BLC AIS 100 Exam 2 Review- Answers (All Correct) University of Wisconsin, Madison

BLC AIS 100 Exam 2 Review- Answers 1. All of the following requirements about internal controls were enacted under the Sarbanes Oxley Act of 2002 except: a. independent outside auditors must attest to the level of internal control. b. companies must develop sound internal controls over financial reporting. c. companies must continually assess the functionality of internal controls. d. independent outside auditors must eliminate redundant internal control. 2. Internal controls are not designed to safeguard assets from a. natural disasters. b. employee theft. c. robbery. d. unauthorized use. 3. An accounts payable clerk also has access to the approved supplier master file for purchases. The control principle of a. establishment of responsibility is violated. b. independent internal verification is violated. c. documentation procedures is violated. d. separation of duties is violated. 4. An employee authorized to sign checks should not record a. owner cash contributions. b. mail receipts. c. cash disbursement transactions. d. sales transactions. 5. If a check correctly written and paid by the bank for $626 is incorrectly recorded on the company's books for $662, the appropriate treatment on the bank reconciliation would be to a. add $36 to the book's balance. b. subtract $36 from the book's balance. c. deduct $36 from the bank's balance. d. deduct $626 from the book's balance. 6. The matching principle a. requires that all credit losses be recorded when an individual customer cannot pay. b. necessitates the recording of an estimated amount for bad debts. c. results in the recording of a known amount for bad debt losses. d. is not involved in the decision of when to expense a credit loss. 7. Under the allowance method, when a specific account is written off a. total assets will be unchanged. b. net income will decrease. c. total assets will decrease. d. total assets will increase. 8. In 2010 Wilkinson Company had net credit sales of $1,125,000. On January 1, 2010, Allowance for Doubtful Accounts had a credit balance of $27,000. During 2010, $45,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivables basis). If the accounts receivable balance at December 31 was $300,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2010? a. $ 30,000 b. $112,500 c. $ 48,000 d. $ 45,000 9. The interest on a $3,000, 9%, 90-day