Exam 8: Internal Control and Cash

Smith Electronics reported the following figures in its 2017 and 2016 financial statements. Compute the cash ratio for 2017 and 2016. What does the cash ratio measure? Use this information to discuss the business performance of Smith Electronics.

The Public Company Accounting Oversight Board oversees the work of auditors of public companies.

Bank errors are posting errors made by the bank that either incorrectly increase or decrease the bank balance.

The bank recorded a $3,000 deposit as $300. How would this information be included on the bank reconciliation?

When calculating the cash ratio, the numerator includes cash equivalents.

Internal control is an organizational plan that ensures that the financial statements are prepared and submitted on time.

A check payment for $658 was incorrectly entered in the Cash account as $856. Which of the following adjustments needs to be made?

A petty cash fund was established with a $370 balance. It currently has cash of $40 and petty cash tickets totaling $330. Which of the following would be included in the entry to replenish the fund?

A company received a bank statement showing a balance of $78,000. Reconciling items included outstanding checks of $2,400 and a deposit in transit of $9,400. What is the company's adjusted bank balance?

Which of the following items are reconciling items on the bank side of the reconciliation?

Petty cash is a fund containing a small amount of cash that is used to pay for minor expenditures.

Which of the following describes the risk assessment component of internal control?

Prepare the journal entries for the following petty cash transactions of Allen Coffee Shop.

In a bank reconciliation, outstanding checks will be shown on the bank side of the reconciliation.

A key to strong control over petty cash is to ensure that several persons serve as custodian at one time.

Journal entries are required if the bank reconciliation includes a book error.

The controller at Horizon, Inc. needs new computers for the accounting department. However, there are no guidelines specifying whether the controller can approve purchases of office equipment. In the above situation, which internal control procedure needs strengthening?

A customer's check for $1,290 was returned for nonsufficient funds. Which of the following journal entries is needed to adjust for the NSF check?

Under the Sarbanes-Oxley Act, accounting firms are allowed to audit a public company and provide certain consulting services for the same client.

For strong controls over cash receipts, the checks to be deposited should be sent to the treasurer, and the remittance advices should be sent to the accounting department.