NLKT-On tap 2

Which of the following accounts making an increase to the inventory account:

• Transportation in.

• Purchases.

• Purchases returns and allowances.

• Transportation out.

If revenues are $500,000, cost of goods sold is $320,000, and operating expenses are $80,000, the gross profit is:

• $100.000

• $180.000

• $320.000

• $500.000

Permitting only designated personnel to handle cash receipts is an application of the principle of:

• establishment of responsibility.

• segregation of duties.

• independent internal verification.

• human resource controls.

An organisation uses internal control to enhance the accuracy and reliability of accounting records and to:

• safeguard assets.

• prevent fraud.

• produce correct financial statements.

• deter employee dishonesty

Hong Company has a credit balance of $10,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on a review and ageing of its accounts receivable at the end of the year, Hong estimates that $50,000 of its receivables are doubtfully uncollectible. The amount of doubtful debts expense which should be reported for the year is:

• $40,000

• $50,000

• $10,000

• can not determined.

In the year 20x1, company A’s receivable balance is $15,000 (made from some customers, and this amount is past due). The company estimates that 5% of this balance will become worthless. What is the accounting treatment for this estimation?

• Debit Doubtful Debts Expense: $750/ Credit Account Receivables: $750

• Debit Allowance for Doubtful Debts: $750/ Credit Doubtful Debts Expense: $750

• Debit Account Receivables: $750/ Credit Allowance for Doubtful Debts: $750

• Debit Doubtful Debts Expense: $750/ Credit Allowance for Doubtful Debts: $750

Which is NOT common fraudulences in the Internal Control of Receivables?

• Not collected Account Receivable.

• Lapping.

• Fake documents.

• Do not write off received amounts.

Which is the best definition of “Bad debt”?

• Bad debt is potential bad debt.

• Bad debt is confirmed uncollectible receivables.

• Bad debt is the past due account receivable.

• Bad debt is the overdue account payable.

Which of the following accounts make a decrease to the inventory account:

• Transportation out.

• Transportation in.

• Purchases discounts.

• Purchases.

Which statement is CORRECT?

• Whatever the cost method applies, it will affect both PL and BS results.

• Only inventory Costing Methods under the perpetual inventory system will affect both PL and BS results.

• Only inventory costing methods under the perpetual inventory system will affect the cost of goods sold and end inventory.

• During inflation or rising prices, applying LIFO would result in a higher gross profit and end inventory balance than the other two methods.