a. how long it takes on the average to sell a unit of merchandise.
b. the accounting period used by the company.
c. the period of time it takes the company to order and receive inventory.
d. the period of time it takes to purchase inventory, sell the inventory, and to collect cash.
2. If Duval Company purchased some merchandise on April 5, sold the same merchandise on April 10 on credit, collected the accounts receivable on April 30 and purchased some more merchandise on May 5, its operating cycle would be:
a. 5 days.
b. 20 days.
c. 25 days.
d. 30 days.
3. Which of the following documents would not be internally generated by the April Company?
a. A receiving report for merchandise purchased by April Company.
b. A vendor’s invoice for merchandise purchased by April Company.
c. A purchase order for the merchandise purchased by April Company.
d. A sales invoice for merchandise sold by April Company.
4. The term "FOB" when used in business means:
a. Free on board.
b. Freight onward bound.
c. Frequently offered bonus
d. Freight obligation bound.
5. Which of the following documents is least likely to be part of a sales transaction?
a. Shipping document.
b. Salesman’s time ticket.
c. Sales invoice.
d. Customer credit report.
6. Which of the following is not a significant element of internal control?
a. Safeguarding of assets and accounting records.
b. Independent verification.
c. Registering with the Securities and Exchange Commission.
d. Adequate documents and records.
7. Sales terms on an invoice may have terms listed as 1/15, net 30. These terms mean
a. The invoice can be paid only between the 15th and 30th day after the invoice date.
b. The merchandise can be returned until the 15th day and if not returned, the merchandise must be paid for by the 30th day after sale.
c. A one to 15 percent discount is allowed depending on when the invoice is paid.
d. A discount of 1 percent is allowed if the invoice is paid by the 15th day or the full amount of the invoice is due by the 30th day.
8. The responsibility for adequate internal control within a company rests with the
a. company management.
b. board of directors of the company.
c. audit committee of the board of directors.
d. Chief Financial Officer of a company.
9. The audit committee of the board of directors of a company would normally not be responsible for
a. reviewing the effectiveness of internal control.
b. recommending the hiring of an independent certified public accountant.
c. recommending salaries for key company officers.
d. reviewing major changes in accounting practices and practices used by the company.
10. Internal control could be strengthened by all of the following except:
a. Prenumbering all accounting documents.
b. Keep all accounting records locked in a safe during all nonbusiness hours.
c. Have the accounting records audited by an independent certified public accountant each year.
d. Have the company president approve all employee vacations.