Exam 4: Internal Control Cash

Slowinski Company is preparing its cash budget for the upcoming year. It anticipates the following cash receipts and cash payments for the year: Collections from customers $ 999,400 Operating expenses paid 360,000 Interest on investments 12,000 Proceeds from sale of machinery 45,000 Purchase of inventory 407,000 Payment of interest expense 14,000 Payment for land 75,000 Payment of long-term debt 23,000 Using the information above, prepare Slowinski's cash budget for the upcoming year. The cash balance at the beginning of the year is $46,400. The minimum cash balance according to management is $100,000.

When a company uses a bank lock-box system, internal control is tight because company personnel never touch incoming cash.

A compensating balance agreement requires a borrower to maintain a maximum balance in a checking account at all times.

The New Jewelry Store sells mostly costume jewelry, but it also sells an expensive watch brand. The owner of the store is concerned about monitoring sales and inventory of the watches. He decided to perform a quick inventory count of the watches on a daily basis as a control procedure. The owner counts 63 watches at the end of business on Thursday. On Friday, a shipment of 24 watches is received. The point-of-sale terminal for Friday indicates that 6 watches were sold that day. A quick inventory of watches at the end of business on Friday indicates that 70 watches are on hand. How many, if any, watches are probably stolen?

Outside auditors are responsible for establishing and maintaining adequate internal controls for each company they audit.

Another term for a "hot check" is:

A bank statement included a NSF check from customer Kim Fields for $2,100. The journal entry to record this reconciling item should:

Nichols Co. has the following information for the second quarter of 2017: Cash balance, March 31 $ 15,000 Sales for April; all cash 200,000 Sales for May; all cash 300,000 Sales for June; all cash 400,000 Cost of Goods Sold is 75% of Sales; all cash Operating expenses is 10% of Sales; all cash Purchase a new computer in June with cash 65,000 Interest expense is paid in May 40,000 Income taxes paid: April 9,000 May 1,500 June 18,000 The minimum cash balance for any month is $10,000. Prepare a cash budget for each month in the second quarter of 2017, showing any excess cash or any financing needed. Any interest on the financing will be deferred until the fiscal year end in December.

In a bank reconciliation, items recorded by the bank, but not yet recorded by the company, include:

The type of fraud committed by employees of an entity, who steal money from the company and cover it up through erroneous entries in the books, is called:

The owner of Samuelson Inc. has reason to believe that an employee has been stealing cash from the company. The employee receives cash from clients, makes the bank deposit, and also prepares the monthly bank reconciliation. To check up on the employee, the owner prepares the following bank reconciliation: Samuelson Inc. Bank Reconciliation September 30 1. Does it appear the employee has stolen from the company? If so, how much? Explain your answer. 2. Which side of the bank reconciliation shows the company's TRUE cash balance?

Opportunity in the fraud triangle arises from:

Which of the following is a CORRECT statement about the petty cash fund?

After approving an invoice for payment:

A check received from a customer for which there are not sufficient funds in the bank to cover the amount of the check is a(n):

When reporting cash on the balance sheet, companies:

Cash and cash equivalents include accounts receivable expected to be collected within 90 days or less.

In most reported fraud cases, fraudsters exhibit one or more behavioral red flags. Which of the following is NOT one of these behavioral red flags?

Most companies have numerous bank accounts, but they usually combine all cash amounts into a single total called "Cash and Cash Equivalents."

Internal controls for cash receipts over the counter and for cash receipts by mail are identical.