Question 1

Which of the following is the primary goal of internal controls for cash payments?

Accepted Answer

A)  Ensure that the business pays only for properly authorized transactions 
B)  Confirm that the request for payments is made by someone who is approved to order goods or services of the type and amount requested 
C)  Ensure that the supplier charges only for items received at approved prices 
D)  Make payments only when a purchase is supported by complete voucher documentation 
A)  Ensure that the business pays only for properly authorized transactions 
B)  Confirm that the request for payments is made by someone who is approved to order goods or services of the type and amount requested 
C)  Ensure that the supplier charges only for items received at approved prices 
D)  Make payments only when a purchase is supported by complete voucher documentation

Question 2

Which of the following statements relating to restricted cash is not correct?

Accepted Answer

A)  Restricted cash is not available for general use but rather restricted for a specific purpose. 
B)  Restricted cash must be reported separately on the balance sheet. 
C)  By including restricted cash as part of the amount reported as cash and cash equivalents, the company more clearly conveys to financial statement users the actual amount of cash available to pay liabilities. 
D)  Companies are sometimes legally or contractually required to set aside cash for a specific purpose and are not allowed to use it for day-to-day operations. 
A)  Restricted cash is not available for general use but rather restricted for a specific purpose. 
B)  Restricted cash must be reported separately on the balance sheet. 
C)  By including restricted cash as part of the amount reported as cash and cash equivalents, the company more clearly conveys to financial statement users the actual amount of cash available to pay liabilities. 
D)  Companies are sometimes legally or contractually required to set aside cash for a specific purpose and are not allowed to use it for day-to-day operations.

Question 3

A system used to reimburse employees for expenditures they have made on behalf of the organization is referred to as a:

Accepted Answer

A)  electronic funds transfer. 
B)  voucher system. 
C)  petty cash system. 
D)  internal control system. 
A)  electronic funds transfer. 
B)  voucher system. 
C)  petty cash system. 
D)  internal control system.

Question 4

All of the following are goals of internal control except:

Accepted Answer

A)  reducing the risk of fraud. 
B)  producing reliable and timely accounting information for use by people internal and external to the organization. 
C)  minimizing the amount of income taxes that must be paid. 
D)  adhering to laws and regulations. 
A)  reducing the risk of fraud. 
B)  producing reliable and timely accounting information for use by people internal and external to the organization. 
C)  minimizing the amount of income taxes that must be paid. 
D)  adhering to laws and regulations.

Question 5

On September 1,a company established a petty cash fund of $100.On September 10,the petty cash fund was replenished when there was $16 remaining and there were petty cash receipts for supplies,$27,and postage,$54.On September 15,the petty cash fund was increased to $125.
Required:
Prepare the journal entries,if any,required on September 1,September 10,and September 15.

Accepted Answer

The answer of On September 1,a company established a petty...

Question 6

Which of the following is not a correct statement regarding the Cash Shortage account?

Accepted Answer

A)  It account normally has a debit balance. 
B)  It is reported on the balance sheet. 
C)  It is reported as a miscellaneous expense. 
D)  If the recorded cash exceeds the cash counted, a shortage exists. 
A)  It account normally has a debit balance. 
B)  It is reported on the balance sheet. 
C)  It is reported as a miscellaneous expense. 
D)  If the recorded cash exceeds the cash counted, a shortage exists.

Question 7

Identify at least five reasons why the company's records might differ from the bank's records.Describe the purpose of a bank reconciliation and discuss why it is a key control.

Accepted Answer

The balance in a company's cash records

Question 8

Which of the following would overstate a company's net income?

Accepted Answer

A)  Counting shipments of customers' orders as revenue before payment has been received. 
B)  Shipping goods to customers without receiving orders from those customers, and recording the transactions as revenue. 
C)  Accruing liabilities for marketing expenses before they are incurred. 
D)  Making an accrual adjusting entry for interest earned on a bond investment. 
A)  Counting shipments of customers' orders as revenue before payment has been received. 
B)  Shipping goods to customers without receiving orders from those customers, and recording the transactions as revenue. 
C)  Accruing liabilities for marketing expenses before they are incurred. 
D)  Making an accrual adjusting entry for interest earned on a bond investment.

Question 9

A company's cash receipts procedures include the following.Cashiers collect cash and issue a receipt at the point of sale.Supervisors take custody of the cash at the end of each cashier's shift and deposit it in the bank.Accounting staff then ensure the receipts from cash sales are properly recorded in the accounting system.Which internal control principle is most evident with these procedures?

Accepted Answer

A)  Restrict access 
B)  Segregate duties 
C)  Document procedures 
D)  Independently verify 
A)  Restrict access 
B)  Segregate duties 
C)  Document procedures 
D)  Independently verify

Question 10

The bank will show a customer's deposit on bank statements as a:

Accepted Answer

A)  debit, because cash is an asset 
B)  credit, because a deposit is a liability from the bank's point of view 
C)  debit, because a deposit is a liability from the bank's point of view 
D)  credit, because cash is an asset 
A)  debit, because cash is an asset 
B)  credit, because a deposit is a liability from the bank's point of view 
C)  debit, because a deposit is a liability from the bank's point of view 
D)  credit, because cash is an asset

Question 11

Criminally minded employees have been known to override internal controls or do which of the following to get around them?

Accepted Answer

A)  Collude 
B)  Segregate duties 
C)  Disarm 
D)  Restrict access 
A)  Collude 
B)  Segregate duties 
C)  Disarm 
D)  Restrict access

Question 12

A difference between an imprest payroll account and petty cash is petty cash is:

Accepted Answer

A)  not held at the bank. 
B)  a special account at the company's bank. 
C)  used for payroll. 
D)  better controlled. 
A)  not held at the bank. 
B)  a special account at the company's bank. 
C)  used for payroll. 
D)  better controlled.

Question 13

Which of the following situations would cause the balance per bank to be more than the balance per books?

Accepted Answer

A)  Deposits in transit 
B)  Service charges 
C)  Outstanding checks 
D)  Checks from customers returned as NSF 
A)  Deposits in transit 
B)  Service charges 
C)  Outstanding checks 
D)  Checks from customers returned as NSF

Question 14

A bank service charge should be a(n)______ on a bank reconciliation.

Accepted Answer

A)  addition to the bank balance 
B)  deduction from the bank balance 
C)  addition to the book balance 
D)  deduction from the book balance 
A)  addition to the bank balance 
B)  deduction from the bank balance 
C)  addition to the book balance 
D)  deduction from the book balance

Question 15

Maple Industries Inc.deposits all cash receipts on the day when they are received and it makes all cash payments by check.At the close of business on December 31,its Cash account shows a debit balance of $18,303.The company's bank statement as of June 30 shows an ending cash balance of $15,921.The following information was also available.
-Outstanding checks as of December 31 total $2,261.
-Included with the bank statement was a debit memo in the amount of $35 for service charges.
-Check No.2519,listed with the canceled checks,was correctly drawn for $805 in payment of a utility bill on December 16.The company mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $850.
-The December 31 cash receipts of $3,425 were placed in the bank's night depository after banking hours and were not recorded on the December 31 bank statement.
-The bank deducted $1,228 for an NSF check from a customer deposited on December 10.
Required:
Prepare the journal entries for the items that would appear on the company's bank reconciliation as of December 31.(Do not prepare the bank reconciliation.)

Accepted Answer

The answer of Maple Industries Inc.deposits all cash receipts on...

Question 16

The Sarbanes-Oxley Act (SOX)requires the establishment of an audit committee that includes the:

Accepted Answer

A)  president of the company. 
B)  chief financial officer of the company. 
C)  independent directors. 
D)  company's external auditors. 
A)  president of the company. 
B)  chief financial officer of the company. 
C)  independent directors. 
D)  company's external auditors.

Question 17

Which of the following bank reconciliation items would not result in a journal entry?

Accepted Answer

A)  Service charge 
B)  Outstanding checks 
C)  A customer's check returned NSF 
D)  Interest earned on deposits 
A)  Service charge 
B)  Outstanding checks 
C)  A customer's check returned NSF 
D)  Interest earned on deposits

Question 18

DigDug Corporation had outstanding checks totaling $5,400 on its June bank reconciliation.In July,DigDug issued checks totaling $38,900.The July bank statement shows that $26,300 in checks cleared the bank in July.The amount of outstanding checks on DigDug's July bank reconciliation should be:

Accepted Answer

A)  $12,600. 
B)  $18,000. 
C)  $5,400. 
D)  $7,200. 
A)  $12,600. 
B)  $18,000. 
C)  $5,400. 
D)  $7,200.

Question 19

Flynn Company's monthly bank statement showed the ending balance of cash of $18,500.The bank reconciliation for the period showed an adjustment for a deposit in transit of $1,500, outstanding checks of $2,000, a NSF check of $700, bank service charges of $30 and the EFT from a customer in payment of the customer's account of $1,500.
-Use the information above to answer the following question.What journal entry should be recorded by Flynn Company for the EFT?

Accepted Answer

A)  Debit Cash and credit Accounts Receivable for $1,500 
B)  Debit Accounts Receivable and credit Cash for $1,500 
C)  Debit Cash and credit Sales Revenue for $1,500 
D)  No journal entry is necessary for this item. 
A)  Debit Cash and credit Accounts Receivable for $1,500 
B)  Debit Accounts Receivable and credit Cash for $1,500 
C)  Debit Cash and credit Sales Revenue for $1,500 
D)  No journal entry is necessary for this item.

Question 20

The company has $10,000 in its checking account,$20,000 in its savings account,$1,000 in petty cash,$25,000 in one-year Treasury bills,and $15,000 in a money market fund.What amount should be reported as cash and cash equivalents on the balance sheet?

Accepted Answer

A)  $30,000 
B)  $31,000 
C)  $46,000 
D)  $71,000 
A)  $30,000 
B)  $31,000 
C)  $46,000 
D)  $71,000

Which of the following is the primary goal of internal controls for cash payments?

Which of the following statements relating to restricted cash is not correct?

A system used to reimburse employees for expenditures they have made on behalf of the organization is referred to as a:

All of the following are goals of internal control except:

Which of the following is not a correct statement regarding the Cash Shortage account?

Identify at least five reasons why the company's records might differ from the bank's records.Describe the purpose of a bank reconciliation and discuss why it is a key control.

Which of the following would overstate a company's net income?

The bank will show a customer's deposit on bank statements as a:

Criminally minded employees have been known to override internal controls or do which of the following to get around them?

A difference between an imprest payroll account and petty cash is petty cash is:

Which of the following situations would cause the balance per bank to be more than the balance per books?

A bank service charge should be a(n)______ on a bank reconciliation.

The Sarbanes-Oxley Act (SOX)requires the establishment of an audit committee that includes the:

Which of the following bank reconciliation items would not result in a journal entry?

DigDug Corporation had outstanding checks totaling $5,400 on its June bank reconciliation.In July,DigDug issued checks totaling $38,900.The July bank statement shows that $26,300 in checks cleared the bank in July.The amount of outstanding checks on DigDug's July bank reconciliation should be:

The company has $10,000 in its checking account,$20,000 in its savings account,$1,000 in petty cash,$25,000 in one-year Treasury bills,and $15,000 in a money market fund.What amount should be reported as cash and cash equivalents on the balance sheet?

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments,financial Statements,and Financial Results

Internal Control and Financial Reporting for Cash and Merchandising Operations

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

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Exam 5: Fraud, Internal Control, and Cash

Which of the following is the primary goal of internal controls for cash payments?

Which of the following statements relating to restricted cash is not correct?

A system used to reimburse employees for expenditures they have made on behalf of the organization is referred to as a:

All of the following are goals of internal control except:

Which of the following is not a correct statement regarding the Cash Shortage account?

Identify at least five reasons why the company's records might differ from the bank's records.Describe the purpose of a bank reconciliation and discuss why it is a key control.

Which of the following would overstate a company's net income?

The bank will show a customer's deposit on bank statements as a:

Criminally minded employees have been known to override internal controls or do which of the following to get around them?

A difference between an imprest payroll account and petty cash is petty cash is:

Which of the following situations would cause the balance per bank to be more than the balance per books?

A bank service charge should be a(n)______ on a bank reconciliation.

The Sarbanes-Oxley Act (SOX)requires the establishment of an audit committee that includes the:

Which of the following bank reconciliation items would not result in a journal entry?

DigDug Corporation had outstanding checks totaling $5,400 on its June bank reconciliation.In July,DigDug issued checks totaling $38,900.The July bank statement shows that $26,300 in checks cleared the bank in July.The amount of outstanding checks on DigDug's July bank reconciliation should be:

The company has $10,000 in its checking account,$20,000 in its savings account,$1,000 in petty cash,$25,000 in one-year Treasury bills,and $15,000 in a money market fund.What amount should be reported as cash and cash equivalents on the balance sheet?

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments,financial Statements,and Financial Results

Internal Control and Financial Reporting for Cash and Merchandising Operations

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters