Multiple Choice Questions Chapter

4 Book Exercise
1.

Which document is NOT prepared by the sales

department?
a. packing slip
b. shipping notice
c. bill of lading
d. stock release
2. Which document triggers the update of the inventory
subsidiary ledger?
a. bill of lading
b. stock release
c. sales order
d. shipping notice
3. Which function should the billing department NOT
perform?
a. record the sales in the sales journal
b. send the ledger copy of the sales order to accounts
receivable
c. send the stock release document and the ship- ping notice
to the billing department as proof of shipment
d. send the stock release document to inventory control
4. When will a credit check approval most likely require
specific authorization by the credit department?
a. when verifying that the current transaction does not
exceed the customers credit limit
b. when verifying that the current transaction is with a valid
customer
c. when a valid customer places a materially large order
d. when a valid customer returns goods
5. Which type of control is considered a compensating
control?
a. segregation of duties
b. access control
c. supervision
d. accounting records
6. Which of the following is NOT an independent
verification control?
a. The shipping department verifies that the goods sent from
the warehouse are correct in type and quantity.
b. General ledger clerks reconcile journal vouch- ers that
were independently prepared in various departments.
c. The use of prenumbered sales orders.
d. The billing department reconciles the shipping notice with
the sales invoice to ensure that customers are billed for only
the quantities shipped.
7. Which function or department below records the
decrease in inventory due to a sale?
a. warehouse
b. sales department
c. billing department
d. inventory control
8. Which situation indicates a weak internal control
structure?
a. the AR clerk authorizes the write off of bad debts
b. the record-keeping clerk maintains both AR and AP
subsidiary ledgers
c. the inventory control clerk authorizes inven- tory
purchases
d. the AR clerk prepares customer statements every month
9. The bill of lading is prepared by the
a. sales clerk.
b. warehouse clerk.
c. shipping clerk
d. billing clerk.
10. Which of following functions should be segregated?
a. opening the mail and recording cash receipts in the
journal
b. authorizing credit and determining reorder quantities
c. shipping goods and preparing the bill of lading
d. providing information on inventory levels and reconciling
the bank statement

Multiple Choice Questions Chapter

5 Book Exercise
1.

Which document helps to ensure that the receiving

clerks actually count the number of goods received?
a. packing list
b. blind copy of purchase order
c. shipping notice
d. invoice
2. When the goods are received and the receiving report
has been prepared, which ledger may be updated?
a. standard cost inventory ledger
b. inventory subsidiary ledger
c. general ledger
d. accounts payable subsidiary ledger
3. Which statement is NOT correct for an expenditure
system with proper internal controls?
a. Cash disbursements maintain the check
register.
b. Accounts payable maintains the accounts payable subsidiary ledger
c. Accounts payable is responsible for paying
invoices.
d. Accounts payable is responsible for authorizing invoices.
4. Which duties should be segregated?
a. matching purchase requisitions, receiving
reports, and invoices and authorizing payment
b. authorizing payment and maintaining the check
register
c. writing checks and maintaining the check
register
d. authorizing payment and maintaining the
accounts payable subsidiary ledger
5. Which documents would an auditor most likely choose
to examine closely to ascertain that all expenditures
incurred during the accounting period have been
recorded as a liability?
a. invoices
b. purchase orders
c. purchase requisitions
d. receiving reports
6. Which task must still require human intervention in an
automated purchases/cash disbursements system?
a. determination of inventory requirements
b. preparation of a purchase order
c. preparation of a receiving report
d. preparation of a check register
7. Which one of the following departments does not have
a copy of the purchase order?
a. the purchasing department
b. the receiving department
c. accounts payable
d. general ledger
8. Which document typically triggers the process of
recording a liability?
a. purchase requisition
b. purchase order
c. receiving report
d. suppliers invoice
9. Which of the following tasks should the cash disbursement clerk NOT perform?
a. review the supporting documents for completeness and accuracy
b. prepare checks
c. approve the liability
d. mark the supporting documents paid
10. Which of the following is true?
a. The cash disbursement function is part of
accounts payable
b. Cash
disbursements
is
an
independent
accounting function.
c. Cash disbursements is a treasury function.

d.

The cash disbursement function is part of the

general ledger department.

c.
d.

Multiple Choice Questions Chapter

6 Book Exercise
1.

The document that captures the total amount of time

that individual workers spend on each pro- duction job
is called a
a. time card.
b. job ticket.
c. personnel action form.
d. labor distribution form.
2. An important reconciliation in the payroll system is
when
a. the general ledger department compares the labor
distribution summary from cost account- ing to the
disbursement voucher from accounts payable.
b. the personnel department compares the num- ber of
employees authorized to receive a pay- check to the
number of paychecks prepared.
c. the production department compares the num- ber of
hours reported on job tickets to the number of hours
reported on time cards.
d. the payroll department compares the labor dis- tribution
summary to the hours reported on time cards.
3. Which internal control is not an important part of the
payroll system?
a. supervisors verify the accuracy of employee time cards
b. paychecks are distributed by an independent paymaster
c. the accounts payable department verifies the accuracy
of the payroll register before transferring payroll funds
to the general checking account
e. the general ledger department reconciles the labor
distribution summary and the payroll dis- bursement
voucher
4. The department responsible for approving pay rate
changes is
a. payroll
b. treasurer
c. personnel
d. cash disbursements
5. Which function should distribute paychecks?
a. personnel
b. timekeeping
c. paymaster
d. payroll
6. Which transaction is not processed in the fixed asset
system?
a. purchase of building
b. repair of equipment
c. purchase of raw materials d. sale of company van
7. Depreciation
a. is calculated by the department that uses the fixed
asset.
b. allocates the cost of the asset overits useful life.
c. is recorded weekly.
d. results in book value approximating fair market value.
8. Depreciation records include all of the following
information about fixed assets EXCEPT the
a. economic benefit of purchasing the asset.
b. cost of the asset.
c. depreciation method being used.
d. location of the asset.
9. Which control is not a part of the fixed asset system?
a. formal analysis of the purchase request
b. review of the assumptions used in the capital
budgeting model
c. development of an economic order quantity model
d. estimates of anticipated cost savings
10. Objectives of the fixed asset system do NOT include
a. authorizing the acquisition of fixed assets.
b. recording depreciation expense.

computing gain and/or loss on the disposal of fixed

assets.
maintaining a record of the fair market value of all fixed
assets.

11. Which of the following is NOT a characteristic of the

fixed asset system?
a. acquisitions are routine transactions requiring
general authorization
b. retirements are reported on an authorized disposal report form
c. acquisition cost is allocated over the expected life of
the asset
d. transfer of fixed assets among departments is
recorded in the fixed asset subsidiary ledger

Multiple Choice Questions Chapter

7 Book Exercise
1.

2.

3.

Which of the following is not an advantageous reason to reduce inventories?

a. Inventories provide a competitive advantage.
b. Inventories can invite overproduction.
c. Inventories are expensive to maintain.
d. Inventories may conceal problems.
e. All of these are good reasons to reduce inventories.
The fundamental EOQ model
a. provides for fluctuating lead times during reor- der
cycles.
b. is relatively insensitive to errors in demand,
procurementcosts, and carrying costs.
c. focuses on the trade-off between production costs
and carrying costs.
d. is stochastic in nature.
e. is best used in conjunction with a periodic in- ventory
system.
Refer to the equation for the EOQ in the text. Car
Country, a local Ford dealer, sells 1,280 small SUVs
each year. Keeping a car on the lot costs Car Country
$200 per month, so the com- pany prefers to order as
few SUVs as is economi- cally feasible. However, each
time an order is placed, the company incurs total costs
of $300. Of this $300, $240 is fixed and $60 is
variable. Determine the companys economic order
quantity.
a. 8
b. 16
c. 18
d. 56
e. 62
Questions 4 through 6 are based on the diagram below,
which represents the EOQ model.

4.
5.
6.
7.

Which line segment represents the reorder lead time?

a. AB
b. AE
c. AF
d. BC e. AC
Which line segment identifies the quantity of safety
stock maintained?
a. AB
b. AE
c. AC
d. BC
e. EF
Which line segment represents the length of time to
consume the total quantity of materials ordered?
a. DE b. BC
c. AC
d. AE e. AD
Which of the following is NOT a principle of lean
manufacturing?

8.

a. Products are pushed from the production end to the

customer.
b. All activities that do not add value and maximize the
use of scarce resources must be eliminated.
c. Achieve high inventory turnover rate.
d. A lean manufacturing firm must have established and
cooperative relationships with vendors.
e. All of the above are lean manufacturing principles.
All of the following are problems with traditional
accounting information EXCEPT:
a. Managers in a JIT setting require immediate
information.
b. The measurement principle tends to ignore standards
other than money.
c. Variance analysis may yield insignificant values.
d. The overhead component in a manufacturing
company is usually very large.
e. All of these are problems associated with traditional
accounting information.

9.

Which of the following is NOT a problem associated

with standard cost accounting?
a. Standard costing motivates management to produce
large batches of products and build inventory.
b. Applying standard costing leads to product cost
distortions in a lean environment.
c. Standard costing data are associated with excessive
time lags that reduce its usefulness.
d. The financial orientation of standard costing may
promote bad decisions.
e. All of the above are problems with standard costing.
10. Which one of the following statements is true?
a. ERP evolved directly from MRP.
b. ERP evolved into MRP and MRP evolved into MRP II.
c. MRP II evolved from MRP and MRP II evolved into
ERP.
d. None of the above is true.