Exam 7: Fraud, Internal Control, and Cash

Rodriguez Company gathered the following reconciling information in preparing its February bank reconciliation: The cash balance reported on the February 28 statement of financial position will be

Cash equivalents under GAAP

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?

Osborn Company assembled the following information in completing its March bank reconciliation: balance per bank $11,460; outstanding checks $2,325; deposits in transit $3,750; NSF check $240; bank service charge $75; cash balance per books $13,200. As a result of this reconciliation, Osborn will

Below are descriptions of internal control problems. In the space to the left of each item, enter the code letter of the one best internal control principle that is related to the problem described. 1. The same person opens incoming mail and posts the accounts receivable subsidiary ledger. 2. Three people handle cash sales from the same cash register drawer. 3. A clothing store is experiencing a high level of inventory shortages because people try on clothing and walk out of the store without paying for the merchandise. 4. The person who is authorized to sign checks approves purchase orders for payment. 5. Some cash payments are not recorded because checks are not prenumbered. 6. Cash shortages are not discovered because there are no daily cash counts by supervisors. 7. The treasurer of the company has not taken a vacation for over 20 years.

Using prenumbered checks and having an approved invoice for each check is an example of

An example of poor internal control is

Short-term, highly liquid investments are currently reported as short-term investments on the statement of financial position.

Identify whether each of the following items would be (a) added to the book balance, (b) deducted from the book balance in a bank reconciliation, (c) added to the bank balance, or (d) deducted from the bank balance. 1. Deposits in transit 2. Bank service charge 3. Collection of note and interest by bank on company's behalf 4. NSF check 5. Outstanding checks

Wynn Company developed the following reconciling information in preparing its September bank reconciliation: Determine the cash balance per books (before adjustments) for Wynn Company.

Important objectives of a system of internal controls are to safeguard assets and to enhance the accuracy and reliability of the accounting records. Briefly discuss how (1) cost-benefit considerations, (2) the human element, and (3) the size of the business, affect the implementation of a system of internal controls.

Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry:

The following reconciling items are applicable to the bank reconciliation for the Hunsicker Company. Indicate how each item should be shown on a bank reconciliation. a. Outstanding checks. b. Bank credit memorandum for collecting a note for the depositor. c. Bank debit memorandum for service charge. d. Deposit in transit.

Identify which of the following reconciling items would require an adjusting entry to be made by Farrell Company. 1. Deposits in transit totaled $2,000. 2. A check written to the company for $350 by Harder Company was returned NSF. 3. The bank charged the company $46 for printing checks. 4. Outstanding checks totaled $1,667. 5. A debit memorandum reported an EFT of $178 to Paco Utilities.

In general, documents should be prenumbered and all documents should be accounted for.

A __________________ fund is used to pay relatively small expenditures.

In order to prevent a transaction from being recorded more than once, a company should maintain only one book of original entry.

To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by an employee who has no other responsibilities pertaining to cash.

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

The Sarbanes-Oxley Act applies to