1. NBC Company had $32,000 in net sales, $15,000 in cost of merchandise sold, $18,000 in operating expenses, and $2,000 in other income. What is NBC Company's gross profit? 

$17,000

$3,000

$1,000

($1,000)

Question 2. An element of internal control is _______. 

generally accepted accounting principles

control procedures

concepts

principles

Question 3. A firm's internal control environment is influenced by _______. 

management's operating style

organizational structure

personnel policies

all of these

Question 4. A credit memorandum from the bank _______. 

decreases a bank customer's account

Is used to show a bank service charge

shows that a company has deposited a customer's NSF check

shows the bank has collected a note receivable for the customer

Question 5. Requiring employees to take annual vacations is part of which element of internal control? 

The control environment

Risk assessment

Control procedures

Monitoring

Question 6. A bank reconciliation should be prepared periodically because _______. 

the depositor's records and the bank's records are in agreement

the bank has not recorded all of its transactions

any differences between the depositor's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected

the bank must make sure that its records are correct

Question 7.Cash equivalents include _______. 

checks

coins and currency

money market accounts and commercial paper

stocks and short-term bonds

Question 8. Orange Co. sells merchandise on credit to Zea Co. in the amount of $9,000. The invoice is dated on September 15 with terms of 1/15, net 45. What is the amount of the discount, and up to what date must the invoice be paid in order for the buyer to take advantage of the discount? 

$180, September 30

$180, September 25

$90, September 30

$90, September 25

Question 9. On the bank's accounting records, customers' accounts are normally shown as _______. 

revenue

a liability

an asset

expenses

Question 10. Generally, the revenue account for a merchandising business is entitled 

Sales

Net Sales

Gross Sales

Gross Profit

Question 11. Which expenses are subtracted from gross profit to arrive at income from operations? 

All expenses

Cost of merchandise sold

Operating expenses

Sales expenses

Question 12. A special cash fund used to make small payments that occur frequently is called a (n) _______. 

operating expenses fund

change fund

market fund

petty cash fund

Question 13. Which of the following would be added to the balance per books on a bank reconciliation? 

Service charges

Outstanding checks

Deposits in transit

Notes collected by the bank

Question 14. The amount of the outstanding checks is included on the bank reconciliation as a(n) 

deduction from the balance per depositor's records.

addition to the balance per bank statement.

deduction from the balance per bank statement.

addition to the balance per depositor's records

Question 15.Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as 

selling expenses

general expenses

other expenses

administrative expenses

Question 16. In credit terms of 1/10, n/30, the "1" represents the 

number of days in the discount period

full amount of the invoice

number of days when the entire amount is due

percent of the cash discount

Question 17.The business's organizational structure influences which of the following elements of

internal control? 

Control procedures

Risk assessment

The control environment

Information and communication

Question 18. The credit terms of a sale are normally indicated on a(n) 

purchase order

invoice

bill of lading

account receivable

Question 19.What is subtracted from sales to arrive at net sales? 

Sales returns and allowances

Sales discounts

Both sales discounts and sales returns and allowances

Neither sales discounts nor sales returns and allowances

Question 20.The Sarbanes-Oxley Act of 2002 requires companies and their independent accountants to _______. 

report on the effectiveness of the company's internal controls

report on any fraud and theft detected in the company

report on the state of the economy and likelihood of fraud

report on the financial activities of the company