Exam 7: Sarbanes-Oxley, Internal Control, and Cash

A customer's check received in settlement of an account receivable is considered cash.

The debit recorded in the journal to reimburse the petty cash fund is to

A person authorized to write checks drawn on a checking account at a bank must sign and have on file with the bank a

A necessary element of internal control is

The following selected transactions relate to cash collections for a firm that maintains a $100 change fund at all times. Present entries to record the transactions for each of the two days of cash receipts from sales.

A bank reconciliation should be prepared periodically because

The following procedures were recently implemented at the Pampered Pets, Inc. For each procedure, indicate whether the internal control over cash represents (1) a strength or (2) a weakness. If it is a weakness, please explain why. (a) At the end of the day, cash register clerks are required to use their own funds to make up any cash shortages in their registers. (b) At the end of the day, an accounting clerk compares the duplicate copy of the daily cash deposit slip with the deposit receipt obtained from the bank. (c) After necessary approvals have been obtained for the payment of a voucher, the treasurer signs and mails the check. The treasurer then stamps the voucher and supporting documentation as paid and returns the voucher and supporting documentation to the accounts payable clerk for filing. (d) Along with the petty cash expense receipts for postage, office supplies, etc., several post-dated employee checks are in the petty cash fund.

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 and 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?

Which of the following would be subtracted from the balance per bank on a bank reconciliation?

A bank reconciliation should be prepared

The following data were gathered to use in reconciling the bank account of Savannah Company: Balance per bank \ 16,750 Balance per company records 16,125 Bank service charges 80 Deposit in transit 2,195 NSF check 950 Outstanding checks 3,850 What is the adjusted balance on the bank reconcilition?

The amount of the "adjusted balance" appearing on the bank reconciliation as of a given date is the amount that is shown on the balance sheet for that date.

In preparing a bank reconciliation, the amount of outstanding checks is added to the balance per bank statement.

The doomsday ratio includes both cash and cash equivalents in the numerator.

Farm Store, Inc. reported the following data in its December 31, 2011 annual report. Required: (1) What is the company's "cash burn" per month? (2) What is the company's ratio of cash to monthly cash expenses? (3) Interpret the ratio you computed in part 2. What are the implications for Farm Store, Inc.

A voucher

Bank reconciliation information for Cole Co. for May 31, 2011 is as follows: Record the appropriate journal entry for Cole Co.

A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. What entry is required in the company's accounts?

What entry is required in the company's accounts to record outstanding checks?

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