Solutions Chapters 7

Solutions Chapters 7 - SOLUTIONS FOR MULTIPLE CHOICE...

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SOLUTIONS FOR MULTIPLE CHOICE QUESTIONS 7.29 a. Incorrect Allowances can be made for anticipated returns if the earning process is substantially complete b. Correct The earning process is complete at this point c. Incorrect Under accrual accounting, the cash does not have to be collected, only collectible. d. Incorrect This is usually the method for determining "b" but the shipment might be FOB destination 7.30 a. incorrect This only initiates the earnings process, it doesn't complete it. b. incorrect this is often the case, but it depends on shipping terms c. correct this is often the same as the bill of lading date d. incorrect under accrual accounting, the company doesn't have to wait for the check to record revenue 7.31 a. incorrect this would not have the outstanding balance; however, there are some times when the auditor confirms the sale instead of the amount receivable. b. Correct this would have the balance for confirming. c. Incorrect this would not have the individual customer balance d. Incorrect this would not have the balance outstanding 7.32 a. incorrect this is an essential part of the cycle b. incorrect this is an essential part of the cycle c. incorrect cash is affected by the collections d. correct even though this involves shipments, it is considered part of the expenditure and disbursement cycle 7.33 a. incorrect The sale could occur but not be approved for credit b. incorrect the approval has nothing to do with completeness c. correct credit approval helps ensure the sale will be collectible d. incorrect even if the credit isn't approved, the company still should have the right to collection. 7.34 a. Incorrect The general ledger bookkeeper doesn't have access to the customer accounts. b. Incorrect There's no advantage to separating access to checks and currency. c. Correct Nobody in the company has access to cash, therefore it cannot be stolen. d. Incorrect Normally checks are made payable to company. That doesn't prevent lapping. 7.35 a. Correct Impropriety of write-offs can be controlled by the review and approval by someone outside the credit department. b. Incorrect Even write-off of old receivables can conceal a cash shortage. c. Incorrect The cashier could be the cause of the shortage. d. Incorrect Write offs should be separated from the sales function. 7.36 a. Incorrect This would increase gross profit. b. Correct Less sales revenue and correct amount of cost of goods sold results in less gross profit, therefore the ratio of gross profit to sales will decrease. (Actually, the gross profit numerator will decrease at a greater rate than the sales denominator in the ratio, causing the ratio to decrease.)
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Incorrect This would increase gross profit. d.
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This homework help was uploaded on 04/05/2008 for the course ACCT 415 taught by Professor Kern during the Fall '07 term at Rutgers.

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Solutions Chapters 7 - SOLUTIONS FOR MULTIPLE CHOICE...

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