chap 8 9

An internal control system consists of the policies and procedures managers use to:

• A. Protect assets.

• B. Ensure reliable accounting.

• C. Promote efficient operations.

• D. Urge adherence to company policies.

• E. All of these.

A properly designed internal control system:

• A. Lowers the company's risk of loss.

• B. Insures profitable operations.

• C. Eliminates the need for an audit.

• D. Requires the use of non-computerized systems.

• E. Is not necessary if the company uses a computerized system.

Cash, not including cash equivalents, includes:

• A. Postage stamps.

• B. Coins, currency, and checking accounts.

• C. IOUs.

• D. Two-year certificates of deposit.

• E. Money market funds.

A company had net sales of $31,500 and ending accounts receivable of $2,700 for the current period. Its days' sales uncollected equals:

• A. 11.7 days.

• B. 23.3 days.

• C. 31.3 days.

• D. 42.5 days.

• E. 46.6 days

Answer explanation

($2,700/$31,500) x 365 = 31.3 days

Mattel had net sales of $4,235 million and ending accounts receivable of $775 million. Its days' sales uncollected equals:
A. 298 days.
B. 66.8 days.
C. 19.4 days.
D. 81.8 days.
E. 65.2 days

• A. 298 days.

• B. 66.8 days.

• C. 19.4 days.

• D. 81.8 days.

• E. 65.2 days

Answer explanation

($775/$4,235) x 365 = 66.8 days

The person who signs a note receivable and promises to pay the principal and interest is the:

• A. Maker.

• B. Payee.

• C. Holder.

• D. Receiver.

• E. Owner.

The interest accrued on $6,500 at 6% for 60 days is:

• A. $ 36.

• B. $ 42.

• C. $ 65.

• D. $180.

• E. $420

Answer explanation

$6,500 x 0.06 x 60/360 = $65

When the maker of a note honors a note this indicates that the note is:

• A. Signed.

• B. Paid in full.

• C. Guaranteed.

• D. Notarized.

• E. Cosigned.

The quality of receivables refers to:

• A. The creditworthiness of sellers.

• B. The speed of collection.

• C. The likelihood of collection without loss.

• D. Sales turnover.

• E. The interest rate.

A company borrowed $10,000 by signing a 180-day promissory note at 11%. The maturity value of the note is:

• A. $12,050

• B. $12,275

• C. $10,550

• D. $12,825

• E. $13,100

Answer explanation

$10,000 + ($10,000 x 0.11 x 180/360) = $10,550