Exam 8: Cash and Internal Controls

At the end of the current period, a company reported $725,000 in net credit sales and $100,000 in ending accounts receivable. Calculate this company's days' sales uncollected at the end of the current period.

Outstanding checks refer to checks that have been:

The following information is available to reconcile Hinckley Company's book balance of cash with its bank statement cash balance as of June 30. The June 30 cash balance according to the accounting records is $57,542, and the bank statement cash balance for that date is $67,047. a. The bank erroneously cleared a $295 check against the account in June that was not issued by Hinckley. The check documentation included with the bank statement indicates the check was actually issued by Dancer Co. b. On June 30, the bank issued a credit memorandum for $35 interest earned on Hinckley's account. c. When the June checks are compared with entries in the accounting records, it is found that Check No. 1727 had been correctly drawn for $1,450 to pay for advertising but was erroneously entered in the accounting records as $1,540. d. A credit memorandum indicates that the bank collected $9,000 cash on a note receivable for Hinckley, deducted a $30 collection fee, and credited the balance to the company's Cash account. Hinckley did not record this transaction before receiving the statement. e. A debit memorandum of $865 is enclosed with the bank statement for an NSF check for $840 received from a customer. The bank assessed a $25 fee for processing it. f. Hinckley's June 30 daily cash receipts of $6,425 were placed in the bank's night depository on that date, but do not appear on the June 30 bank statement. g. Hinckley's June 30 cash disbursements journal indicates that Check No. 1737 for $4,830 and Check No. 1740 for $3,280 were both written and entered in the accounting records, but are not among the canceled checks. h. A debit memorandum for $115.00 indicates the bank deducted the annual lock box fee for the company. 1. Prepare the bank reconciliation for this company as of June 30. 2. Prepare the journal entries necessary to bring the company's book balance of cash into conformity with the reconciled cash balance as of June 30.

Franklin Company's bank reconciliation as of August 31 is shown below. Bank balance \ 14,237 Book balance \ 13,162 + Deposit in transit 4,500 Bank service fees -50 - Outstanding checks -3,900 Note collected 1.725 Adjusted bank balance \ 14,837 Adjusted book balance \ 14,837 The adjusting journal entries that Clayborn must record as a result of the bank reconciliation include:

An internal control system consists of the policies and procedures companies use to protect assets, ensure reliable accounting, promote efficient operations, and uphold company policies.

Cash equivalents:

The following account balances are taken from Ferguson Sports at December 31. 2016 2015 Accounts receivable 18,020 23,450 Net sales 163,500 157,100 Calculate the number of days' sales uncollected for both years. According to this analysis, is the company's collection of receivables improving? Explain.

On June 3, Zhang Co. received and recorded a $3,500 invoice for merchandise on which the terms were 2/10, n/60. The company uses the net method to records invoices. On June 17, the company discovered that the invoice had been incorrectly filed and the discount lost. Prepare the June 3 general journal entry to record the purchase, the June 17 entry to record the discount lost, and the August 2 entry to record payment of the invoice.

Which internal control principle prescribes the use of pre-numbered printed checks?

Quibble Company established a $300 petty cash fund by issuing a check to the custodian on February 1. On February 15, the petty cash fund was replenished and increased to $800 in total. The contents of the petty cash fund at the time of the February 15 replenishment were: The company uses the perpetual inventory method. Prepare Quibble's general journal entry to record both the reimbursement and the increase of the petty fund on February 15.

________ reflects the liquidity of a company's accounts receivable.

Signature cards, deposit tickets, checks, and bank statements are all examples of internal control devices for banking activities.

A company wants to decrease its $200 petty cash fund to $175. The entry to reduce the fund is:

The treasurer of a company is responsible for cash management. List five cash management principles that are essential for effective cash management.

An analysis that explains differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a(n):

Collusion is a form of fraud where individuals collaborate to thwart separation of duties.

The entry to increase the balance in petty cash from $50 to $75 would include a credit to Petty Cash of $25.

At the end of the day on March 15, the cash register's record shows $1,957, but the count of cash in the register is $1,965. Prepare the general journal entry to record the day's cash sales.

Match each of the following terms with the appropriate definitions. 1. Fundamental guidelines applicable to all companies established to minimize the risk of fraud and theft and to increase the reliability and accuracy of the accounting records. 2. A method of initially recording purchases at the full invoice price ignoring any cash discount. 3. A document used within the company to notify the appropriate persons that ordered goods have been received and to describe the quantity and condition of the goods. 4. An income statement account used to record the income effects of cash overages and cash shortages arising from missing petty cash receipts or errors in making change. 5. A measure of how quickly a company can convert its accounts receivable into cash. 6. A document the purchasing department uses to place an order with a supplier. 7. A set of procedures and approvals designed to control cash disbursements and the acceptance of obligations. 8. A method of initially recording purchases at the invoice price less any purchase discounts offered by the seller. 9. A report explaining any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement. 10. The ability of a company to pay for its near-term obligations.

A remittance advice is a(n):