ACC 340 ACC 340 Midterm

Midterm Exam 1) Would it be okay if your AR Clerk, who handles receipts, also reconciles the bank statement at the end of the month? Why or why not? It is better to have separate individuals managing receipts and reconciling bank statements. By doing so, potential errors, fraud, and conflicts of interest can be prevented. 2) The company's environment has two aspects. One is the external environment. Which of the following is not an external environment factor? D - Tone at the Top a. Economic b. Technical c. Social d. Tone at the Top 3) Name two methods that are commonly used to speed up the collection of receivables. a. Lockbox b. ACH 4) Match the description of the controls with the financial area the control would pertain to. (some matching items may be used more than once) Question Items A - All check stock must be locked up when not in use. - A - Cash B - Review all employee advances with the payroll and payables staff at least once per month. C - Prepaid Expense C - Require approval of bad debt writeoffs. B - Accounts Receivable D - Audit shipment terms. F - Inventory E - Require approval of bad-debt writeoff. B - Accounts Receivable F- Review Uncashed Checks. A - Cash G- Audit the receiving dock. F - Inventory H - Compare capital investment projections to actual results. D - Fixed Assets I - Require supervisory approval of all borrowings and repayments. E - Debt J - Require approval of credits. B - Accounts Receivable K- Perform a physical inventory of plant equipment every three months. D - Fixed Assets Matching Items Answer Items A. Cash B. Accounts Receivable C. Prepaid Expenses D. Fixed Assets E. Debt ACC 340 Midterm 1
F. Inventory 5) The company sells widgets for $3 each. Variable costs are .50 cents per unit. Fixed costs are $100,000. The number of units the company needs to sell to break even is a. 33,333 b. 40,000 c. 50,000 d. 25,000 $100,000 $3.00-$0.50 6) SG&A in a medium to large sized company would typically include the costs of all of the following departments except: a. Accounting Department b. Legal Department c. Overhead d. Marketing Department 7) Name and define two methods of valuing inventory. Name several pros and cons of each. Weighted Average Cost has several pros and cons. Some pros are that it evens out fluctuations in inventory costs over time, is straightforward to calculate, and easy record keeping. Drawbacks include inaccurate costs during fluctuations, obscured profit margins, inflated obsolete inventory value, unsuitability for unique items, limited cost visibility, tax compliance challenges, and suboptimal decisions based on averaged costs. Standard Cost provides cost predictability by setting predetermined standard costs, making budgeting, and forecasting easier. Standard fee simplifies record-keeping as each item has a fixed standard cost. Inventory valuation remains stable, avoiding significant cost fluctuations during price changes. The standard cost method does have drawbacks. Complexity in setting accurate costs, issues in fluctuating markets, costly variance investigation, potential incentives distortion, need for regular revisions, limited suitability for custom-made products, and lack of cost transparency. 8) What is receivables float? What is payables float? Receivable float is the time between a company receiving payment and the funds being available for use. Payables float refers to the delay between a payment sent to a supplier and the funds being deducted from the company's account. ACC 340 Midterm 2
9) What is the Payback Method? When would the controller use this calculation? Name several advantages and disadvantages of using this method. The payback method is a way to evaluate how fast an investment can recover the original cost. A controller could use this method for a quick and simple evaluation of an investment's payback period. However, this method does not consider the cash flow beyond the payback period, making it less comprehensive than other methods. 10. Describe at least two roles of the controller you would enjoy if you were the controller of a company. What do you find interesting about these roles? What would be challenging about these roles? What kind of background would you need to perform these roles adequately for a company? Process Analysis: Process analysis for the controller is centered around evaluating and enhancing financial and operational processes within a company. This involves identifying areas that require improvement or streamlining, analyzing the efficiency of existing processes, and collecting relevant data and metrics for evaluation. Process mapping and flowchart creation are used to visualize the current processes, aiding in understanding their complexities. Based on the analysis, the controller proposes improvements and works with various teams to implement the recommended changes. They continuously review and refine processes to ensure ongoing effectiveness and alignment with the company's objectives. These roles offer the chance to explore the company's financial and operational processes in detail, gaining valuable insights into its functioning. Finding areas for improvement and making changes can directly boost the company's efficiency and profitability, making the role rewarding and valuable. In these roles, you get to understand how the company operates by examining its financial and operational processes. Making improvements can directly benefit the company's efficiency and profitability, making the role rewarding. To perform process analysis well, the controller needs a strong educational background in finance, accounting, or business administration, along with relevant work experience. Additional certifications like Six Sigma can be helpful. Essential skills include strong analytical abilities, project management, effective communication, collaboration, attention to detail, business acumen, problem-solving, and knowledge of change management. The controller can significantly improve the company's performance and efficiency with the right background and skills. Budgeting and Forecasting: The controller's role in a company's financial planning and analysis is crucial, particularly in budgeting and forecasting. They are responsible for creating comprehensive budgets and collaborating with different departments to set financial targets and allocate resources efficiently. Throughout the fiscal year, the controller keeps a close eye on actual performance compared to the budget and conducts variance analysis to identify discrepancies. ACC 340 Midterm 3
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