Question 1

Cancelled checks are checks the bank has paid and deducted from the customer's account during the period.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

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

Question 3

A company records 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

The answer of A company records invoices at net amounts....

Question 4

A voucher system's control over cash disbursements begins when a company incurs an obligation that will result in eventual payment of cash.

Accepted Answer

A) True 
 B)False

Question 5

The voucher register is a journal that is used to record approved vouchers.

Accepted Answer

A) True 
 B)False

Question 6

Prepare the necessary general journal entries to adjust cash to the reconciled balance.

Accepted Answer

To prepare the necessary general journal

Question 7

A company's internal control system:

Accepted Answer

A)  Eliminates the company's risk of loss. 
B)  Monitors company and employee performance. 
C)  Eliminates human error. 
D)  Eliminates the need for audits. 
E)  Eliminates the need for managers' certification of controls. 
A)  Eliminates the company's risk of loss. 
B)  Monitors company and employee performance. 
C)  Eliminates human error. 
D)  Eliminates the need for audits. 
E)  Eliminates the need for managers' certification of controls.

Question 8

A company had the following transactions during January:   Using the net method of recording purchases, prepare the journal entries to record these January transactions.

Accepted Answer

The answer of A company had the following transactions during...

Question 9

A voucher system is a series of prescribed control procedures:

Accepted Answer

A)  Designed to eliminate the need for subsidiary ledgers. 
B)  Designed to determine if the company is operating profitably. 
C)  Used almost exclusively by small companies. 
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 eliminate the need for subsidiary ledgers. 
B)  Designed to determine if the company is operating profitably. 
C)  Used almost exclusively by small companies. 
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 10

The gross method of recording purchases refers to the method of recording:

Accepted Answer

A)  Purchases at the invoice price less any cash discounts. 
B)  Specified amounts and timing of payments that a buyer agrees to make in return for being granted credit. 
C)  Purchases at the full invoice price, without deducting any cash discounts. 
D)  Inventory at its selling price. 
E)  Inventory at the lower of cost or market. 
A)  Purchases at the invoice price less any cash discounts. 
B)  Specified amounts and timing of payments that a buyer agrees to make in return for being granted credit. 
C)  Purchases at the full invoice price, without deducting any cash discounts. 
D)  Inventory at its selling price. 
E)  Inventory at the lower of cost or market.

Question 11

The following information is available to reconcile Litner 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 $78,356, and the bank statement cash balance for that date is $83,525.
a. The bank erroneously cleared a $480 check against the account in April that was not issued by Litner. The check documentation included with the bank statement indicates the check was actually issued by Lightning Co.
b. On April 30, the bank issued a credit memorandum for $53 interest earned on Litner'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.
d. A credit memorandum indicates that the bank collected $10,000 cash on a note receivable for Litner, deducted a $30 collection fee, and credited the balance to the company's Cash account. Litner 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. Litner'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. Litner'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

The answer of The following information is available to reconcile...

Question 12

A voucher system establishes procedures for verifying, approving, and recording obligations for eventual cash disbursement.

Accepted Answer

A) True 
 B)False

Question 13

The document, also known as the check authorization, that is a checklist of steps necessary for approving an invoice for recording and payment is the

Accepted Answer

A)  Purchase requisition. 
B)  Purchase order. 
C)  Invoice. 
D)  Receiving report. 
E)  Invoice approval. 
A)  Purchase requisition. 
B)  Purchase order. 
C)  Invoice. 
D)  Receiving report. 
E)  Invoice approval.

Question 14

If a check correctly written and paid by the bank for $794 is incorrectly recorded in the company's books for $749, how should this error be treated on the bank reconciliation?

Accepted Answer

A)  Subtract $45 from the bank's balance. 
B)  Add $45 to the bank's balance. 
C)  Subtract $45 from the book balance. 
D)  Add $45 to the book balance. 
E)  Subtract $45 from the bank's balance and add $45 to the book's balancE.$794 - 749 = $45 
A)  Subtract $45 from the bank's balance. 
B)  Add $45 to the bank's balance. 
C)  Subtract $45 from the book balance. 
D)  Add $45 to the book balance. 
E)  Subtract $45 from the bank's balance and add $45 to the book's balancE.$794 - 749 = $45

Question 15

A company had net sales of $31,500 and ending accounts receivable of $2,700 for the current period. Its days' sales uncollected equals:

Accepted Answer

A)  11.7 days. 
B)  23.3 days. 
C)  31.3 days. 
D)  42.5 days. 
E)  46.6 days. 
A)  11.7 days. 
B)  23.3 days. 
C)  31.3 days. 
D)  42.5 days. 
E)  46.6 days.

Question 16

Describe the net method of accounting for purchases. Why do companies use the net method?

Accepted Answer

The net method assumes that a firm will

Question 17

The internal document prepared by a department manager that informs the purchasing department of its needs that lists the merchandise needed and requests that it be purchased is the

Accepted Answer

A)  Purchase requisition. 
B)  Purchase order. 
C)  Invoice. 
D)  Receiving report. 
E)  Invoice approval. 
A)  Purchase requisition. 
B)  Purchase order. 
C)  Invoice. 
D)  Receiving report. 
E)  Invoice approval.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

When a voucher system is used, recording a purchase is initiated by an invoice approval and a voucher, not an invoice.

Accepted Answer

A) True 
 B)False

Question 20

_________________________ is the use of electronic communication to transfer cash from one party to another.

Accepted Answer

Electronic

Exam 8: Cash and Internal Controls

Cancelled checks are checks the bank has paid and deducted from the customer's account during the period.

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

A voucher system's control over cash disbursements begins when a company incurs an obligation that will result in eventual payment of cash.

The voucher register is a journal that is used to record approved vouchers.

Prepare the necessary general journal entries to adjust cash to the reconciled balance.

A company's internal control system:

A company had the following transactions during January: Using the net method of recording purchases, prepare the journal entries to record these January transactions.

A voucher system is a series of prescribed control procedures:

The gross method of recording purchases refers to the method of recording:

A voucher system establishes procedures for verifying, approving, and recording obligations for eventual cash disbursement.

The document, also known as the check authorization, that is a checklist of steps necessary for approving an invoice for recording and payment is the

If a check correctly written and paid by the bank for $794 is incorrectly recorded in the company's books for $749, how should this error be treated on the bank reconciliation?

A company had net sales of $31,500 and ending accounts receivable of $2,700 for the current period. Its days' sales uncollected equals:

Describe the net method of accounting for purchases. Why do companies use the net method?

The internal document prepared by a department manager that informs the purchasing department of its needs that lists the merchandise needed and requests that it be purchased is the

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

When a voucher system is used, recording a purchase is initiated by an invoice approval and a voucher, not an invoice.

_________________________ is the use of electronic communication to transfer cash from one party to another.

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 Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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