Exam 7: Internal Control and Cash

In the normal operation of business, you receive a check from a customer and deposit it into your checking account. With your bank statement you are advised that this check for $775 is "NSF." The bank also informs you that due to the amount of activity on your business account the monthly service charge is $75. During a bank reconciliation, you will

A firm's internal control environment is not influenced by

Which one of the following below is not an element of internal control?

A voucher is a form on which is recorded pertinent data about a liability and the particulars of its payment.

How is the Internal Control-Integrated Framework used by companies?

An element of internal control is

Which of the following is a reason that businesses use bank accounts as part of their internal control measures.

Match the following elements of internal control: -monitoring

Match each item to a bank statement adjustment, a company books adjustment, or either. -Note collected by the bank

The bank reconciliation is an important part of the system of internal controls.

Using the following information, prepare a bank reconciliation for Miller Co. for August 31:

The bank statement for Farmer Co. indicates a balance of $7,735.00 on June 30. After the journal entries for June had been posted, the cash account had a balance of $4,098.00. Prepare a bank reconciliation on the basis of the following reconciling items: ​ (a) Cash sales of $\$ 742$ had been erroneously recorded in the cash receipts journal as $\$ 724$ . (b) Deposits in transit not recorded by bank, $\$ 425$ . (c) Bank debit memo for service charges, $\$ 35$ . (d) Bank credit memo for note collected by bank, $\$ 2,475$ including $\$ 75$ interest. (e) Bank debit memo for $\$ 256 \mathrm { NSF }$ (not sufficient funds) check from Janice Smith, a customer. (f) Checks outstanding, $\$ 1,860$ .

Which of the following should not be considered cash by an accountant?

The effect of a debit memo on the company's books decreases an asset. On the bank's records, the debit memo:

Cash equivalents

Selected financial statement data for two years ended December 31 for Carey Co. follow. Assets are reported at their year-end value. ​ Year 2 Year 1 Cash \ 32,500 \ 30,100 Short-term investments 9,400 10,200 Operating expenses 72,800 70,400 Depreciation expense 12,000 11,200 ​ Calculate the days' cash on hand for the two years, rounding all calculations to one decimal place.

a $1,000 note from one of your customers was collected by the bank

The following bank reconciliation was prepared as of July 31 for Maestro Corp. ​ ​ (a) Identify the errors in the bank reconciliation. Assume that both cash balances before adjustment are correct. (b) Prepare a corrected bank reconciliation. ​

The bank often informs the company of bank service charges by including a credit memo with the monthly bank statement.

You began your new job as the accountant at Bolivar Industries during the month of December. During your first month, you found several interesting issues. 1) While looking through the invoices, you found Invoices 213-242, 245-271, and 275-290. It appears that invoices 243, 244, 272, 273, and 274 are missing. 2) During the month, Clerk # 3 issued $250 in refunds as compared to Clerks #1, #2, and #4 who issued less than $50 each. 3) The daily cash receipts and bank deposits reconcile, except on Tuesdays during the month. 4) Business is generally brisk during the holiday season, but two weeks before Christmas there was a sudden increase in slow payments. Part A: What kind of warning signs could be associated with these issues? Part B: What control could you put in place regarding cash refunds mentioned in Part A (2)?