Question 1

If a bank reconciliation includes interest revenue collected by a bank, a journal entry is required which credits Cash and debits Interest Revenue.

Accepted Answer

A) True 
 B)False

Question 2

The following information is available for Ashley Company for the month ending June 30, 2019.
• Balance as per the bank statement is $11,240.
• Balance as per books is $10,200.
• Check #506 for $1,200 and check #510 for $900 were not shown on the June 30 bank statement.
• A deposit in transit of $3,110 had not been received by the bank when the bank statement
 $$\text { was generated. }$$ • A bank debit memo indicated an NSF check for $85 written by Maddie Wolfe to
 $$\text { Ashley Company on June } 13$$ • A bank credit memo indicated a note collected by the bank of $2,100 and interest revenue
 $$\text { of } \$ 55 \text { on June } 20$$ • The bank statement indicated service charges of $20.
Prepare bank reconciliation for Ashley Company for June 30, 2019.

Accepted Answer

Ashley Company
 Bank

Question 3

If a company does not protect its assets, it is throwing away resources.

Accepted Answer

A) True 
 B)False

Question 4

Electronic data interchange (EDI) allows a retailer's computers to communicate with the computers of suppliers.

Accepted Answer

A) True 
 B)False

Question 5

Martin Inc. has a cash ratio of 0.3. This implies that the company ________.

Accepted Answer

A)  has an unnecessarily large amount of cash supply 
B)  is not sending a strong message to investors and creditors that it has the ability to repay its short-term debt 
C)  is not in a position to meet its long-term obligations 
D)  has no liquidity issues 
A)  has an unnecessarily large amount of cash supply 
B)  is not sending a strong message to investors and creditors that it has the ability to repay its short-term debt 
C)  is not in a position to meet its long-term obligations 
D)  has no liquidity issues

Question 6

Which of the following is an attribute of the internal control procedure-competent, reliable, and ethical personnel?

Accepted Answer

A)  providing cross training to allow sales personnel to record revenue transactions 
B)  the need to train and supervise employees 
C)  monitoring of internal controls by external auditors 
D)  purchase of burglar alarms 
A)  providing cross training to allow sales personnel to record revenue transactions 
B)  the need to train and supervise employees 
C)  monitoring of internal controls by external auditors 
D)  purchase of burglar alarms

Question 7

The party who issues a check is the maker.

Accepted Answer

A) True 
 B)False

Question 8

The bank statement shows the beginning and ending balances of cash in a bank account, cash receipts and payments, and the names of all individuals who are authorized to sign checks.

Accepted Answer

A) True 
 B)False

Question 9

In a bank reconciliation, a book error will be shown on the bank side of the reconciliation.

Accepted Answer

A) True 
 B)False

Question 10

A cash equivalent is a highly liquid investment that can be converted into cash in one year or less.

Accepted Answer

A) True 
 B)False

Question 11

Having a cash ratio above 1.0 implies that a company has enough cash and cash equivalents to pay current liabilities.

Accepted Answer

A) True 
 B)False

Question 12

In addition to the account number, a check shows the 9-digit routing number.

Accepted Answer

A) True 
 B)False

Question 13

Refer to the following bank reconciliation:
  
- Journalize the adjusting entry for the first reconciling item: Note collected by bank. Omit explanation.

Accepted Answer

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Question 14

Which one of the following is true of a signature card?

Accepted Answer

A)  It shows each authorized person's signature for a bank account. 
B)  It is the same as a deposit receipt and acts as a proof of the deposit transaction. 
C)  It can be used as a debit card. 
D)  It can only be used for bank accounts of individuals, not for the bank accounts of businesses. 
A)  It shows each authorized person's signature for a bank account. 
B)  It is the same as a deposit receipt and acts as a proof of the deposit transaction. 
C)  It can be used as a debit card. 
D)  It can only be used for bank accounts of individuals, not for the bank accounts of businesses.

Question 15

Which of the following is NOT a reason why paying by check is an important internal control?

Accepted Answer

A)  The check provides a record of the payment. 
B)  The check must be signed by an authorized official. 
C)  Before signing the check, the purchasing agent reviews the invoice or other evidence supporting the payment. 
D)  All of the above statements are correct. 
A)  The check provides a record of the payment. 
B)  The check must be signed by an authorized official. 
C)  Before signing the check, the purchasing agent reviews the invoice or other evidence supporting the payment. 
D)  All of the above statements are correct.

Question 16

A basic procedure of internal control over cash receipts is that the deposit of the cash and the recording of the receipts into the journal should be separated.

Accepted Answer

A) True 
 B)False

Question 17

To ensure that there is no collusion between the manager and sales clerks, the accounting department employees deposit the cash in the bank and use the deposit slip to prepare the journal entry for cash receipts and sales revenue.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is NOT an acceptable task for a retail store manager?

Accepted Answer

A)  making the cash deposit at the bank 
B)  proving the cash by comparing the cash in the drawer against the point-of-sale terminal's record of cash sales 
C)  using the point-of-sale terminal's tape to record the journal entry for sales revenue 
D)  overseeing the work of the sales clerks 
A)  making the cash deposit at the bank 
B)  proving the cash by comparing the cash in the drawer against the point-of-sale terminal's record of cash sales 
C)  using the point-of-sale terminal's tape to record the journal entry for sales revenue 
D)  overseeing the work of the sales clerks

Question 19

List the five components of internal control.

Accepted Answer

control procedures,

Question 20

Mercury Company established a petty cash fund with a $500 balance. Which of the following statements is incorrect?

Accepted Answer

A)  A journal entry is needed to debit the Cash account and credit the Petty Cash account for $500. 
B)  There is no net effect on current assets. 
C)  The sum of the cash plus the total of the petty cash tickets should equal $500 at all times. 
D)  The petty cash custodian cashes a check for $500 and places the currency in the petty cash fund box. 
A)  A journal entry is needed to debit the Cash account and credit the Petty Cash account for $500. 
B)  There is no net effect on current assets. 
C)  The sum of the cash plus the total of the petty cash tickets should equal $500 at all times. 
D)  The petty cash custodian cashes a check for $500 and places the currency in the petty cash fund box.

Exam 7: Internal Control and Cash

If a bank reconciliation includes interest revenue collected by a bank, a journal entry is required which credits Cash and debits Interest Revenue.

If a company does not protect its assets, it is throwing away resources.

Electronic data interchange (EDI) allows a retailer's computers to communicate with the computers of suppliers.

Martin Inc. has a cash ratio of 0.3. This implies that the company ________.

Which of the following is an attribute of the internal control procedure-competent, reliable, and ethical personnel?

The party who issues a check is the maker.

The bank statement shows the beginning and ending balances of cash in a bank account, cash receipts and payments, and the names of all individuals who are authorized to sign checks.

In a bank reconciliation, a book error will be shown on the bank side of the reconciliation.

A cash equivalent is a highly liquid investment that can be converted into cash in one year or less.

Having a cash ratio above 1.0 implies that a company has enough cash and cash equivalents to pay current liabilities.

In addition to the account number, a check shows the 9-digit routing number.

Refer to the following bank reconciliation: - Journalize the adjusting entry for the first reconciling item: Note collected by bank. Omit explanation.

Which one of the following is true of a signature card?

Which of the following is NOT a reason why paying by check is an important internal control?

A basic procedure of internal control over cash receipts is that the deposit of the cash and the recording of the receipts into the journal should be separated.

To ensure that there is no collusion between the manager and sales clerks, the accounting department employees deposit the cash in the bank and use the deposit slip to prepare the journal entry for cash receipts and sales revenue.

Which of the following is NOT an acceptable task for a retail store manager?

List the five components of internal control.

Mercury Company established a petty cash fund with a $500 balance. Which of the following statements is incorrect?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Receivables

Plant Assets, Natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based Just-In-Time

Cost Volume Profit Analysis

Variable Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Understanding Accounting Information Systems and their Components

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