Southern New Hampshire University
Midterm Exam
1) Would it be okay if your AR Clerk, who handles receipts, also reconciles the bank statement at the end of the month? Why or why not? No, this would not be okay. There needs to be a segregation of duties in order to ensure proper internal control is in place, reducing risk for fraud and theft.
2) The company's environment has two aspects. One is the external environment. Which of the following is not an external environment factor?
a. Economic b. Technical C. Social d. Tone at the Top
3) Name two methods that are commonly used to speed up the collection of receivables
ACH Debits -- Like an automatic bank draft from consumers accounts ensuring payments are received on time Paid in Full Discounts -- This is something my company just started a few months ago and it really works. There are so many customers that are willing to pay their premiums in full to save a couple hundred dollars. This expedites the collection of receivables because the company gets to receive the annual premium payments from consumers instead of single installment throughout the year.
4) Match the description of the controls with the financial area the control would pertain to. (some matching items may be used more than once)
Question Items
A - All check stock must be locked up when not in use. A -- Cash B - Review all employee advances with the payroll and payables staff at least once per month. c - Prepaid Expenses C - Require approval of bad debt writeoffs. E -- Debt D - Audit shipment terms. F -- Inventory E - Require approval of bad-debt writeoff. E -- Debt F- Review Uncashed Checks. A -- Cash G- Audit the receiving dock. F -- Inventory H - Compare capital investment projections to actual results. D -- Fixed Assets I - Require supervisory approval of all borrowings and repayments. E -- Debt J - Require approval of credits. B -- Accounts Receivable K- Perform a physical inventory of plant equipment every three months. D -- Fixed Assets
Matching Items
Answer Items A. Cash
ACC 340 Midterm
1
Southern New Hampshire University
B. Accounts Receivable C. Prepaid Expenses D. Fixed Assets E. Debt F. Inventory
The company sells widgets for $3 each. Variable costs are .50 cents per unit. Fixed costs are $100,000. The number of units the company needs to sell to break even is
a. 33,333 b. 40,000 C. 50,000 d. 25,000
6) SG&A in a medium to large sized company would typically include the costs of all of the following departments except:
a. Accounting Department b. Legal Department Overhead d. Marketing Department
7) Name and define two methods of valuing inventory. Name several pros and cons of each.
First Out). LIFO -- Most recent production is distributed first . Pros
Tax benefits
Better at matching revenues and costs Cons Complicated, hard to understand Ending inventory valued at old prices
FIFO -Oldest inventory