Question 1

Refer to the following bank reconciliation:   Journalize the adjusting entry for the second reconciling item: interest revenue.

Accepted Answer

The answer of Refer to the following bank reconciliation: ...

Question 2

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

Accepted Answer

A) Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate. 
B) Risk assessment is the "tone at the top" of the business. 
C) A company must identify its risks and take necessary steps to minimize it. 
D) Risk assessment is designed to ensure that the business's goals are achieved. 
A) Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate. 
B) Risk assessment is the "tone at the top" of the business. 
C) A company must identify its risks and take necessary steps to minimize it. 
D) Risk assessment is designed to ensure that the business's goals are achieved.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

A system cannot be overcome or broken into if its internal controls are properly designed and structured.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is used by companies to separate cash duties and establish stronger control over cash receipts?

Accepted Answer

A) an encryption system 
B) an imprest system 
C) a lock-box system 
D) a firewall system 
A) an encryption system 
B) an imprest system 
C) a lock-box system 
D) a firewall system

Question 6

Separation of duties is a part of the definition of internal control.

Accepted Answer

A) True 
 B)False

Question 7

In a bank reconciliation, a deposit in transit will be shown on the bank side of the reconciliation.

Accepted Answer

A) True 
 B)False

Question 8

A receiving report should be matched with the supplier invoice before a payment to the supplier is approved.

Accepted Answer

A) True 
 B)False

Question 9

The cash ratios of four companies are listed below.   Which company has the maximum ability to repay its short-term debts?

Accepted Answer

A) Juan Corp. 
B) Rose Inc. 
C) Freelance Inc. 
D) Pioneer Corp. 
A) Juan Corp. 
B) Rose Inc. 
C) Freelance Inc. 
D) Pioneer Corp.

Question 10

The bookkeeper of Fire Steel Inc. recorded a $1,524.00 check as $15,240 in payment of the current month's rent. Which of the following journal entries is needed to adjust for this error in the books of the company?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 11

Which of the following is the most basic internal control measure for cash?

Accepted Answer

A) keeping money in a bank account 
B) checking for counterfeit bills 
C) counting cash receipts twice 
D) internal audit of cash procedures 
A) keeping money in a bank account 
B) checking for counterfeit bills 
C) counting cash receipts twice 
D) internal audit of cash procedures

Question 12

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

Accepted Answer

A) a deduction on the bank side 
B) a deduction on the book side 
C) an addition on the book side 
D) an addition on the bank side 
A) a deduction on the bank side 
B) a deduction on the book side 
C) an addition on the book side 
D) an addition on the bank side

Question 13

In reconciling a bank statement, the bank balance is $1,500 and the checkbook balance is $2,105. Which of the following is the most probable reason for the checkbook balance being larger than the bank balance?

Accepted Answer

A) The bank has not cleared certain outstanding checks. 
B) The bank has added interest revenue to the account balance. 
C) A deposit in transit was made at the end of the month. 
D) The bank received an EFT from a customer. 
A) The bank has not cleared certain outstanding checks. 
B) The bank has added interest revenue to the account balance. 
C) A deposit in transit was made at the end of the month. 
D) The bank received an EFT from a customer.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Which of the following would be included in the journal to record an NSF check?

Accepted Answer

A) a debit to Accounts Payable and a credit to Cash 
B) a debit to Accounts Receivable and a credit to Cash 
C) a debit to Cash and a credit to Accounts Receivable 
D) a debit to Bank Expense and a credit to Cash 
A) a debit to Accounts Payable and a credit to Cash 
B) a debit to Accounts Receivable and a credit to Cash 
C) a debit to Cash and a credit to Accounts Receivable 
D) a debit to Bank Expense and a credit to Cash

Question 16

A petty cash fund was established with a $500 balance. It currently has cash of $20 and petty cash tickets as shown below.   Which of the following would be the journal entry to replenish the Petty Cash account?

Accepted Answer

A) debit various expenses $480; credit Cash $480 
B) debit various expenses $480; credit Petty Cash $480 
C) debit Cash $20; credit various expenses $20 
D) credit Petty Cash $480; debit Cash $480 
A) debit various expenses $480; credit Cash $480 
B) debit various expenses $480; credit Petty Cash $480 
C) debit Cash $20; credit various expenses $20 
D) credit Petty Cash $480; debit Cash $480

Question 17

The following information is needed to reconcile the cash balance for Fire Steel Inc. • A deposit of $5,800 is in transit.
• Outstanding checks total $1,500.
• The book balance is $6,800 at February 28, 2013.
• The bookkeeper recorded a $1,740 check as $17,400 in payment of the current month's rent.
• The bank balance at February 28, 2013 was $18,000.
• A deposit of $400 was credited by the bank for $4,000.
• A customer's check for $3,700 was returned for nonsufficient funds.
• The bank service charge is $60.
What was the adjusted book balance?

Accepted Answer

A) $18,720 
B) $18,060 
C) $18,700 
D) $18,820 
A) $18,720 
B) $18,060 
C) $18,700 
D) $18,820

Question 18

The journal entry to open a new petty cash fund includes a debit to the Petty Cash account and a credit to the Cash account.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) outstanding checks and correction of book error 
B) deposit in transit and NSF check 
C) deposit in transit and outstanding checks 
D) bank service charge and correction of book error 
A) outstanding checks and correction of book error 
B) deposit in transit and NSF check 
C) deposit in transit and outstanding checks 
D) bank service charge and correction of book error

Question 20

A company's cash ledger shows an ending balance of $4,000. Reconciling items included a bookkeeper error of $100 (a $500 check recorded as $600), two outstanding checks totaling $820, a service charge of $25, a deposit in transit of $280, and interest revenue of $31. What is the adjusted book balance?

Accepted Answer

A) $3,894 
B) $3,460 
C) $4,106 
D) $4,540 
A) $3,894 
B) $3,460 
C) $4,106 
D) $4,540

Exam 8: Internal Control and Cash

Refer to the following bank reconciliation: Journalize the adjusting entry for the second reconciling item: interest revenue.

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

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

A system cannot be overcome or broken into if its internal controls are properly designed and structured.

Which of the following is used by companies to separate cash duties and establish stronger control over cash receipts?

Separation of duties is a part of the definition of internal control.

In a bank reconciliation, a deposit in transit will be shown on the bank side of the reconciliation.

A receiving report should be matched with the supplier invoice before a payment to the supplier is approved.

The cash ratios of four companies are listed below. Which company has the maximum ability to repay its short-term debts?

The bookkeeper of Fire Steel Inc. recorded a $1,524.00 check as $15,240 in payment of the current month's rent. Which of the following journal entries is needed to adjust for this error in the books of the company?

Which of the following is the most basic internal control measure for cash?

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

In reconciling a bank statement, the bank balance is $1,500 and the checkbook balance is $2,105. Which of the following is the most probable reason for the checkbook balance being larger than the bank balance?

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

Which of the following would be included in the journal to record an NSF check?

A petty cash fund was established with a $500 balance. It currently has cash of $20 and petty cash tickets as shown below. Which of the following would be the journal entry to replenish the Petty Cash account?

The journal entry to open a new petty cash fund includes a debit to the Petty Cash account and a credit to the Cash account.

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

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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