Exam 2, ch. 6-7 Flashcards
1
Q
Purpose of inventory turnover
A
Indicate liquidity of inventory
2
Q
Inventory turnover
A
Cost of goods sold / Average inventory
3
Q
Days in inventory
A
365 / Inventory turnover
4
Q
LIFO reserve
A
Companies using LIFO also have to report inventory under FIFO
5
Q
Fraud triangle
A
Opportunity, financial pressure, rationalization
6
Q
Six principles of control activities
A
- Establishment of responsibility
- Segregation of duties
- Documentation procedures
- Physical controls
- Independent internal verification
- Human resource controls
7
Q
Two common principles of segregation of duties
A
- Different individuals should be responsible for related activities
- The responsibility for record-keeping for an asset should be separate from the physical custody of that asset
8
Q
Straight-line depreciation method
A
(Cost - residual value) / Useful life
9
Q
Adjusted cash balance per bank
A
Cash balance per bank
Add deposits in transit
Less outstanding checks
10
Q
Adjusted cash balance per books
A
Cash balance per books Add notes receivable Add/deduct recording errors Less NSF checks Less bank service charges
