The number of days' sales in inventory measures
a. the length of time it takes to acquire, sell, and replace the inventory
b. the length of time it takes to acquire and receive payment for the inventory
c. the number of days inventory is on hand prior to sale
d. the number of days inventory takes to arrive after ordering
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Q. 2) Avatar, Inc. bought a machine on January 1, 2011 for 96,000. The machine is expected to last for 8 years, after which it will be worthless. What is the book value of the machine on Avatar's balance sheet at December 31, 2012?
A) 96,000
B) 84,000
C) 72,000
D) 24,000
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Q. 3) Top 10 management concerns about IT's capability to support an organization's vision and strategy include all except the following:
a. decline in IT investments during recession
b. overall security of IT assets
c. the Internet
d. need for project management leadership
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Q. 4) Match each of the following terms with the appropriate definition. Use each term only once.
a. monetary-unit assumption
b. historical-cost principle
c. going-concern assumption
d revenue-recognition principle
e. matching principle
f. accrual accounting
g. accruals
h. deferrals
i. cash-basis accounting
j. detective controls
k. corrective controls
l. preventive controls
_____ 1. Procedures to find errors
_____ 2. Transactions in which the revenue is earned or the expense is incurred before the exchange of cash
_____ 3. An accounting principle which requires that revenue should be recognized when it is earned
_____ 4. An accounting assumption which requires that financial statement items be measured in monetary units
_____ 5. An accounting method in which revenues are recognized when earned and expenses recognized when incurred
_____ 6. Transactions in which the exchange of cash takes place before the revenue is earned or the expense incurred.
_____ 7. An accounting principle which requires that financial statement items should be reported at their costs at the time of the transaction
_____ 8. An accounting method in which revenues are recognized when cash is collected and expenses are recognized when cash is disbursed
_____ 9. An accounting principle which requires that expenses should be recognized in the same period as the revenue they helped generate
_____ 10. An accounting assumption which assumes that a company will continue to be in business in the future
_____ 11. Controls designed to fix errors
_____ 12. Controls designed to prevent an error or irregularity
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Q. 5) The Social Security, Medicare, FUTA, and SUTA tax accounts normally have credit balances.
a. True
b. False
Indicate whether the statement is true or false
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Q. 6) Examine the balance sheet for Out of Africa. Make any changes that you believe are necessary for a proper presentation, and then prepare a corrected balance sheet.
Out of Africa
Balance Sheet
For the Month Ended October 31, 2012
Assets Liabilities
Accounts payable 1,850 Accounts receivable 2,700
Retained earnings 21,650
Store equipment 15,000 Shareholders' equity
Inventory 8,950 Cash 6,850
Contributed capital 10,000
Total assets 25,800 Total liabilities and shareholders' equity 19,550
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