cards
b. paychecks are distributed by an independent
2. When the goods are received and the receiving report has paymaster
been prepared, which ledger may be updated? c. the accounts payable department verifies the accuracy of the
a. standard cost inventory ledger c. general ledger payroll register before transferring payroll funds to the general
b.inventory subsidiary ledger d. accounts payable subsidiary checking
ledger account
4. The department responsible for approving pay rate 3. Refer to the equation for the EOQ in the text.
changes is Car Country, a local Ford dealer, sells 1,280 small SUVs each
a. payroll year. Keeping a car on the lot costs Car Country $200 per
b. treasurer month, so the company prefers to order as few SUVs as is
c. personnel economically feasible. However, each time an order is placed,
d. cash disbursements the company incurs total costs of $300.
Of this $300, $240 is fixed and $60 is variable.
5. Which function should distribute paychecks? Determine the company's economic order quantity.
a. personnel a.8 c.18 d.56
b. timekeeping b.16 e.62
c. paymaster 4. Which line segment represents the reorder lead time?
d. payroll a. AB
b. AE
6. Which transaction is not processed in the fixed asset c. AF
system? d. BC
a. purchase of building e. AC
b. repair of equipment
c. purchase of raw materials 5. Which line segment identifies the quantity of safety stock
d. sale of company van maintained?
a. AB
7. Depreciation b. AE
a. is calculated by the department that uses the fixed asset. c. AC
b. allocates the cost of the asset over its useful life. d. BC
c. is recorded weekly. e. EF
d. results in book value approximating fair market
value. 6. Which line segment represents the length of time to
consume the total quantity of materials ordered?
8. Depreciation records include all of the following a. DE
information about fixed assets EXCEPT the b. BC
a. economic benefit of purchasing the asset. c. AC
b. cost of the asset. d. AE
c. depreciation method being used. e. AD
d. location of the asset.
7. Which of the following is NOT a principle of lean
9. Which control is not a part of the fixed asset system? manufacturing?
a. formal analysis of the purchase request a. Products are pushed from the production end to the customer.
b. review of the assumptions used in the capital budgeting model b. All activities that do not add value and maximize the use of
c. development of an economic order quantity model scarce resources must be eliminated.
d. estimates of anticipated cost savings c. Achieve high inventory turnover rate.
d. A lean manufacturing firm must have established and
10. Objectives of the fixed asset system do NOT include cooperative relationships with vendors.
a. authorizing the acquisition of fixed assets. d. All of the above are lean manufacturing principles.
b. recording depreciation expense.
c. computing gain and/or loss on the disposal of fixed assets. 8. All of the following are problems with traditional
d. maintaining a record of the fair market value of all fixed assets. accounting information EXCEPT:
a. Managers in a JIT setting require immediate information.
11. Which of the following is NOT a characteristic of the fixed b. The measurement principle tends to ignore standards other
asset system? than money.
a. acquisitions are routine transactions requiring general c. Variance analysis may yield insignificant values.
authorization d. The overhead component in a manufacturing company is usually
b. retirements are reported on an authorized disposal report form very large.
c. acquisition cost is allocated over the expected life of the asset e. All of these are problems associated with traditional accounting
d. transfer of fixed assets among departments is recorded in the information.
fixed asset subsidiary ledger
9. Which of the following is NOT a problem associated with
CHAPTER 7 standard cost accounting?
1. Which of the following is not an advantageous reason to a. Standard costing motivates management to produce large
reduce inventories? batches of products and build inventory.
a. Inventories provide a competitive advantage. b. Applying standard costing leads to product cost distortions in a
b. Inventories can invite overproduction. lean environment.
c. Inventories are expensive to maintain. c. Standard costing data are associated with excessive time lags
d. Inventories may conceal problems. that reduce its usefulness.
e. All of these are good reasons to reduce inventories. d. The financial orientation of standard costing may promote bad
decisions.
2. The fundamental EOQ model e. All of the above are problems with standard costing.
a. provides for fluctuating lead times during reorder cycles.
b. is relatively insensitive to errors in demand, procurement costs, 10. Which one of the following statements is true?
and carrying costs. a. ERP evolved directly from MRP.
c. focuses on the trade-off between production costs and carrying b. ERP evolved into MRP and MRP evolved into
costs. c. MRP II.
d. is stochastic in nature. d. MRP II evolved from MRP and MRP Il evolved into ERP.
e. is best used in conjunction with a periodic inventory system. e. None of the above is true.
CHAPTER 8 9. The following are all output reports of the financial
1. Sequential access means that reporting system, EXCEPT
a. data are stored on magnetic tape. a. variance analysis report.
b. the address of the location of data is found through the use of b. statement of cash flows.
either an algorithm or an index. c. tax return.
c. to read any record on the file, all of the preceding records must d. comparative balance sheet.
first be read.
d. each record can be accessed in the same amount of time. 10. Which of the following budgeting processes is
LEAST likely to motivate managers toward organizational
2. Which file has as its primary purpose to provide historical goals?
financial data for comparative financial reports? a. setting budget targets at attainable levels
a. journal voucher history file b. participation by subordinates in the budgetary process
b. budget master file c. use of management by exception
c. responsibility file d. holding subordinates accountable for the items they control
d. general ledger history file e. having top management set budget levels

3. Which of the following statements is true? 11. Which of the following would normally be considered in a
a. journal vouchers detailing transaction activity flow from various strategic plan?
operational departments into the GLS, where they are a. setting a target of 12 percent return on sales
independently reconciled and posted to the journal voucher b. maintaining the image of the company as the industry leader
history file. c. setting a market price per share of stock outstanding
b. Journal vouchers summarizing transaction activity flow from d. distributing monthly reports for departmental variance analysis
the accounting department into the GLS, where they are e. tightening credit terms for customers to 2/10, n/30
independently reconciled and posted to the general ledger
accounts. 12. At what level of management is the long-range planning
c. Journal vouchers summarizing transaction activity flow from function most important?
various operational departments into the GLS, where they are a. at top management levels
independently reconciled and posted to the general ledger b. at middle management levels
accounts. c. at lower management levels
d. Journal vouchers summarizing transaction activity flow from d. for staff functions
various operational departments into the GLS, where they are e. for line functions
independently reconciled and posted to the journal voucher
history file. 13. Which of the following is the basic purpose of a
responsibility accounting?
4. Which of the following statements best describes a a. variance analysis
computer-based GL/FRS? b. motivation
a. Most firms derive little additional benefit from a real-time FRS. c. authority
b. Batch processing is typically not appropriate for transaction d. budgeting
processing of GLS. e. pricing
c. The sequential file approach is an inefficient use of technology.
d. A batch system with direct access files recreates the entire 14. Which statement below best describes a profit center?
database each time the file is updated. a. The authority to make decisions affecting the maior
determinants of profit, including the power to choose its markets
5. Which of the following is NOT a potential exposure of the and sources of supply.
FRS? b. The authority to make decisions affecting the major
a. a defective audit trail determinants of profit, including the power to choose its markets,
b. general ledger accounts that are out of balance with subsidiary sources of supply, and significant control over the amount of
accounts invested capital.
c. unauthorized access to the check register c. The authority to make decisions over the most significant costs
d. unauthorized access to the general ledger of operations, including the power to choose the sources of supply.
d. The authority to provide specialized support to other units
6. Which task should the general ledger perform? within the organization.
a. update the general ledger e. The responsibility for combining the raw materials, direct labor,
b. prepare journal vouchers and other factors of production into a final product.
c. have custody of physical assets
d. have record-keeping responsibility for special journals of 15. Which statement below best describes an investment
subsidiary ledgers center?
a. The authority to make decisions affecting the maior
7. The Ozment Corporation uses a performance reporting system determinants of profit, including the power to choose its markets
that shows online the data for each subordinate who reports to a and sources of supply.
supervisor. b. The authority to make decisions affecting the major
The data presented show the actual costs incurred during the determinants of profit, including the power to choose its markets
period, the budgeted costs, and all variances from budget for that and sources of supply, and significant control over the amount of
subordinate's department. The name of this system of reporting is invested capital.
a. contribution accounting. c .The authority to make decisions over the most significant costs
b. responsibility accounting. of operations, including the power to choose the sources of supply.
c. flexible budgeting. d. The authority to provide specialized support to other units
d. program budgeting. within the organization.
e. cost-benefit accounting. e. The responsibility for developing markets for and selling of the
output of the organization.
8. Which of the following is not a characteristic of the strategic
planning process?
a. emphasis on both the short and long run
b. analysis of external economic factors
c. review of the attributes and behavior of the organization's
competition
d. analysis and review of departmental process
e. analysis of consumer demand