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1. An internal control system consists of all the following policies and procedures except ones designed to:

1. Protect assets.
2. Ensure reliable accounting.
3. Guarantee a return to investors.
4. Urge adherence to company policies.

2. In a business, which of the following procedures would weaken control over cash receipts that arrive through the mail?

1. After the mail is opened, a list (in triplicate) of the money received is prepared with a record of senders name, the amount, and explanation of why the money was sent.
2. The bank reconciliation is prepared by a person who does not handle cash or record cash receipts.
3. For safety, only one person should open the mail and that person should immediately deposit the cash received in the bank.
4. All of these are good internal control procedures over cash receipts that arrive through the mail.

3. Most preferred stocks have the following distinctive features except:

1. Preference over common stock as to dividends.
2. Cumulative dividend rights.
3. Overall voting power.
4. Callable at the option of the corporation

4. Which one of the following would not be considered in the development of a partnership agreement?

1. Stock options
2. Profit and loss levels
3. Processing disputes
4. Asset contributions

5. Plant assets are:

1. Tangible assets used in the operation of a business that have a useful life of more than one accounting period.
2. Current assets.
3. Held for sale.
4. None of the above.

6. The class of capital stock that normally has the most voting power.

1. Preferred stock.
2. Retained earnings
3. Paid in Capital.
4. Common stock.

7. In a bank reconciliation, the balance shown in the bank statement and the accounting records:

1. Is the amount the company must pay for its plant assets.
2. Equals to zero.
3. Are both adjusted for any unreconciled transactions.
4. All of the above.

8. A delivery truck which cost $10,200 has a residual value of $1,100 after 5 years. The periodic depreciation at year 4 using the straight line method is

1. $1,820.
2. $1,800.
3. $2,260.
4. None of the above.

9. Which of the following is not a characteristic of the common stock of a large, publicly owned corporation?

1. The shares may be transferred from one investor to another without disrupting the continuity of business operations.
2. A cumulative right to receive dividends.
3. Voting rights in the election of the board of directors.
4. None of the above.

10. Mutual agency is defined as:

1. a mutual agreement
2. a synonym for partnership
3. the right of all partners to represent the companys normal business operations
4. a partnership between two partnerships

11. Copyrights are exclusive rights granted by the federal government to protect the production and sale of literary or artistic materials for:

1. Life plus 70 years.
2. Life plus 50 years.
3. Life plus 10 years.
4. Life plus 75 years.

12. When a business is organized as a corporation, which of the following statements is true?

1. Stockholders are liable for the debts of the business in proportion to their percentage ownership of capital stock.
2. Fluctuations in the market value of outstanding shares of capital stock do not affect the amount of stockholders equity shown in the balance sheet.
3. Stockholders do not have to pay personal income taxes on dividends received, because the corporation is subject to income taxes on its earnings.
4. Each stockholder has the right to bind the corporation to contracts and to make other managerial decisions.

13. Depreciation is a process of:

1. Asset valuation.
2. Cost allocation.
3. Temporary increases in market value.
4. Salvage value.

14. Each of the following measures strengthens internal control over cash receipts except:

1. The use of the cash register.
2. Preparation of a daily listing of all checks received through the mail.
3. The use of a petty cash fund.
4. The deposit of cash receipts in the bank on a daily basis.

15. Which of the following asset will not be depreciated over its service life?

1. Buildings.
2. Land.
3. Furniture.
4. Equipment.

16. A positive attribute included in goodwill will include:

1. Superior management.
2. Land.
3. Harmonization of accounting standards.
4. The book value of plant and assets.

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