Question 1

The group within an organization that is responsible for monitoring and evaluating the internal control system is called:

Accepted Answer

A)  the audit committee. 
B)  the internal audit staff. 
C)  the board of directors. 
D)  the accounting staff.

Question 2

Match the following terms with the best definitions for questions 212 through 219.
-Typically sent along with a remittance advice.

Accepted Answer

A) Purchase requisition. 
B) Receiving Report. 
C) Vendor Invoice. 
D) Check. 
E) Control procedures.
F)Inventory count.
G)Segregation of duties.
H)Source document control.

Question 3

Typically the classification known as readily available refers to investments that are converted into cash in _______________ months or less.

Accepted Answer

The answer of Typically the classification known as readily available...

Question 4

When reconciling a bank account, the company does not have to prepare an adjusting entry for outstanding checks.

Accepted Answer

A) True 
 B)False

Question 5

Blairsville Corp.prepares monthly bank reconciliations of its checking account balance.The bank statement for July 2016 indicated the following: $\begin{array}{lr}
\text { Balance, July } 31,2016 & \$ 63,400 \
\text { Service charge for July } & 160 \
\text { Interest earned during July } & 100 \
\text { NSF check from Black Corp. (deposited by Blairsville) } & 1,150 \
\text { Note }(\$ 3,000) \text { and interest }(\$ 80) \text { collected for Blairsville from a } & 3,080 \
\text { customer of Blairsville's } &
\end{array}$ ​
An analysis of canceled checks and deposits and the records of Blairsville revealed the following items: $\begin{array}{lr}
\text { Checking account balance per Blairsville's books } & \$ 58,770 \
\text { Outstanding checks as of July } 31 & 4,630 \
\text { Deposit in transit at July } 31 & 1,780 \
\text { Error in recording check \#205 issued by Blairsville } & 90\
\end{array}$ ​
The correct amount of check #205 is $540, but it was recorded as a cash disbursement of $450.The check was issued to pay for merchandise purchases.The check appeared on the bank statement correctly.
A) Prepare a bank reconciliation schedule at July 31, 2016, in proper form.
​
B) What amount would Blairsville report on its balance sheet at July 31, 2016, for cash?
​

Accepted Answer

The answer of Blairsville Corp.prepares monthly bank reconciliations of its...

Question 6

Match
Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation.
-Interest earned on the checking account for May

Accepted Answer

A) Addition to bank balance 
B) Subtraction from bank balance 
C) Addition to book balance 
D) Subtraction from book balance 
E) Would not appear on the May reconciliation

Question 7

Match
Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation.
-Check written on the company's account and paid by the bank is returned with the bank statement

Accepted Answer

A) Addition to bank balance 
B) Subtraction from bank balance 
C) Addition to book balance 
D) Subtraction from book balance 
E) Would not appear on the May reconciliation

Question 8

Which of the following represents the subset of board of directors that acts as a direct contact between stockholders and the independent accounting firm?

Accepted Answer

A)  External Auditors 
B)  Internal audit staff 
C)  Audit Committee 
D)  Stockholders' representative

Question 9

A credit memorandum appeared on Central Company's bank statement.How will Central treat this amount on its bank reconciliation?

Accepted Answer

A)  Add it to the bank balance 
B)  Add it to the book balance 
C)  Deduct from the bank balance 
D)  Deduct from the book balance

Question 10

Gentech Corp.prepared a bank reconciliation as of June 30, 2016.The following items were identified: $$\begin{array} { l r } 
\text { Gentech's bank balance } & \$ 14,300 \
\text { Deposits in transit } & \$ 1,000 \
\text { Outstanding checks } & 1,300 \
\text { Bank service charges } & 50 \
\text { Customer's NSF check returned by the bank } & 150
\end{array}$$ ? Gentech's adjusted cash balance at June 30, 2016 is

Accepted Answer

A)  $13,800 
B)  $14,100 
C)  $14,000 
D)  $14,300

Question 11

Which of the following statements is false regarding a credit memorandum?

Accepted Answer

A)  A credit memorandum is added to the balance per the company's books 
B)  A credit memorandum could be issued for interest earned on checking balances 
C)  A credit memorandum is issued when the bank collects a note for the customer. 
D)  A credit memorandum is subtracted from the balance per the company's books.

Question 12

Match
Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation.
-Customer's check which was deposited on May 31 is not listed on the bank statement

Accepted Answer

A) Addition to bank balance 
B) Subtraction from bank balance 
C) Addition to book balance 
D) Subtraction from book balance 
E) Would not appear on the May reconciliation

Question 13

Euro Corp.began the year with $19,000 in cash and another $1,000 in cash equivalents.During the year, operations generated $132,000 in cash.Net cash used in investing activities during the year was $213,000, and the company raised a net amount of $168,000 from financing activities.
Required:
Determine the year-end balance in cash and cash equivalents.

Accepted Answer

The answer of Euro Corp.began the year with $19,000 in...

Question 14

One concern of the internal auditor is the efficiency with which the organization is run.

Accepted Answer

A) True 
 B)False

Question 15

The accountant for Lola Corp.was preparing a bank reconciliation as of February 28, 2016.The following items were identified: $\begin{array}{lr}
\text { Lola's book balance } & \$ 35,900 \
\text { Outstanding checks } & 12,050 \
\text { Interest earned on checking accounts } & 75 \
\text { Customer's NSF check returned by the bank } & 325\
\end{array}$ There was an error in recording a customer's check as the check was recorded by Lola as $110, but the correct amount of $101 was recorded by the bank. Lola's adjusted cash balance at February 28, 2016 is

Accepted Answer

A)  $23,591 
B)  $35,641 
C)  $35,659 
D)  $47,691

Question 16

The following set of items describes activities completed by a company in collecting cash for merchandise sales.For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. Cash register tapes are picked up daily by an employee from the accounting department.

Accepted Answer

A)  Adheres to sound internal control procedures 
B)  Violates sound internal control procedures 
C)  Neither strengthens nor violates internal control

Question 17

Which one of the following items would be added to the balance per bank statement in a bank reconciliation?

Accepted Answer

A)  Outstanding checks 
B)  Deposits in transit 
C)  Service charge 
D)  Interest on customer note

Question 18

For the following items Questions 220-227, indicate whether each should be (a) included or (b) excluded from the line item titled Cash and cash equivalents on the balance sheet.
-Petty cash

Accepted Answer

A) Included 
B) Excluded

Question 19

For the following items Questions 220-227, indicate whether each should be (a) included or (b) excluded from the line item titled Cash and cash equivalents on the balance sheet.
-Certificate of deposit maturing in six months

Accepted Answer

A) Included 
B) Excluded

Question 20

____________________ are those investments that are readily convertible into known amounts of cash and that have an original maturity to the investor of three months or less.

Accepted Answer

The answer of ____________________ are those investments that are readily...

Exam 6: Cash and Internal Control

The group within an organization that is responsible for monitoring and evaluating the internal control system is called:

Match the following terms with the best definitions for questions 212 through 219. -Typically sent along with a remittance advice.

Typically the classification known as readily available refers to investments that are converted into cash in _______________ months or less.

When reconciling a bank account, the company does not have to prepare an adjusting entry for outstanding checks.

Match Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation. -Interest earned on the checking account for May

Match Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation. -Check written on the company's account and paid by the bank is returned with the bank statement

Which of the following represents the subset of board of directors that acts as a direct contact between stockholders and the independent accounting firm?

A credit memorandum appeared on Central Company's bank statement.How will Central treat this amount on its bank reconciliation?

Which of the following statements is false regarding a credit memorandum?

Match Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation. -Customer's check which was deposited on May 31 is not listed on the bank statement

One concern of the internal auditor is the efficiency with which the organization is run.

Which one of the following items would be added to the balance per bank statement in a bank reconciliation?

For the following items Questions 220-227, indicate whether each should be (a) included or (b) excluded from the line item titled Cash and cash equivalents on the balance sheet. -Petty cash

For the following items Questions 220-227, indicate whether each should be (a) included or (b) excluded from the line item titled Cash and cash equivalents on the balance sheet. -Certificate of deposit maturing in six months

____________________ are those investments that are readily convertible into known amounts of cash and that have an original maturity to the investor of three months or less.