Exam 7: Fraud, Internal Control, and Cash

A remittance advice attached to a company check provides

In the month of May, Grimm Company. wrote checks in the amount of $92,500. In June, checks in the amount of $126,580 were written. In May, $84,680 of these checks were presented to the bank for payment, and $108,830 in June. What is the amount of outstanding checks at the end of May?

Listed below are seven errors or problems which might occur in the processing of cash transactions. Also shown is a list of internal control principles. Evaluate each possible error and cite a principle that is listed that would reduce the probability of the error occurring. If none of the principles given will correct the problem, write "None." If you think more than one principle is appropriate, list all principles that apply. Possible Errors or Problems 1. An employee steals the cash collected from a customer for an account receivable and conceals this theft by issuing a credit memorandum indicating that the customer returned the merchandise. 2. A small fire destroys 3 days of cash receipts. 3. The official designated to sign checks is able to steal blank checks and issue them without fear of detection. 4. A salesclerk in serving customers often rings up a sale for less than the actual amount and then keeps the additional cash collected from the customer. 5. Three cashiers use one cash register drawer and the cash in the drawer is often short of the balance kept on hand. 6. Each cashier counts his own register drawer each day and verbally reports the results to the supervisor. 7. Cashiers with over 5 years' experience are not bonded. Internal Control Principles a. Establishment of responsibility b. Segregation of duties c. Physical controls d. Documentation procedures e. Independent internal verification

Storing cash in a company safe is an application of which internal control principle?

Cash equivalents are currently reported as short-term investments on the statement of financial position.

Which one of the following is not an objective of a system of internal controls?

The custodian of a company asset should

Internal control is most effective when several people are responsible for a given task.

In preparing its June 30, 2014 bank reconciliation, Huang Company has the following information available: The adjusted cash balance at June 30, 2014 is

Tavarez Company assembled the following information in completing its July bank reconciliation: balance per bank $22,920; outstanding checks $4,650; deposits in transit $7,500; NSF check $480; bank service charge $150; cash balance per books $26,400. As a result of this reconciliation, Tavarez will

Longfellow Company gathered the following reconciling information in preparing its April bank reconciliation: The adjusted cash balance per books at April 30 is

In preparing its bank reconciliation for the month of December 2014, Reinhardt Company has the following information available What amount should be reported for cash on the company's December 31, 2014 statement of financial position?

The petty cash fund of CHF200 for the Hansen Company appeared as follows on July 31, 2014: On July 31, the office manager gives instruction to increase the petty cash fund to CHF300. The journal entry to replenish the petty cash fund would include a

Using _______________ documents is a control measure which helps in accounting for all documents in a series and also prevents a document from being recorded more than once.

A $200 petty cash fund has cash of $36 and receipts of $168. The journal entry to replenish the account would include a

The cash records of Landis Company show the following four situations. 1. The June 30 bank reconciliation indicated that deposits in transit total $1,080. During July the general ledger account Cash shows deposits of $23,620, but the bank statement indicates that only $21,400 in deposits were received during the month. 2. The June 30 bank reconciliation also reported outstanding checks of $1,020. During the month of July, Landis Company books show that $26,800 of checks were issued. The bank statement showed that $24,600 of checks cleared the bank in July. 3. In September, deposits per the bank statement totaled $40,100, deposits per books were $38,100, and deposits in transit at September 30 were $3,150. 4. In September, cash disbursements per books were $36,550, checks clearing the bank were $37,500, and outstanding checks at September 30 were $3,150. There were no bank debit or credit memoranda. No errors were made by either the bank or Landis Company. Instructions Answer the following questions. (a) In situation (1), what were the deposits in transit at July 31? (b) In situation (2), what were the outstanding checks at July 31? (c) In situation (3), what were the deposits in transit at August 31? (d) In situation (4), what were the outstanding checks at August 31?

In preparing a bank reconciliation, outstanding checks are ______________ from the cash balance per ______________.

Certificates of deposit are currently classified as cash on the statement of financial position.