EXAM 2 - Priya Patel Introduction to Financial Accounting...

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Priya Patel Form A Introduction to Financial Accounting 1. Which of the following reasons are why physical inventory is taken at year-end for a company using a perpetual inventory system? a. To check the accuracy of inventory records, and determine the amount of inventory lost due to shoplifting, employee theft, and other causes. 2. Goods in transit should be included in the inventory of the buyer when the d. Terms of the sale are FOB shipping point. 3. In taking physical inventory at year end, consigned goods must be a. Included in the consignor’s inventory and excluded from the consignee’s. 4. In a period of inflation, the cost flow method that results in the lowest income taxes is the d. Periodic LIFO method 5. Overstating ending inventory will understate: c. Cost of goods sold 6. A conceptual framework underlying financial accounting is important because b. It can lead to consistent standards and can help to prescribe the nature, function and limits of financial accounting and financial statements. 7. Which of the following statements is true? c. Relevance and reliability are the two primary qualities that make accounting information useful for decision making. 8. Marshall Corporation does not adjust amounts in its financial statements for the effects of inflation. d. Monetary unit assumption 9. Tide Corporation does not accrue a contingent lawsuit gain in the current period’s income statement. a. Conservatism 10. CVS Company reports current and noncurrent classifications in its balance sheet. c. Going-concern assumption 11. Using the broadest definition, internal controls are b. Methods and measures adopted to safeguard assets, and enhance the accuracy and reliability of accounting records. 12. Which of the following measures are required under the Sarbanes Oxley Act of 2002? e. All of the above .
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13. Permitting only designated personnel to handle cash receipts is an application of the principle of: b. Establishment of responsibility. 14. After Sutton company’s voucher payment system, only the voucher (but not the supporting bill) is stamped paid and returned to the accounting department from the treasury. e. Other controls (voucher system) 15. Each week, Marah leaves company checks in an envelope behind the cash register.
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