Name:

__________________________________________
Section: _________________________
Midterm
Subject: Accounting Information System
________________

January 23, 2016

2:00 P.M. 5:00 P.M. ,
Permit No.

True/False: (T/F)
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1.
2.
3.
4.
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14.
15.
16.
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19.
20.

The sales order captures suppliers name, address, and TIN.

Business bankruptcy cases may involve fraudulent behavior.
Employee should be aware of the firms commitment to ethics.
Falsification is another word for financial fraud.
The trend toward distributed data processing decreases the exposure to fraud from remote locations.
Segregation of duties is an example of external control procedures.
General control prevent and detect unauthorized and illegal access to the firms assets.
Journal voucher file is a compilation of all journal vouchers posted to the general ledger.
Inventory control department adjust the stock record to reflect the reduction in inventory.
Integrated accounting systems automatically transfer data between modules.
A remittance advice is a form of turn-around document.
In point of sale systems, authorization takes the form of validation of credit card charges.
In most large organizations, the journal voucher file has replaced the formal general journal.
The cash receipts journal is a special journal.
The principal source document in the sales order system is the sales order
Sales return involves receiving, sales, credit, and billing departments, but not accounts receivable.
Employees should be made aware of the firms commitment to ethics.
Source code is an example of intellectual property.
Copyright laws and computer industry standards have been developed jointly and rarely conflict.
The ethical principle of justice asserts that the benefits of the decision should be distributed fairly to those who share
the risks.

Multiple Choice:
C
1. Which document often accompanies merchandise shipped to a customer?
a. picking ticket
c. packing slip
b. credit memo
d. sales order
A
2. Which activity is part of the sales order entry process?
a. checking customer credit
c. approving sales returns
b. setting customer credit limits
d. preparing a bill of lading
D
3. For good internal control, who should approved credit memos?
a. Sales manager
c. Billing manager
b. Controller
d. Credit manager
D
4. The credit approval process involves which of the following?
a. Establishing a credit limit
c. Investigating the credit history of the customer
b. Verifying the customer order does not
d. All of the above.
exceed an authorized limit
D
5. The billing cycle includes the following:
a. Invoicing
c. Shipping
b. Making bank deposits.
d. Both A and C
D
6. An electronic lockbox has which of the following functions?
a. Safeguard cash
c. Improves cash management
b. Only A
d. Both A and C
A
7. Which of the following is a threat to the Sales Order Entry activity of the Revenue Cycle?
a. Uncollectible accounts
c. Theft of inventory
b. Billing errors
d. Failure to bill
A
8. Internal control system have limitations. These include
a. stability of systems
c. circumvention
b. possibility of honest error
d. management override
C
9. Business ethics involves
a. how managers decide on what is right in conducting business
c. both a and b
b. how managers decide on what is right for the business
d. none of the above
C
10. The four principal types of fraud include all of the following except
a. bribery
c. gratuities
b. conflict of interest
d. economic extortion
B
11. The board of directors consists entirely of personal friends of the chief executive officer. This indicates
a. the accounting system
c. control procedures
b. the control environment
d. this is not a weakness
B
12. Employee fraud involves three steps. Of the following, which is not involved?
a. concealing the crime to avoid detection
c. converting the asset to a usable form
b. misstating financial statements
d. converting the asset to a usable form
C
13. An accounting system that maintains an adequate audit trail is implementing which internal control procedure?
a. access controls
c. accounting records
b. segregation of functions
d. independent verification
C
14. When duties cannot be segregated, the most important internal control procedure is
a. accounting records
c. supervision
b. access controls
d. independent verification
B
15. The decision to extend credit beyond the normal credit limit is an example of
a. independent verification
c. segregation of functions
b. authorization
d. supervision

16. Which of the following is not an internal control procedure?

a. accounting records
c. authorization
b. managements operating cycle
d. independent verification

17. When certain customers made cash payments to reduce their accounts receivable, the bookkeeper embezzled the cash an
the accounts as uncollectible. Which control procedure would most likely prevent this irregularity?
a. segregation of duties
c. accounting system
b. access controls
d. accounting records
18. The office manager forgot to record in the accounting records the daily bank deposit. Which control procedure would most
or detect this error?
a. segregation of duties
c. independent verification
b. access controls
d. accounting records
19. Management can expect various benefits to follow from implementing a system of strong internal control. Which of the follo
is least likely to occur?
a. reduced cost of an external audit
c. prevents employee collusion to commit fraud
b. availability of reliable data for decisiond. some assurance that important documents and records are
protected
making purposes
20. The most cost-effective type of internal control is
a. corrective control
c. preventive control
b. detective control
d. accounting control
21. Refer to No. 20. What is the firms debt ratio if its ROE is 15 percent and its ROA is 10 percent?
a. 67%
c. 25%
b. 50%
d. 33%
22. Info Technics Inc. has an equity multiplier of 2.75. The companys assets are financed with some combination of long-term
common equity. What is the companys debt ratio?
a. 25.00%
c. 52.48%
b. 36.36%
d. 63.64%
23. Refer to No. 22. What is the companys common equity ratio?
a. 25.00%
c. 63.64%
b. 36.36%
d. 75.00%
24. A firm has total interest charges of 20,000 per year, sales of $2 million, a tax rate of 40 percent, and a profit margin of 6 p
is the firms times-interest-earned ratio?
a. 10
c. 12
b. 11
d. 13
25. Refer to No. 24. What is the firms times-interest-earned ratio, if its profit margin decreases to 3% and its interest charges
40,000 per year?
a. 3.0
c. 2.5
b. 3.5
d. 4.2
26. The breakeven point is obtained at intersection of
a. Total revenue and Total cost line
c. Total cost and variable cost line
b. Variable cost and fixed cost line
d. Fixed cost and total cost line
27. An industry is selling a product for 10 per unit. The fixed cost for assets is 40,000 with variable cost of 6 per unit. How
should be produced to break even?
a.
8,000
c. 10,000
b. 12,000
d. 14,000
28. The following assumptions are made in case of break-even analysis, except
a. All fixed costs are fixed
c. All variable costs are fixed
b. The prices of input factors are constant
d. Volume of production and volumes of sales are equal
29. The contribution margin ratio always increases when the
a. break-even point increases
c. variable costs as a percentage of net sales increase
b. break-even point decreases
d. variable costs as a percentage of net sales increase
30. To compute the break-even point in units, which of the following formulas is used?
a. FC/CM per unit
c. CM/CM ratio
b. FC/CM ratio
d. (FC+VC)/CM ratio