Using prenumbered checks and having an approved invoice

ACT 200 Spring 2020

TAP 5 – 15 % - CH 5 & 7 – V2 U1

Name ____________________________________ ID______________________

Exercise 1 (50 points) These financial items are for Decorating ABC Service at year-end, December 31, 2020

Salaries and Wages expense 21,000 Cash 15,000 Interest expense 8,500 Accounts Receivable 5,500 Building 20,000 Dividends 3,000

Service Revenue 90,000 Accumulated depreciation-Building 7,000

Rent revenue 2,500 Depreciation expense 6,000 Instructions:

Prepare an income statement for the year ended December 31, 2020.

Exercise 2 (20 points) Give a definition of Fraud and what are three main factors that contribute to Fraudalent activity?

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Exercise 3 – Multiple choice questions – Choose one right answer (15 points) 1) Physical controls to safeguard assets do not include

a. cashier department supervisors. b. vaults. c. television monitors. d. alarms

2) Having different individuals receive cash, record cash receipts, and hold the cash is an

example of a. establishment of responsibility. b. segregation of duties. c. documentation procedures. d. independent internal verification.

3) Using prenumbered checks and having an approved invoice for each check is an example of a. establishment of responsibility. b. segregation of duties. c. documentation procedures. d. independent internal verification.

Exercise 4 – True and False Questions – mention if the statements below are TRUE or FALSE (15 points)

1) The most important element of the fraud triangle is rationalization. 2) In order to prevent a transaction from being recorded more than once, a company

should maintain only one book of original entry. 3) Other income and expense excludes revenues and expenses that are unrelated to the

company’s main line of operations.

Bonus question (10 points)

Maxwell Company's financial information is presented below.

Sales Revenue ???? Cost of Goods Sold 400,000 Sales Returns and Allowances 40,000 Gross Profit ???? Net Sales 650,000 Calculate the missing amounts.