Question 1

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.

Question 2

What is the purpose of the days' sales uncollected ratio?

Accepted Answer

The answer of What is the purpose of the days'...

Question 3

Which of the following events would cause a bank to debit a depositor's account?

Accepted Answer

A)  The depositor authorizes the bank to charge the depositor's account $50 for new checks. 
B)  The bank collects a note receivable and related interest on the depositor's behalf. 
C)  The depositor determines there are outstanding checks drawn on the account at month-end. 
D)  The depositor determines there are deposits in transit on the account at month-end. 
E)  The bank determines it incorrectly charged the depositor's account twice for the monthly service charge in a previous month.

Question 4

The steps to reconcile the balance of the bank statement to the adjusted balance include adding outstanding checks, deposits, and bank service charges.

Accepted Answer

A) True 
 B)False

Question 5

Merchandise with an invoice price of $2,000 was purchased on October 3, terms 1/15, n/60. The company uses the net method to record purchases. The entry to record the cash payment of this purchase obligation on October 17 is:

Accepted Answer

A)  Debit Accounts Payable $1,980; credit Cash $1,980. 
B)  Debit Accounts Payable $2,000; credit Cash $2,000. 
C)  Debit Accounts Payable $1,980; credit Discounts Lost $20; credit Cash $2,000. 
D)  Debit Accounts Payable $2,000; credit Merchandise Inventory $20; credit Cash $1,980. 
E)  Debit Accounts Payable $2,000; credit Merchandise Inventory $40; credit Cash $1,960.

Question 6

A company purchased merchandise inventory costing $15,000 with credit terms of 2/10, n/30 on November 7. On November 15, the company paid 1/3 of the amount due. The remaining balance was paid on December 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

The answer of A company purchased merchandise inventory costing $15,000...

Question 7

The document that is an itemized statement of goods prepared by a vendor listing the customer's name, items sold, sales prices, and terms of the sale is the

Accepted Answer

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

Question 8

The document that the purchasing department prepares and sends to the vendor to place an order is the

Accepted Answer

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

Question 9

Match each of the following transactions 1 through 10 with the applicable internal control principle a through g (some answers refer to more than one principle).

Accepted Answer

The answer of Match each of the following transactions 1...

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Martha Company has an established petty cash fund in the amount of $500. The fund was last reimbursed on November 30. At the end of December, the fund contained the following petty cash receipts: If, in addition to these receipts, the petty cash fund contains $301 of cash, the journal entry to reimburse the fund on December 31 will include:

Accepted Answer

A)  A debit to Transportation-In of $73. 
B)  A debit to Transportation-Out of $73. 
C)  A credit to Office Supplies of $66. 
D)  A credit to Cash Over and Short of $10. 
E)  A debit to Cash Over and Short of $10.

Question 12

Discuss how the principles of internal control apply to cash receipts.

Accepted Answer

The answer of Discuss how the principles of internal control...

Question 13

A company had $43 missing from petty cash that was not accounted for by petty cash receipts. The correct procedure is to:

Accepted Answer

A)  Debit Cash Over and Short for $43. 
B)  Credit Cash Over and Short for $43. 
C)  Debit Petty Cash for $43. 
D)  Credit Petty Cash for $43. 
E)  Credit Cash for $43.

Question 14

Two limitations of internal control systems are ____________________ and _______________.

Accepted Answer

The answer of Two limitations of internal control systems are...

Question 15

What are the steps that must be completed before an invoice approval is complete and a voucher prepared?

Accepted Answer

The answer of What are the steps that must be...

Exam 8: Cash and Internal Controls