Question 1

Which of the following is included in the internal control procedure-documents?

Accepted Answer

A)  Mandatory vacations will improve internal control. 
B)  Separate the custody of assets from accounting. 
C)  The invoices and orders must be pre-numbered. 
D)  A company should purchase a fireproof vault to protect legal documents. 
A)  Mandatory vacations will improve internal control. 
B)  Separate the custody of assets from accounting. 
C)  The invoices and orders must be pre-numbered. 
D)  A company should purchase a fireproof vault to protect legal documents.

Question 2

The Metro Construction Company had the following financial data as of December 31, 2018:
 $$\begin{array} { | l | r | } 
\hline \text { Cash } & \$ 90,000 \
\hline \text { Cash Equivalents } & 30,000 \
\hline \text { Accounts Receivable } & 55,000 \
\hline \text { Total current liabilities } & 80,000 \
\hline
\end{array}$$ $\begin{array}{lrr}
  \text {  Cash and cash equivalents} &\$120,000\
 \text {  Total cuurent liabilities} &80,000\
\end{array}$
 a. What is the cash ratio as of December 31, 2018? Show the formula and your computations.
b. Comment on the cash ratio for Metro Construction Company.

Accepted Answer

a.  b. The cash ratio is used to measure

Question 3

The data of Graham Brothers Corp. for two years are given below. $$\begin{array} { | l | r | r | } 
\hline & { \mathbf { 2 0 1 8 } } &  { \mathbf { 2 0 1 9 } } \
\hline \text { Cash and cash equivalents } & \$ 5,000 & \$ 12,100 \
\hline \text { Total current liabilities } & 21,000 & 34,000 \
\hline
\end{array}$$ Based on the above information, which of the following statements is true?

Accepted Answer

A)  Cash ratio has increased from 0.02 in 2018 to 0.03 in 2019. 
B)  Cash ratio has increased from 0.05 in 2018 to 0.08 in 2019. 
C)  Cash ratio has increased from 0.356 in 2018 to 0.238 in 2019. 
D)  Cash ratio has increased from 0.238 in 2018 to 0.356 in 2019. 
A)  Cash ratio has increased from 0.02 in 2018 to 0.03 in 2019. 
B)  Cash ratio has increased from 0.05 in 2018 to 0.08 in 2019. 
C)  Cash ratio has increased from 0.356 in 2018 to 0.238 in 2019. 
D)  Cash ratio has increased from 0.238 in 2018 to 0.356 in 2019.

Question 4

Cash is the most liquid asset reported on the balance sheet because it is the medium of exchange.

Accepted Answer

A) True 
 B)False

Question 5

Journal entries are required if the bank reconciliation includes a book error.

Accepted Answer

A) True 
 B)False

Question 6

Rearranging plain-text messages by a mathematical process is known as ________.

Accepted Answer

A)  password 
B)  phishing 
C)  encryption 
D)  virus 
A)  password 
B)  phishing 
C)  encryption 
D)  virus

Question 7

The bank statement reveals an EFT payment made to one of the company's suppliers that has not yet been recorded in the journal. How would this information be included on the bank reconciliation?

Accepted Answer

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

Question 8

Two or more people working together to circumvent internal controls and defraud a company is known as ________.

Accepted Answer

A)  encryption 
B)  firewall 
C)  collusion 
D)  separation of duties 
A)  encryption 
B)  firewall 
C)  collusion 
D)  separation of duties

Question 9

For good internal control, the purchasing agent should neither receive the goods nor approve the payment.

Accepted Answer

A) True 
 B)False

Question 10

For strong controls over cash receipts, the checks to be deposited should be sent to the treasurer, and the remittance advices should be sent to the accounting department.

Accepted Answer

A) True 
 B)False

Question 11

A business keeps cash in a bank account because banks have established practices for safeguarding the business's money.

Accepted Answer

A) True 
 B)False

Question 12

Evaluated receipts settlement (ERS) is a streamlined process that bypasses paper documents altogether.

Accepted Answer

A) True 
 B)False

Question 13

Debit card transactions are considered electronic funds transfers.

Accepted Answer

A) True 
 B)False

Question 14

The controller at Business Services Consulting needs new computers for the accounting department. However, there are no guidelines specifying whether the controller can approve purchases of office equipment. Which internal control procedure needs strengthening?

Accepted Answer

A)  assignment of responsibilities 
B)  competent, reliable, and ethical personnel 
C)  separation of duties 
D)  documents 
A)  assignment of responsibilities 
B)  competent, reliable, and ethical personnel 
C)  separation of duties 
D)  documents

Question 15

The payee is the issuer of a check.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following items must be examined by the controller or treasurer before signing a check?

Accepted Answer

A)  the ledger 
B)  the purchase order 
C)  the confirmation report 
D)  the journal entry 
A)  the ledger 
B)  the purchase order 
C)  the confirmation report 
D)  the journal entry

Question 17

Which of the following is a measure for discouraging theft for a retail store that accepts cash receipts over the counter?

Accepted Answer

A)  A receipt is issued for each transaction to ensure that each sale is recorded. 
B)  At the end of the day, the sales clerk proves the cash by comparing the cash in the drawer against the machine's record of cash sales. 
C)  The sales clerk uses the machine tape to record the journal entry for cash receipts and sales revenue. 
D)  The store clerk deposits the cash in the bank. 
A)  A receipt is issued for each transaction to ensure that each sale is recorded. 
B)  At the end of the day, the sales clerk proves the cash by comparing the cash in the drawer against the machine's record of cash sales. 
C)  The sales clerk uses the machine tape to record the journal entry for cash receipts and sales revenue. 
D)  The store clerk deposits the cash in the bank.

Question 18

Phillips, Inc. had the following financial data for the year ended December 31, 2019. $$\begin{array} { | l | r | } 
\hline \text { Cash } & \$ 44,000 \
\hline \text { Cash equivalents } & 79,000 \
\hline \text { Long term investments } & 55,000 \
\hline \text { Total current liabilities } & 145,000 \
\hline
\end{array}$$ What is the cash ratio as of December 31, 2019, for Phillips, Inc.? (Round your answer to two decimal
Places.)

Accepted Answer

A)  0.30 
B)  0.38 
C)  0.49 
D)  0.85 
A)  0.30 
B)  0.38 
C)  0.49 
D)  0.85

Question 19

Checking accounts and money market accounts are examples of cash equivalents.

Accepted Answer

A) True 
 B)False

Question 20

Burglar alarms, fire alarms, and security cameras improve internal control.

Accepted Answer

A) True 
 B)False

Exam 7: Internal Control and Cash

Which of the following is included in the internal control procedure-documents?

The data of Graham Brothers Corp. for two years are given below. Cash and cash equivalents \ 5,000 \ 12,100 Total current liabilities 21,000 34,000 Based on the above information, which of the following statements is true?

Cash is the most liquid asset reported on the balance sheet because it is the medium of exchange.

Journal entries are required if the bank reconciliation includes a book error.

Rearranging plain-text messages by a mathematical process is known as ________.

The bank statement reveals an EFT payment made to one of the company's suppliers that has not yet been recorded in the journal. How would this information be included on the bank reconciliation?

Two or more people working together to circumvent internal controls and defraud a company is known as ________.

For good internal control, the purchasing agent should neither receive the goods nor approve the payment.

For strong controls over cash receipts, the checks to be deposited should be sent to the treasurer, and the remittance advices should be sent to the accounting department.

A business keeps cash in a bank account because banks have established practices for safeguarding the business's money.

Evaluated receipts settlement (ERS) is a streamlined process that bypasses paper documents altogether.

Debit card transactions are considered electronic funds transfers.

The controller at Business Services Consulting needs new computers for the accounting department. However, there are no guidelines specifying whether the controller can approve purchases of office equipment. Which internal control procedure needs strengthening?

The payee is the issuer of a check.

Which of the following items must be examined by the controller or treasurer before signing a check?

Which of the following is a measure for discouraging theft for a retail store that accepts cash receipts over the counter?

Phillips, Inc. had the following financial data for the year ended December 31, 2019. Cash \ 44,000 Cash equivalents 79,000 Long term investments 55,000 Total current liabilities 145,000 What is the cash ratio as of December 31, 2019, for Phillips, Inc.? (Round your answer to two decimal Places.)

Checking accounts and money market accounts are examples of cash equivalents.

Burglar alarms, fire alarms, and security cameras improve internal control.

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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