Exam 7: Fraud, Internal Control, and Cash

The following credit sales are budgeted by Milford Company: May \ 357,000 June 525,000 July 735,000 August 630,000 The company's past experience indicates that 70% of the accounts receivable are collected in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale. The anticipated cash inflow for the month of August is

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

If a check correctly written and paid by the bank for $491 is incorrectly recorded on the company's books for $419, the appropriate treatment on the bank reconciliation would be to

A $100 petty cash fund has cash of $16 and receipts of $86. The journal entry to replenish the account would include a

Deposits in transit

A $200 petty cash fund has cash of $26 and receipts of $170. The journal entry to replenish the account would include

Which of the following would not be subtracted from the balance per books on a bank reconciliation?

The bank statement for Cates Company indicates a balance of $1,730 on June 30. The cash balance per books had a balance of $799 on this date. The following information pertains to the bank transactions for the company. 1. Deposit of $760, representing cash receipts of June 30, did not appear on the bank statement. 2. Outstanding checks totaled $340. 3. Bank service charges for June amounted to $25 4. The bank collected a note receivable for the company for $1,400 plus $56 interest revenue. 5. An NSF check for $80 from a customer was returned with the statement. Instructions a. Prepare a bank reconciliation for June 30. b. Prepare any adjusting entries necessary as a result of the bank reconciliation.

Which of the following is not an internal control procedure for cash?

Identify which of the following reconciling items would require an adjusting entry to be made by Costello Company. 1. Deposits in transit totaled $2,000. 2. A check written to the company for $350 by Grover 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.

IFRS, compared to GAAP, tends to be more

If a check correctly written and paid by the bank for $628 is incorrectly recorded on the company's books for $682, the appropriate treatment on the bank reconciliation would be to

A consequence of separation of duties is that

Employees who handle cash should be ______________ in order to protect against misappropriation of assets by dishonest employees.

A very small company would have the most difficulty in implementing which of the following internal control activities?

An exception to disbursements being made by check is acceptable when cash is paid

Holcomb Company expects to have a cash balance of $43,000 on January 1, 2014. These are the relevant monthly budget data for the first two months of 2014. 1. Collections from customers: January $85,000, February $132,000 2. Payments to suppliers: January $40,000, February $50,000 3. Wages: January $34,000, February $40,000. Wages are paid in the month they are incurred. 4. Administrative expenses: January $24,000, February $31,000. These costs include depreciation of $1,000 per month. All other costs are paid as incurred. 5. Selling expenses: January $15,000, February $20,000. These costs are exclusive of depreciation. They are paid as incurred. 6. Sales of short-term investments in January are expected to realize $12,000 in cash. Holcomb has a line of credit at a local bank that enables it to borrow up to $40,000. The company wants to maintain a minimum monthly cash balance of $25,000. Instructions Prepare a cash budget for January and February.

Sound internal control activities dictate that the amount of cash on hand should be kept to a maximum.

Which of the following is not a basic principle of cash management?

Identify the internal control procedures applicable to cash receipts for Colorado Company in each of the following situations. 1. All cashiers are bonded. 2. The treasurer compares the total cash receipts to the bank deposit daily. 3. The bookkeeper records cash receipts which are held by the treasurer. 4. Only the treasurer holds cash receipts. 5. Deposit slips are completed for each deposit.