Exam 7: Fraud, Internal Control, and Cash

The petty cash fund of $200 for Ginther Company appeared as follows on December 31, 2018: Cash $61.60 Petty cash vouchers Freight in $27.40 Postage 45.00 Balloons for a special occasion 63.00 Instructions 1. Briefly describe when the petty cash fund should be replenished. Because there is cash on hand, is there a need to replenish the fund at year end on December 31? Explain. 2. Prepare in general journal form the entry to replenish the fund. 3. On December 31, the office manager gives instructions to increase the petty cash fund by $50. Make the appropriate journal entry.

Electronic Funds Transfer (EFT) is a disbursement system that uses telephone or computer to transfer cash from one location to another.

In the month of May, Kijak Company Inc. wrote checks in the amount of $56,000. In June, checks in the amount of $76,000 were written. In May, $50,000 of these checks were presented to the bank for payment, and $66,000 in June. What is the amount of outstanding checks at the end of June?

The fraud triangle applies to

If a petty cash fund is established in the amount of $200, and contains $119 in cash and $84 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to the following accounts

The following information pertains to Manning Video Company. 1. Cash balance per bank, July 31, $8,363. 2. July bank service charge not recorded by the depositor $22. 3. The bank erroneously charged another company's $700 check against Manning's account. 4. Cash balance per books, July 31, $9,784. 5. The bank charged Manning's account $350 for a customer's NSF check. 6. Deposits in transit, July 31, $2,700. 7. Manning recorded a cash receipt from a customer as $32. The bank correctly recorded it at $23 8. Bank collected a $1,750 note for Manning in July, plus interest $36. Less collection fee $20.The collection has not been recorded by Manning and no interest has been accrued. 9. Outstanding check, July 31, $594. Instructions (a) Prepare a bank reconciliation at July 31. (b) Journalize the adjusting entries at July 31 on the books of Manning Video Company.

A check correctly written for $270 was incorrectly entered in the cash payments journal for $720. In preparing a bank reconciliation, $_____________ must be ______________ the cash balance per ______________.

Sarbanes Oxley applies to

The ______________ of an asset should not have access to the accounting records of that asset.

The cash account shows a balance of $90,000 before reconciliation. The bank statement does not include a deposit of $5,000 made on the last day of the month. The bank statement shows a collection by the bank of $2,400 and a customer's check for $640 was returned because it was NSF. A customer's check for $900 was recorded on the books as $1,080, and a check written for $138 was recorded as $192. The correct balance in the cash account was

Controls that enhance the accuracy and reliability of the accounting records are

Cash equivalents are highly liquid investments that can be converted into a specific amount of cash.

The principle of establishing responsibility does not include

Using the code letters below, indicate how each of the items listed would be handled in preparing a bank reconciliation. Enter the appropriate code letter in the space to the left of each item. A Add to cash balance per books B Deduct from cash balance per books C Add to cash balance per bank D Deduct from cash balance per bank E Does not affect the bank reconciliation Items: 1. Outstanding checks. 2. Bank service charge. 3. Check for $420 correctly written and paid by the bank but incorrectly entered in the cash payments journal for $240. 4. Deposit in transit. 5. Bank returns deposited check marked NSF. 6. Bank collects notes receivable and interest for depositor. 7. Bank debit memorandum for check printing fees. 8. Petty cash custodian has $91 in paid petty cash vouchers that have not been reimbursed. 9. Bank charged a check against the company which should have been charged to another company. 10. A check for $246 was correctly paid by the bank but was incorrectly entered in the cash payments journal for $264.

A credit balance in Cash Over and Short is reported as a(n)

The following information was used to prepare the March 2018, bank reconciliation for Walker Machine Works. Identify the items that require adjustment to the cash balance per books and prepare the appropriate adjusting entries. 1. Included with the bank statement materials was a check from Bob Simpson for $40 stamped "NSF." 2. A personal deposit by Annie Walker to her personal account in the amount of $300 for dividends on her General Electric common stock was credited to the company account. 3. The bank statement included a debit memorandum for $22.00 for two books of blank checks for Walker Machine Works. 4. The bank statement contains a credit memorandum for $24.75 interest on the average checking account balance. 5. The daily deposits of March 30 and March 31, for $3,362 and $3,125 respectively, were not included in the bank statement postings. 6. Two checks totaling $316.86, which were outstanding at the end of February, cleared in March and were returned with the March statement. 7. The bank statement included a credit memorandum dated March 28, 2018, for $45.00 for the monthly interest on a 6-month, $15,000 certificate of deposit that the company owns. 8. Four checks, #8712, #8716, #8718, #8719, totaling $5,369.65, did not clear the bank during March. 9. On March 24, 2018, Walker Machine Works delivered to the bank for collection a $4,500, 3-month note from Don Decker. A credit memorandum dated March 29, 2018, indicated the collection of the note and $90.00 of interest. 10. The bank statement included a debit memorandum for $25.00 for the collection service on the above note and interest.

Collusion may result when one individual circumvents prescribed controls and may significantly impair the effectiveness of a system.

Two individuals at a retail store work the same cash register. You evaluate this situation as

The extent of internal control features adopted by a company must be evaluated in terms of cost-benefit.

The independent internal verification principle involves each of the following except the ______________ of data prepared by other employees.