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, it is not acceptable for the AR Clerk to handle both responsibilities. Separation of these
makes it become easier for the clerk to secretly hide the payment record and take the money for their own.
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
The answer is D. Tone at the Top.
3) Name two methods that are commonly used to speed up the collection of receivables.
Offer on discount of early payment- This gives the customer incentive to make prompt payments. This action reduces the money that would be owed at the end of the month.
ACH Payment- Payment can be sent electronically straight to the company's bank. This takes away the writing of a check and putting it in snail mail hoping it makes it to its destination in time.
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 EXPENSE
C - Require approval of bad debt writeoffs. E-DEBIT 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
ACC 340 Midterm
1
Southern New Hampshire University
Answer Items A. Cash B. Accounts Receivable C. Prepaid Expenses D. Fixed Assets E. Debt F. Inventory
$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 Legal Department Overhead d. Marketing Department
7) Name and define two methods of valuing inventory. Name several pros and cons of each.
FIFO (First in first out)- Oldest inventory is cycled through first.
Pros: More practical and the easier method to use
Holds inventory that has fast turnover and converts quickly thus revenue and costs are from related periods.
Cons: Cashflow becomes limited. Cost becomes less accurate
LIFO (Last in first out)- The most recent inventory is cycled through first.
Pros: Matching revenue and costs in this method are more accurate. The tax benefits associated with this method are mo