Question 1

A bank reconciliation explains any differences between the balance of a checking account on the depositor's records and the balance reported on the bank statement.

Accepted Answer

A) True 
 B)False

Question 2

A voucher is an internal document or file:

Accepted Answer

A)  Used to accumulate information needed to control cash disbursements and to ensure that transactions are properly recorded. 
B)  Used as a substitute for an invoice if the supplier fails to send one. 
C)  Takes the place of a bank check. 
D)  Prepared after an invoice is received. 
E)  Prepared before the company orders goods to make sure that all goods are being ordered from an approved vendor list. 
A)  Used to accumulate information needed to control cash disbursements and to ensure that transactions are properly recorded. 
B)  Used as a substitute for an invoice if the supplier fails to send one. 
C)  Takes the place of a bank check. 
D)  Prepared after an invoice is received. 
E)  Prepared before the company orders goods to make sure that all goods are being ordered from an approved vendor list.

Question 3

Clayborn Company' bank reconciliation as of May 31 is shown below. $$\begin{array} { | l | r | l | r | } 
\hline \text { Bank balanee } & \$ 15,800 & \text { Book balance } & \$ 17,025 \
\hline \text { + Deposit in transit } & 5,200 & \text { Bank service fees } & - 25 \
\hline \text { - Outstanding checks } & - 4,600 & \text { NSF returned } & \underline { - 600 } \
\hline \text { Adjusted bank balanes } & \$ 16,400 & \text { Adjusted book balance } & \$ 16,400 \
\hline
\end{array}$$ One of the adjusting journal entries that Clayborn must record as a result of the bank reconciliation includes:

Accepted Answer

A)  A credit to Cash of $4,600 
B)  A debit to Cash of $625 
C)  A credit to Cash of $600 
D)  A debit to cash of $25 
E)  A debit to Cash of $5,200 
A)  A credit to Cash of $4,600 
B)  A debit to Cash of $625 
C)  A credit to Cash of $600 
D)  A debit to cash of $25 
E)  A debit to Cash of $5,200

Question 4

A bank does not issue a debit memorandum to notify the depositor of which of the following?

Accepted Answer

A)  An uncollectible check. 
B)  A deposit to their account. 
C)  A fee assessed to the depositor's account. 
D)  Periodic payments arranged in advance, by a depositor. 
E)  All withdrawals through an ATM. 
A)  An uncollectible check. 
B)  A deposit to their account. 
C)  A fee assessed to the depositor's account. 
D)  Periodic payments arranged in advance, by a depositor. 
E)  All withdrawals through an ATM.

Question 5

All of the following are considered effective cash management principles except:

Accepted Answer

A)  Keeping only necessary levels of assets. 
B)  Planning expenditures. 
C)  Delaying payment of liabilities until the last possible day. 
D)  Encouraging collection of receivables by offering discounts for early payments. 
E)  Retaining excess cash for unexpected expenditures. 
A)  Keeping only necessary levels of assets. 
B)  Planning expenditures. 
C)  Delaying payment of liabilities until the last possible day. 
D)  Encouraging collection of receivables by offering discounts for early payments. 
E)  Retaining excess cash for unexpected expenditures.

Question 6

Match between columns
                        Premises:  Cashiers have access to the cash register recorded tape or file.
 A company uses a voucher system, but the cash disbursement clerk pays directly from invoices received.
 Only sales clerks use the cash registered, but they all share the same cash drawer.
 The bookkeeper prepares and signs checks and completes the bank reconciliation.
 A restaurant allows servers to keep cash collected in their aprons and ring in all sales at the end of the night.
 A company fails to hire a CPA to perform an annual audit.
 A company does not bond its key cash-handling employees.
 A company has a single department that handles purchasing, receiving, and inventory management.
 A large company has no internal auditor on staff.
 A company manager keeps pre-signed checks in his desk drawer for employees to hand write when the accountant is out of the office.

Accepted Answer

The Answer of Establish responsibility and Maintain adequate records and is...

Question 7

Cash equivalents meet all of the following criteria except:

Accepted Answer

A)  Have a market value that is not sensitive to interest rate changes. 
B)  More liquid than cash. 
C)  Short-term investments purchased within 3 months of their maturity dates. 
D)  Readily convertible to a known cash amount. 
E)  Short-term U.S. treasury bills. 
A)  Have a market value that is not sensitive to interest rate changes. 
B)  More liquid than cash. 
C)  Short-term investments purchased within 3 months of their maturity dates. 
D)  Readily convertible to a known cash amount. 
E)  Short-term U.S. treasury bills.

Question 8

The following information is available to reconcile Dibble Co.'s book balance of cash with its bank statement cash balance as of April 30. The April 30 cash balance according to the accounting records is $68,356, and the bank statement cash balance for that date is $73,525.
a. The bank erroneously cleared a $480 check against the account in April that was not issued by Dibble. The check documentation included with the bank statement indicates the check was actually issued by Flushing Co.
b. On April 30, the bank issued a credit memorandum for $53 interest earned on Dibble's account.
c. When the April checks are compared with entries in the accounting records, it is found that Check No. 1828 had been correctly drawn for $1,530 to pay for advertising but was erroneously entered in the accounting records as $1,350.
105
d. A credit memorandum indicates that the bank collected $10,000 cash on a note receivable for Dibble, deducted a $30 collection fee, and credited the balance to the company's Cash account. Dibble did not record this transaction before receiving the statement.
e. A debit memorandum of $895 is enclosed with the bank statement for an NSF check for $870 received from a customer. The bank assessed a $25 fee for processing it.
f. Dibble's April 30 daily cash receipts of $5,102 were placed in the bank's night depository on that date, but do not appear on the April 30 bank statement.
g. Dibble's April 30 cash disbursements journal indicates that Check No. 1837 for $584 and Check No. 1840 for $1,219 were both written and entered in the accounting records, but are not among the canceled checks.
1. Prepare the bank reconciliation for this company as of April 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 April 30.

Accepted Answer

None

Question 9

Internal control in technologically advanced accounting systems depends less on the design and operation of the information system and more on the analysis of its resulting documents.

Accepted Answer

A) True 
 B)False

Question 10

The entry to establish a petty cash fund includes:

Accepted Answer

A)  A debit to Petty Cash and a credit to Accounts Receivable. 
B)  A debit to Petty Cash and a credit to Cash. 
C)  A debit to Cash and a credit to Petty Cash. 
D)  A debit to Cash and a credit to Petty Cash Over and Short. 
E)  A debit to Cash and a credit to Cash Over and Short. 
A)  A debit to Petty Cash and a credit to Accounts Receivable. 
B)  A debit to Petty Cash and a credit to Cash. 
C)  A debit to Cash and a credit to Petty Cash. 
D)  A debit to Cash and a credit to Petty Cash Over and Short. 
E)  A debit to Cash and a credit to Cash Over and Short.

Question 11

Akron Company purchased merchandise inventory costing $10,000 with credit terms of 2/10, n/30 on March 7. On March 15, the company paid 1/2 of the amount due. The remaining balance was paid on April 7.
Required:
a. Record the journal entries related to this transaction using the gross method of recording purchases.
b. Record the journal entries related to this transaction using the net method of recording purchases.

Accepted Answer

a.
 \[\begin{array} { | l | l | r | r |

Question 12

A voucher system is a set of procedures and approvals:

Accepted Answer

A)  Designed to determine if the company is operating profitably. 
B)  Used almost exclusively by small companies. 
C)  Designed to eliminate the need for subsidiary ledgers. 
D)  Used to ensure that the company sells on credit only to creditworthy customers. 
E)  Designed to control cash disbursements and the acceptance of obligations. 
A)  Designed to determine if the company is operating profitably. 
B)  Used almost exclusively by small companies. 
C)  Designed to eliminate the need for subsidiary ledgers. 
D)  Used to ensure that the company sells on credit only to creditworthy customers. 
E)  Designed to control cash disbursements and the acceptance of obligations.

Question 13

The impact of technology on internal controls includes:

Accepted Answer

A)  Elimination of the need for regular audits. 
B)  Reduced processing errors. 
C)  Elimination of separation of duties. 
D)  Elimination of fraud. 
E)  Elimination of the need to bond employees. 
A)  Elimination of the need for regular audits. 
B)  Reduced processing errors. 
C)  Elimination of separation of duties. 
D)  Elimination of fraud. 
E)  Elimination of the need to bond employees.

Question 14

Liquidity refers to a company's ability to pay its long-term obligations.

Accepted Answer

A) True 
 B)False

Question 15

The Petty Cash account is a separate bank account used for small amounts.

Accepted Answer

A) True 
 B)False

Question 16

When evaluating the days' sales uncollected ratio, generally the higher the receivables balance, the better the ratio.

Accepted Answer

A) True 
 B)False

Question 17

Two clerks sharing the same cash register is a violation of which internal control principle?

Accepted Answer

A)  Maintain adequate records. 
B)  Establish responsibilities. 
C)  Apply technological controls. 
D)  Bond key employees. 
E)  Insure assets. 
A)  Maintain adequate records. 
B)  Establish responsibilities. 
C)  Apply technological controls. 
D)  Bond key employees. 
E)  Insure assets.

Question 18

If a check that was outstanding on last period's bank reconciliation was not among the cancelled checks returned by the bank this period, in preparing this period's reconciliation, the amount of this check should be:

Accepted Answer

A)  Added to the book balance of cash as an outstanding check. 
B)  Deducted from the bank balance of cash as an outstanding check. 
C)  Deducted from the book balance of cash as an outstanding check. 
D)  Ignored in preparing the period's bank reconciliation as an outstanding check. 
E)  Added to the bank balance of cash as an outstanding check. 
A)  Added to the book balance of cash as an outstanding check. 
B)  Deducted from the bank balance of cash as an outstanding check. 
C)  Deducted from the book balance of cash as an outstanding check. 
D)  Ignored in preparing the period's bank reconciliation as an outstanding check. 
E)  Added to the bank balance of cash as an outstanding check.

Question 19

Outstanding checks, deposits in transit, and bank service charges are added to the beginning balance of the bank statement to determine the adjusted bank balance.

Accepted Answer

A) True 
 B)False

Question 20

A company records purchase invoices at net amounts. On March 5, the company recorded merchandise purchased, invoice price $17,000, terms 2/15, n/60. On March 24, this company discovered that the invoice had been incorrectly filed and the discount had been lost. The invoice was paid on April 1. Prepare journal entries to record these events.

Accepted Answer

\[\begin{array} { | c | c | l | r | r |

Exam 8: Cash and Internal Controls

A bank reconciliation explains any differences between the balance of a checking account on the depositor's records and the balance reported on the bank statement.

A voucher is an internal document or file:

A bank does not issue a debit memorandum to notify the depositor of which of the following?

All of the following are considered effective cash management principles except:

Cash equivalents meet all of the following criteria except:

Internal control in technologically advanced accounting systems depends less on the design and operation of the information system and more on the analysis of its resulting documents.

The entry to establish a petty cash fund includes:

A voucher system is a set of procedures and approvals:

The impact of technology on internal controls includes:

Liquidity refers to a company's ability to pay its long-term obligations.

The Petty Cash account is a separate bank account used for small amounts.

When evaluating the days' sales uncollected ratio, generally the higher the receivables balance, the better the ratio.

Two clerks sharing the same cash register is a violation of which internal control principle?

If a check that was outstanding on last period's bank reconciliation was not among the cancelled checks returned by the bank this period, in preparing this period's reconciliation, the amount of this check should be:

Outstanding checks, deposits in transit, and bank service charges are added to the beginning balance of the bank statement to determine the adjusted bank balance.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

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