Exam 4: Internal Controls, Accounting for Cash, and Ethics

The May 31, 2014, balance per bank statement for Upton Company was $7,200. The cash balance per books was $9,500. Outstanding checks amounted to $800, and deposits in transit were $2,400. The bank statement contained an NSF check for $500, a service charge for $25, and a debit memo for direct payment of the telephone bill of $175. Required: Prepare a bank reconciliation to determine the true cash balance at May 31, 2014.

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(Essay)

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Question 1

Correct Answer:

Verified

$\begin{array}{lc}\text { Balance per bank } & \$ 7,200 \\\text { Add: Deposit in transit } & 2,400 \\\text { Less: Outstanding checks } & (800)\\\text { True cash balance }&\$ 8,800\\\text { Balance per books } & \$ 9,500 \\\text { Less, NSF check } & (500) \\\text { Service charge } & (25) \\\text { Debit memo } & (175)\\\text { True cash balance }&\$8,800\end{array}$

Indicate whether each of the following statements is true or false. -Deposits in transit appear on the bank statement as credit memos

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(True/False)

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Question 2

Correct Answer:

Verified

False

Indicate whether each of the following statements regarding internal control is true or false. -Administrative controls are concerned with the reliability of a business's financial statements

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(True/False)

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Question 3

Correct Answer:

Verified

False

For internal control purposes, what is meant by "separation of duties?"

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Question 4

Effective internal controls for cash include:

(Multiple Choice)

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Question 5

Indicate whether each of the following statements regarding internal controls is true or false. -The design of the internal control system varies from company to company

(True/False)

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Question 6

The bank statement for Ronson Company included a debit memo for a bank service charge of $58. Required: a) Show the effects of recognizing the bank service charge on the financial statements by recording appropriate amounts in the financial statements model provided. Include dollar amounts of increases and decreases; for cash flow, indicate whether it is an operating activity, investing activity, or financing activity. b) Is the recognition of the bank service charge an asset source, use, or exchange transaction?

(Essay)

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Question 7

Indicate whether each of the following statements is true or false. -Service fees charged by a bank appear on bank statements as debit memos

(True/False)

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Question 8

Indicate whether each of the following statements about cash receipts is true or false. -A record of all cash collections should be made immediately upon receipt

(True/False)

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Question 9

Which of the following is not considered an accounting control?

(Multiple Choice)

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Question 10

The confidentiality rules in the AICPA's code of ethics for CPAs prohibits accountants

(Multiple Choice)

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Question 11

The Sarbanes-Oxley Act

(Multiple Choice)

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Question 12

How will a certified check be treated in a company's bank reconciliation?

(Multiple Choice)

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Question 13

Which of the following is an internal control procedure used to safeguard a company's assets?

(Multiple Choice)

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Question 14

Indicate whether each of the following statements about cash receipts is true or false. -Cash that a business collects late in the day should be deposited with the next day's cash receipts

(True/False)

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Question 15

Which of the following statements about materiality is true.

(Multiple Choice)

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Question 16

In preparing bank reconciliations, typical adjustments to the bank balance include

(Multiple Choice)

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Question 17

The April 30, 2014 bank statement for Tuttle Corporation shows an ending balance of $34,451. The unadjusted cash account balance was $28,350. The accountant for Tuttle gathered the following information: 1) April's deposit in transit was $4,240 2) The bank statement reports a service charge of $39 3) A credit memo included in the bank statement shows interest earned of $95 4) Outstanding checks totaled $10,935 5) The bank statement included a customer's $650 NSF check deposited in April What is the true cash balance as of April 30, 2014?

(Multiple Choice)

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Question 18

What is an outstanding check?

(Essay)

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Question 19

Indicate whether each of the following statements about a bank statement is true or false. -The confidentiality rules of the AICPA's code of ethics for CPAs only applies to audit engagements

(True/False)

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Question 20

Indicate whether each of the following statements is true or false. -Deposits in transit appear on the bank statement as credit memos

Indicate whether each of the following statements regarding internal control is true or false. -Administrative controls are concerned with the reliability of a business's financial statements

For internal control purposes, what is meant by "separation of duties?"

Effective internal controls for cash include:

Indicate whether each of the following statements regarding internal controls is true or false. -The design of the internal control system varies from company to company

Indicate whether each of the following statements is true or false. -Service fees charged by a bank appear on bank statements as debit memos

Indicate whether each of the following statements about cash receipts is true or false. -A record of all cash collections should be made immediately upon receipt

Which of the following is not considered an accounting control?

The confidentiality rules in the AICPA's code of ethics for CPAs prohibits accountants

The Sarbanes-Oxley Act

How will a certified check be treated in a company's bank reconciliation?

Which of the following is an internal control procedure used to safeguard a company's assets?

Indicate whether each of the following statements about cash receipts is true or false. -Cash that a business collects late in the day should be deposited with the next day's cash receipts

Which of the following statements about materiality is true.

In preparing bank reconciliations, typical adjustments to the bank balance include

What is an outstanding check?

Indicate whether each of the following statements about a bank statement is true or false. -The confidentiality rules of the AICPA's code of ethics for CPAs only applies to audit engagements

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

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