Exam 8: Internal Control and Cash

You began your new job as the accountant at Bolivar Industries during the month of December. During your first month, you found several interesting issues.? 1) While looking through the invoices, you found Invoices 213-242, 245-271, and 275-290. It appears that invoices243, 244, 272, 273, and 274 are missing.? 2) During the month, Clerk # 3 issued $250 in refunds as compared to Clerks #1, #2, and #4 who issued less than$50 each.? 3) The daily cash receipts and bank deposits reconcile, except on Tuesdays during the month.? 4) Business is generally brisk during the holiday season, but two weeks before Christmas there was a suddenincrease in slow payments. ?Required (a) What kind of warning signs could be associated with these issues? (b) What control could you put in place regarding cash refunds mentioned in (a)(2)?

If an adjustment for an NSF check is made in a company's bank reconciliation, then the company must have written a bad check during the month.

Identify each of the following as relating to (a) the control environment, (b) risk assessment, or (c) control procedures. ?1. Mandatory vacations 2. Personnel policies 3. Report of outside consultants on future market changes

Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the item is a (n)

The amount of cash to be reported on the balance sheet at June 30 is the

Roper Electronics received its bank statement for the month of August with an ending balance of $11,740. Roper determined that Check No. 613 for $155 and Check No. 601 for $420 were both outstanding. Also, a $6,900 deposit for August 30 was in transit as of the end of the month. Northern Regional Bank also collected a $5,000 notes receivable on August 1 that was issued March 1. Accrued interest is $250. Northern Regional Bank charged a $35 fee for the collection service. The bank statement reveals a bank service charge of $20. A customer check for $68 was returned with the bank statement marked "NSF." The ending balance of the Roper cash account is $12,938.?Prepare a bank/account reconciliation and any necessary journal entries for the reconciliation.

(a)Where are cash equivalents disclosed in the financial statements? (b)List three examples of cash equivalents.

Garden Gate, Inc. reported the following data in its August 31 annual report. Cash and cash equivalents$ 485,625 Cash flow from operations (630,000)Required (a) What is the company's "cash burn" per month? (b) What is the company's ratio of cash to monthly cash expenses? (c) Interpret the ratio you computed in part b. What are the implications for Garden Gate, Inc.?

In preparing a bank reconciliation, the amount indicated by a debit memo for bank service charges is added to the balance per company's records.

The type of account and normal balance of Petty Cash is a (n)

In preparing a bank reconciliation, the amount of an error indicating the recording of a check in the journal for an amount larger than the amount of the check is added to the balance per company's records.

An element of internal control is

After a bank reconciliation is completed, journal entries are prepared for items in the balance per company's records as well as items in the balance per bank statement.

On April 3, Snappy Sales decides to establish a $135 petty cash fund to relieve the burden on Accounting. (a) Journalize the establishment of the fund. (b) On April 11, the petty cash fund has receipts for mail and postage of $32.75, contributions and donations of$25.25, meals and entertainment of $68.00, and $9.75 in cash. Journalize the replenishment of the fund. (c) On April 12, Snappy Sales decides to increase petty cash to $175. Journalize this transaction.

You began your new job as the accountant for Morton Company. You were surprised to find that the company had a $2,000 petty cash fund, which sits in the break room. The president of the company told you: "Our petty cash system here works quite smoothly. Since everyone is honest here, everyone has access to the fund for incidentals that might pop up in the course of the business day. Most of these situations don't have any receipts tied to them, so I just put the money back in the fund when my secretary tells me that we have run out of petty cash and we debit the amount to Miscellaneous Expense."​Required (a) Should you implement some controls on petty cash? Why? (b) If so, what controls could be used for petty cash?

Businesses that have several bank accounts, petty cash, and cash on hand would maintain a separate ledger account for each type of cash.

The amount of deposits in transit is included on the bank reconciliation as a (n)

Match the following elements of internal control: -Control procedures

The following information is from Madison Corporation's accounting records for May. Check No. 3269 was returned as a double payment and voided. Checks that have not cleared the bank include No. 3252, No. 3260, and series No. 3275-3278.? 3247 \ 32.64 3263 \ 24.87 3248 400.00 3264 45.00 3249 309.22 3265 33.78 3250 256.00 3266 756.77 3251 3,212.17 3267 84.34 3252 56.89 3268 789.00 3253 98.02 3269 48.90 3254 47.55 3270 34.41 3255 1,124.77 3271 872.00 3256 250.00 3272 22.00 3257 68.00 3273 562.38 3258 215.56 3274 512.00 3259 38.55 3275 603.50 3260 92.65 3276 67.00 3261 44.61 3277 301.61 3262 72.96 3278 47.88 In addition to the above list of checks, Madison had Check No. 2264 for $32.98 and Check No. 2655 for $45.99 outstanding previously that have not cleared.1. Create an outstanding checks list for Madison at the end of May.2. What is the total amount of checks that cleared the bank (written in May)?

For efficiency of operations and better control over cash, a company should maintain only one bank account.