Exam 7: Fraud, Internal Control, and Cash

Match the internal control principle below with the appropriate cash disbursements procedure described. a. Establishment of responsibility b. Segregation of duties c. Documentation procedures d. Physical controls e. Independent internal verification f. Human resource controls _____ 1. Compare checks to invoices. _____ 2. Different individuals approve and make payments. _____ 3. Print check amounts by machine with indelible ink. _____ 4. Only designated personnel are authorized to sign checks. _____ 5. Each check must have approved invoice. _____ 6. Requiring employees to take vacations.

Nolan Company had checks outstanding totaling $14,400 on its June bank reconciliation. In July, Nolan Company issued checks totaling $103,800. The July bank statement shows that $64,800 in checks cleared the bank in July. A check from one of Nolan Company's customers in the amount of $800 was also returned marked "NSF." The amount of outstanding checks on Nolan Company's July bank reconciliation should be

Medaid is a medical office management franchise. There are currently twenty-five medical offices managed by a Medaid franchisee. One of the services provided to franchisees is assistance in training various staff members. Medaid is preparing a manual for the front office staff to use as a reference guide. It will be used in training new employees as well. One of the reasons the manual is being prepared is to stress the importance of strong internal controls. Required: Prepare a short paragraph, to be included in the training materials, describing the benefits of sound internal control, from the viewpoint of the employee.

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

Replenishing the petty cash fund requires

El Greco Inc'.s month-end bank statement shows a balance of €51,000, outstanding checks are €11,000, a deposit of €2,500 which was in transit at month end. In reconciling the bank statement, El Greco discovered that a check for €500 was erroneously charged by the bank against the company's account. The adjusted balance in the bank account at month end is

Maximum benefit from independent internal verification is obtained when

The principle of internal control that prevents one individual from being responsible for all the related activities of a given task is ______________.

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?

Prepare the entry to replenish the $200 petty cash fund of Kruger Company, assuming the fund has receipts for: freight-out $60, postage $105, and miscellaneous expense $20. The fund contains $8 in cash.

The cash balance per books for Feagen Company on September 30, 2014 is $10,740.93. The following checks and receipts were recorded for the month of October, 2014: In addition, the bank statement for the month of October is presented below: Check No. 18 was correctly written for $708.62 for a payment on account. The NSF check was from S. Long, a customer, in settlement of an accounts receivable. An entry had not been made for the NSF check. The credit memo is for the collection of a note receivable including interest of $60 which has not been accrued. The bank service charge is $35.00. Instructions (a) Prepare a bank reconciliation at October 31. (b) Prepare the adjusting journal entries required by the bank reconciliation.

Which of the following items would be reported as cash on the statement of financial position?

Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them

A bank statement

Bank errors

A check returned by the bank marked "NSF" means

Franco Company wrote checks totaling €37,090 during June and €38,650 during July. In June, €36,250 of these checks cleared the bank. In July, checks of €38,230 cleared the bank. What was the amount of outstanding checks at July 31?

Riley Company received a notice with its bank statement that the bank had collected a note receivable for ₤8,000 plus ₤400 of interest. The bank had credited these amounts to Riley's account less a collection fee of ₤10. Riley Company had already accrued the interest for this note on its books. (a) How will these items affect Riley Company's bank reconciliation? (b) Prepare the journal entry that Riley Company will make to record this information on its books.