Exam 6: Cash and Internal Control

The following set of items describes activities completed by a company in purchasing and paying for merchandise. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. Extensions and footings on purchase invoices are verified before the invoices are approved for payment

Houston Corp. prepares monthly bank reconciliations of its checking account balance. The bank statement for July 2014 indicated the following: Note $3,000 and interest $80 collected for Houston from a customer of Houston's 3,080 An analysis of canceled checks and deposits and the records of Houston revealed the following items: The correct amount of check #205 is $540, but it was recorded as a cash disbursement of $450. The check was issued to pay for merchandise purchases. The check appeared on the bank statement correctly. A Prepare a bank reconciliation schedule at July 31, 2014, in proper form. B What amount would Houston report on its balance sheet at July 31, 2014, for cash?

What is meant by "cash equivalents"?

An is a form that a department uses to initiate a request to order merchandise.

Match the action with the category of internal control procedures -Independent verification

Some cash equivalents appear in the long term investment section of a balance sheet.

A company prepares adjusting entries for debit memorandums but not for credit memorandums

The Dinho Corporation identified the following data when preparing their April bank reconciliation: In addition, Dinho incorrectly recorded a deposit in its books in the amount of $1,000. The correct amount was recorded by the bank as $1,200. What is the adjusted cash balance at the end of April?

A debit memorandum appeared on Cinco Inc.'s May bank statement. How will Cinco treat this amount on its May bank reconciliation?

A check drawn by a company for $360 in payment of a liability was recorded in the journal as $630. This item would be included on the bank reconciliation as an:

On April 1, Blake Sales decides to establish a $275.00 Petty Cash Account to relieve the burden on Accounting. a Identify and analyze the effects of this transaction. b On April 15th, the petty cash fund has receipts for mail and postage of $124.75, contributions and donations of $53.25, meals and entertainment of $63.85 and $32.75 in cash. Identify and analyze the transaction for the replenishment of the fund. c On April 16th, Blake Sales decides to increase petty cash to $400.00. Identify and analyze the effects of this transaction.

The following set of items describes activities completed by a company in collecting cash for merchandise sales. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. An employee from the accounting department compares the control list and the cash register tapes with the bank deposit slip.

Which one of the following is not a procedure in the approval of a specific invoice for payment?

Sarcon Corp. prepares monthly bank reconciliations of its checking account balance. The bank statement for October, 2014, indicated the following: An analysis of canceled checks and deposits and the records of Sarcon revealed the following items: REQUIRED: Prepare a bank reconciliation at October 31, 2014 in proper form. Sarcon Corp. Bank Reconciliation October 31, 2014

A check that is returned or "bounces" because of insufficient funds is called an .

are those investments that are readily convertible into known amounts of cash and that have an original maturity to the investor of three months or less.

Which one of the following procedures is not part of preparing a bank reconciliation of a checking account

What five-member body created by the Sarbanes-Oxley Act was given authority to set U.S. auditing standards?

The notification accompanying a check that indicates the specific invoice being paid is called a

An advantage of a strong system of internal control is that less testing of the accounting system is done by the outside auditors.