Slide 1Chapter 4Chapter 4:Chapter 4:Chapter 4Chapter 5Chapter 5Slide 8Chapter 5Chapter 5Chapter 5Chapter 5:Chapter 6Chapter 6:Chapter 6Chapter 6Chapter 6:Chapter 6:Chapter 6Chapter 6:Chapter 6:Chapter 6:Slide 23Chapter 7Question 7-1Question 7-2Question 7-3Question 7-4Question 7-5Question 7-6Question 7-7Question 7-8Contra AccountContra AccountMidterm 2– Review questionsChap 4, 5, 6 and 7Chapter 41 Which of the following is a requirement of the Sarbanes-Oxley Act?a) The outside auditor must issue an internal control report for each public company, and the Public Company Oversight Board evaluates the client's internal controls.b) The Public Company Oversight Board issues an internal control audit report for every publicly held company.c) Accounting firms may not both audit a public client and also provide certain consulting services for the same client.d) Public companies oversee the work of auditors of other public companies.2Chapter 4:2) At the West Texas Clothing Store, a sales employee assists customers with finding the items the customer wishes to purchase, then rings up the purchase and collects the cash. At the end of the day, this employee counts the cash and fills out a cash-count form. Which internal control procedure is being violated by West Texas Clothing Store?A) Competent, reliable, and ethical personnel should be hired. B) Job rotation improves internal control. C) To validate their accounting records, a company should have an audit by an external accountant. D) Separation of duties is necessary. 3Chapter 4:3) A company received a bank statement with a balance of $5,350. Reconciling items included a bookkeeper error of $200 (a $300 check recorded as $500), two outstanding checks totaling $720, a service charge of $15, a deposit in transit of $180, and interest revenue of $21. What is the adjusted balance?A) $4,636 B) $4,610 C) $5,016 D) $4,810 4Chapter 44) The petty cash fund of $400 was established for minor disbursements. At the end of the month, the fund included petty cash tickets for the purchase of $185 in supplies, $41 for postage, $86 for fuel and a delivery charge of $65 and cash of $23. How much cash is required to replenish the fund?A) $23B) $226C) $312D) $377Chapter 5Accounting for marketable securities•Record at Current Market Price•Unrealized Gain/Loss – means company has not sold the stock•Gain/Loss sale of stock – means company has sold stockAccount for and control of accounts receivableUsing the allowance method for uncollectible accounts (Estimate uncollected accounts)% of sales method (adjust by the amount)% of Receivable/Aging accounts receivable method (adjust to the amount)RatioReceivables turnover ratio = Notes receivable and interest: P*Interest Rate*TimeChapter 51. Marketable securities purchased on June 1, 2015 for $85,000 were valued at $80,000 on December 31, 2015. The securities were sold at beginning of 2016 for $83,000. The 2016 income statement should report a(n):A) Realized loss of $2,000.B) Realized gain of $3,000.C) Unrealized loss of $5,000 and a realized gain of $3,000.D) Unrealized gain recovered of $3,000.#2 - Which of the following values is used to report Accounts Receivable on the Balance Sheet?A) Net Realizable ValueB) Present ValueC) Market ValueD) Historical CostChapter 53. Espana Van Conversions had credit sales of $2,000,000 during Year 1. On 12/31/Year 1, the balance in Accounts Receivable was $81,000. The company estimates bad debts to equal 1% of credit sales. What effect will the company’s 12/31 adjusting entry have on the company’s income statement and balance sheet?a. Decrease income by $20,000; no effect on balance sheetb. Decrease income by $20,000; decrease assets by $20,000c. No effect on either income statement or balance sheetd. None of the above.Chapter 54. The Astroids Company records show the following aging of accounts receivable:Days 0 30 31 60 61 90 Over 90‑ ‑ ‑Amount $2,000 $1,000 $ 500 $ 100% EstimatedUncollectible 5% 20% 30% 50%If the balance in the Allowance For Doubtful Accounts is a credit of $50 before adjustment, the Bad Debt Expense for the period is:a. $ 450b. $ 500c. $ 550d. $1400Chapter 55. You received a 4-month, 6%, $10,000 note on 10/1/2015. Your accounting period starts at1/1 and ends at 12/31. How much interest revenue did you earn during 2015 on this note?a. $150b. $50c. $200d. $600Chapter 5:6) The following information is from the 2015 records of Armadillo Camera Shops. Accounts Receivable, December 31, 2015 $330,000 (debit)Allowance for uncollectible accounts, January 1, 2015 30,000 (credit)Net sales for 2015 1,500,000Accounts written off as uncollectible during 2015 25,500 Uncollectible accounts expense is estimated by the percent-of-sales method. Management estimates that 2% of net sales are uncollectible. Which of the following will be the 12/31/15 balance in the allowance for uncollectible accounts?A) $25,500 B) $30,000 C) $34,500 D) $30,50012Chapter 6Account for inventory, net purchases and cost of goods sold; use perpetual and periodic methodsUsing inventory costing methods:LIFO, FIFO, Average CostLower of cost or market adjustmentUsing gross profit percentage and inventory turnover.13Chapter 6:1) The ending inventory for Misty Harbor Co. is $57,000. If beginning inventory was $68,000 and goods available for sale totaled $117,000, the cost of goods sold is:A) $60,000B) $128,000C) $68,000D) $49,000E) none of the above14Chapter 62. The following statements regarding perpetual inventory and periodic inventory methods of handling merchandise are all correct except (choose one):a. A perpetual inventory method makes it unnecessary to take a physical count of inventory on hand.b. The perpetual inventory method offers better inventory control and more accurate determination of cost of goods sold than the period inventory method.c. The periodic inventory method is based upon the assumption that goods that were acquired and are not on hand have been previously sold.d. The periodic inventory system is less expensive to operate but may lead to inefficiencies.Chapter 63. Regan Corporation’s December 31, 2015, ending inventory was understated by $42,000. What effect will this understatement have on total assets and net income for 2015? Assets Net incomeA understateNo effectB No effect No effectC