1. Units-of-activity is an appropriate depreciation method to use when (Points : 1)

it is impossible to determine the productivity of the asset.

the asset’s use will be constant over its useful life.

the productivity of the asset varies significantly from one period to another.

the company is a manufacturing company

2. The reconciliation of the cash register tape with the cash in the register is an example of (Points : 1)

other controls.

independent internal verification.

establishment of responsibility.

segregation of duties.

3. Mitchell Corporation bought equipment on January 1, 2012 .The equipment cost $120,000 and had an expected salvage value of $20,000. The life of the equipment was estimated to be 6 years. The depreciable cost of the equipment is (Points : 1)





4. A plant asset with a cost of $360,000 and accumulated depreciation of $342,000 is sold for $42,000. What is the amount of the gain or loss on disposal of the plant asset? (Points : 1)

$42,000 loss.

$24,000 loss.

$24,000 gain.

$42,000 gain.

5. Maximum benefit from independent internal verification is obtained when (Points : 1)

it is made on a pre-announced basis.

it is done by the employee possessing custody of the asset.

discrepancies are reported to management.

it is done at the time of the audit.

6. A system of internal control (Points : 1)

is infallible.

can be rendered ineffective by employee collusion.

invariably will have costs exceeding benefits.

is premised on the concept of absolute assurance

7. A company purchases a remote building site for computer operations. The building will be suitable for operations after some expenditures. The wiring must be replaced to computer specifications. The roof is leaky and must be replaced. All rooms must be repainted and recarpeted and there will also be some plumbing work done. Which of the following statements is true? (Points : 1)

The cost of the building will not include the repainting and recarpeting costs.

The cost of the building will include the cost of replacing the roof.

The cost of the building is the purchase price of the building, while the additional expenditures are all capitalized as Building Improvements.

The wiring is part of the computer costs, not the building cost.

8. The account Allowance for Doubtful Accounts is classified as a(n) (Points : 1)


contra account of Bad Debt Expense.


contra account to Accounts Receivable.

9. The matching rule relates to credit losses by stating that bad debt expense should be recorded (Points : 1)

in the same period as allowed for tax purposes.

in the period of the sale.

for an exact amount.

in the period of the loss.

10. A very small company would have the most difficulty in implementing which of the following internal control activities? (Points : 1)

Separation of duties.

Limited access to assets.

Periodic independent verification.

Sound personnel procedures.