Question 1

Once the company receives the inventory, it prepares a(n) ________ to list the goods received.

Accepted Answer

A)  invoice 
B)  purchase approval form 
C)  receiving report 
D)  EFT transfer 
A)  invoice 
B)  purchase approval form 
C)  receiving report 
D)  EFT transfer

Question 2

When approving an invoice for payment:

Accepted Answer

A)  the receiving department should examine the payment packet to make sure all the documents agree. 
B)  after payment, the payment packet should be stamped "paid". 
C)  checks should be returned to the department who prepared them for mailing. 
D)  the person who ordered the goods should examine the payment package to make sure all the documents agree. 
A)  the receiving department should examine the payment packet to make sure all the documents agree. 
B)  after payment, the payment packet should be stamped "paid". 
C)  checks should be returned to the department who prepared them for mailing. 
D)  the person who ordered the goods should examine the payment package to make sure all the documents agree.

Question 3

Most petty cash funds use an imprest system.

Accepted Answer

A) True 
 B)False

Question 4

A company is looking at various financing agreements. Bank A has agreed to loan the company $100,000 at an interest rate of 6%. This is the lowest interest rate the company has been offered. However, as a condition to the loan, the company must maintain a compensating balance amount equal to 10% of the loan. Determine the company's actual effective interest rate on the loan.

Accepted Answer

Compensating balance = 100,000

Question 5

Prepare the bank reconciliation for June 30 and make the journal entries that Apples Galore, Inc. should record on June 30 to update its cash account.
• The bank statement indicated a monthly service charge of $110.
• Janus made a deposit on June 30, but this deposit did not appear on the bank statement until July 6th. The amount of the deposit was, $1,835.
• An electronic funds deposit per the bank statement indicated the bank collected an account receivable of $700 from one of Apple Galore's customers.
• The bank also collected interest revenue for Apple Galore of $88.
• The bank also returned a nonsufficient funds check for $378 from John Able, one of Apple Galore's customers.
• Checks #1874 for $1,844, #1898 for $609, and #1899 for $875 were written by Apple Galore and sent to the respective companies, but these checks do not appear on the bank statement.
• The balance on the bank statement as of June 30 was $18,119.
• The Cash account on Apple Galore's books showed an amount of $16,326.

Accepted Answer

The answer of Prepare the bank reconciliation for June 30...

Question 6

If the bank records a deposit of $800 as $80, the error should be shown on a bank reconciliation as a(n):

Accepted Answer

A)  deduction from the book balance of $880. 
B)  deduction from the bank balance of $880. 
C)  addition to the bank balance of $720. 
D)  addition to the book balance of $720. 
A)  deduction from the book balance of $880. 
B)  deduction from the bank balance of $880. 
C)  addition to the bank balance of $720. 
D)  addition to the book balance of $720.

Question 7

Differences between the amount of cash reported on a company's bank statement and the balance in the company's cash account before the bank reconciliation are primarily due to:

Accepted Answer

A)  errors in the accounting process by the company. 
B)  errors made by the bank. 
C)  differences between the cash basis and accrual basis of accounting. 
D)  the timing difference in recording transactions. 
A)  errors in the accounting process by the company. 
B)  errors made by the bank. 
C)  differences between the cash basis and accrual basis of accounting. 
D)  the timing difference in recording transactions.

Question 8

Several large frauds occurred in 2001 and 2002. Which of the following was NOT a consequence of these frauds?

Accepted Answer

A)  Arthur Anderson, LLP was convicted of fraud but was allowed to stay in business. 
B)  There were adverse market reactions throughout the world. 
C)  Thousands of jobs were lost when Enron and WorldCom went out of business. 
D)  There was a loss of confidence in the financial reporting system. 
A)  Arthur Anderson, LLP was convicted of fraud but was allowed to stay in business. 
B)  There were adverse market reactions throughout the world. 
C)  Thousands of jobs were lost when Enron and WorldCom went out of business. 
D)  There was a loss of confidence in the financial reporting system.

Question 9

All mail is opened by a mail clerk, who forwards all of the cash remittances to the accounting department. The accounting department prepares a listing of the cash receipts and then forwards a copy of the list to the accounts receivable clerk, so she can record the payments in the accounts.
Can anything be done to strengthen the internal control procedures?

Accepted Answer

Yes, the mail clerk should prepare a lis

Question 10

The Toy Store borrowed $12,000 from the bank and agreed to keep $3,000 on deposit at all times. The net result of this compensating balance agreement is that:

Accepted Answer

A)  the Toy Store actually only borrowed $9,000. 
B)  the Toy Store actually only borrowed $3,000. 
C)  the actual interest rate is lower than the stated interest rate. 
D)  none of the above are true. 
A)  the Toy Store actually only borrowed $9,000. 
B)  the Toy Store actually only borrowed $3,000. 
C)  the actual interest rate is lower than the stated interest rate. 
D)  none of the above are true.

Question 11

The rule that all major groups of transactions should be supported by hard copy documents or electronic records is part of the control procedure of:

Accepted Answer

A)  limited access. 
B)  segregation of duties. 
C)  adequate records. 
D)  proper approvals. 
A)  limited access. 
B)  segregation of duties. 
C)  adequate records. 
D)  proper approvals.

Question 12

A company's comparisons and compliance monitoring:

Accepted Answer

A)  should include cash budgets, which are the budgets of future period's net income. 
B)  can contain "rolling" budgets which are constantly updated . 
C)  should include internal auditors who are completely independent of the business. 
D)  should contain adequate hiring practices. 
A)  should include cash budgets, which are the budgets of future period's net income. 
B)  can contain "rolling" budgets which are constantly updated . 
C)  should include internal auditors who are completely independent of the business. 
D)  should contain adequate hiring practices.

Question 13

ABC Store sells expensive watches. An inventory at the beginning of the day showed 40 watches in the store. 10 new watches were added to the inventory during the day. The point-of-sale terminal recorded 3 watches sold. An inventory taken at the end of the day should show how many watches still in the store?

Accepted Answer

A)  27 
B)  47 
C)  53 
D)  Cannot be determined from the data 
A)  27 
B)  47 
C)  53 
D)  Cannot be determined from the data

Once the company receives the inventory, it prepares a(n) ________ to list the goods received.

When approving an invoice for payment:

Most petty cash funds use an imprest system.

If the bank records a deposit of $800 as $80, the error should be shown on a bank reconciliation as a(n):

Differences between the amount of cash reported on a company's bank statement and the balance in the company's cash account before the bank reconciliation are primarily due to:

Several large frauds occurred in 2001 and 2002. Which of the following was NOT a consequence of these frauds?

The Toy Store borrowed $12,000 from the bank and agreed to keep $3,000 on deposit at all times. The net result of this compensating balance agreement is that:

The rule that all major groups of transactions should be supported by hard copy documents or electronic records is part of the control procedure of:

A company's comparisons and compliance monitoring:

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Short-Term Investments Receivables

Inventory Cost of Goods Sold

Plant Assets, Natural Resources, Intangibles

Long-Term Investments the Time Value of Money

Liabilities

Stockholders Equity

The Income Statement, the Statement of Comprehensive Income, the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

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Exam 4: Internal Control Cash

Once the company receives the inventory, it prepares a(n) ________ to list the goods received.

When approving an invoice for payment:

Most petty cash funds use an imprest system.

If the bank records a deposit of $800 as $80, the error should be shown on a bank reconciliation as a(n):

Differences between the amount of cash reported on a company's bank statement and the balance in the company's cash account before the bank reconciliation are primarily due to:

Several large frauds occurred in 2001 and 2002. Which of the following was NOT a consequence of these frauds?

The Toy Store borrowed $12,000 from the bank and agreed to keep $3,000 on deposit at all times. The net result of this compensating balance agreement is that:

The rule that all major groups of transactions should be supported by hard copy documents or electronic records is part of the control procedure of:

A company's comparisons and compliance monitoring:

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Short-Term Investments Receivables

Inventory Cost of Goods Sold

Plant Assets, Natural Resources, Intangibles

Long-Term Investments the Time Value of Money

Liabilities

Stockholders Equity

The Income Statement, the Statement of Comprehensive Income, the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Filters