Question 1

It is difficult and costly to plan controls that can prevent collusion.

Accepted Answer

A) True 
 B)False

Question 2

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 3

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 4

Which of the following is representative of safeguarding assets?

Accepted Answer

A)  attaching electronic sensors to merchandise inventory 
B)  reducing expenses to increase operating profit 
C)  increasing operating profit to increase net income 
D)  allowing company accountants to handle cash 
A)  attaching electronic sensors to merchandise inventory 
B)  reducing expenses to increase operating profit 
C)  increasing operating profit to increase net income 
D)  allowing company accountants to handle cash

Question 5

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 6

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

Accepted Answer

A) True 
 B)False

Question 7

Debit card transactions are considered electronic funds transfers.

Accepted Answer

A) True 
 B)False

Question 8

Which is the most liquid form of asset?

Accepted Answer

A)  cash 
B)  accounts receivable 
C)  inventory 
D)  supplies 
A)  cash 
B)  accounts receivable 
C)  inventory 
D)  supplies

Question 9

Journal entries that arise from reconciling items on the book side of the bank reconciliation include either a debit to Cash or a credit to Cash.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Cash equivalents are included in the calculation of the cash ratio.

Accepted Answer

A) True 
 B)False

Question 12

The cash ratios of four companies are listed below. $$\begin{array} { | l | c | } 
\hline \text { Company } & \text { Cash Ratio } \
\hline \text { Tuan Company } & 0.22 \
\hline \text { Rose Company } & 0.10 \
\hline \text { Freelance Company } & 0.16 \
\hline \text { Pioneer Company } & 0.28 \
\hline
\end{array}$$ Which company has the highest ability to repay its current liabilities?

Accepted Answer

A)  Juan Company 
B)  Rose Company 
C)  Freelance Company 
D)  Pioneer Company 
A)  Juan Company 
B)  Rose Company 
C)  Freelance Company 
D)  Pioneer Company

Question 13

A company received a bank statement with a balance of $6,100.Reconciling items included a bookkeeper error of $400-a $400 check recorded as $800-two outstanding checks totaling $810,a service charge of $24,a deposit in transit of $270,and interest revenue of $21.What is the adjusted bank balance?

Accepted Answer

A)  $5,205 
B)  $5,160 
C)  $4,757 
D)  $5,560 
A)  $5,205 
B)  $5,160 
C)  $4,757 
D)  $5,560

Question 14

The bank's routing number ________.

Accepted Answer

A)  contains 10 digits 
B)  identifies the bank upon which the payment is drawn 
C)  includes the account number of the business 
D)  is not shown on the check 
A)  contains 10 digits 
B)  identifies the bank upon which the payment is drawn 
C)  includes the account number of the business 
D)  is not shown on the check

Question 15

For the following situation,state whether it represents a strength or weakness in internal control and give the reason for your answer.
The bookkeeper opens the mail,makes the deposit,and makes the journal entries to record receipt of the cash and checks.

Accepted Answer

Weakness
Separation of duties

Question 16

A petty cash fund was established with a $200 balance.It currently has cash of $35 and petty cash tickets as follows: Office expense $130 and Entertainment Expense $45.Which of the following would be included in the journal entry to replenish the Petty Cash fund?

Accepted Answer

A)  debit to Cash Short & Over for $25 
B)  credit to Cash Short & Over for $10 
C)  credit to Cash Short & Over for $25 
D)  debit to Cash Short & Over for $10 
A)  debit to Cash Short & Over for $25 
B)  credit to Cash Short & Over for $10 
C)  credit to Cash Short & Over for $25 
D)  debit to Cash Short & Over for $10

Question 17

Under the gross method,when the credit card processor deposits the cash proceeds from credit and debit card sales ________.

Accepted Answer

A)  there will be no fee charged for the transaction 
B)  the deposit is made on the last day of the month 
C)  the total sales plus the processing fee assessed equals the net amount of cash deposited 
D)  the processing fees are deducted from the company's bank account by the processor 
A)  there will be no fee charged for the transaction 
B)  the deposit is made on the last day of the month 
C)  the total sales plus the processing fee assessed equals the net amount of cash deposited 
D)  the processing fees are deducted from the company's bank account by the processor

Question 18

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

Exam 8: Internal Control and Cash

It is difficult and costly to plan controls that can prevent collusion.

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

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

Which of the following is representative of safeguarding assets?

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?

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

Debit card transactions are considered electronic funds transfers.

Which is the most liquid form of asset?

Journal entries that arise from reconciling items on the book side of the bank reconciliation include either a debit to Cash or a credit to Cash.

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

Cash equivalents are included in the calculation of the cash ratio.

The cash ratios of four companies are listed below. Company Cash Ratio Tuan Company 0.22 Rose Company 0.10 Freelance Company 0.16 Pioneer Company 0.28 Which company has the highest ability to repay its current liabilities?

A company received a bank statement with a balance of $6,100.Reconciling items included a bookkeeper error of $400-a $400 check recorded as $800-two outstanding checks totaling $810,a service charge of $24,a deposit in transit of $270,and interest revenue of $21.What is the adjusted bank balance?

The bank's routing number ________.

For the following situation,state whether it represents a strength or weakness in internal control and give the reason for your answer. The bookkeeper opens the mail,makes the deposit,and makes the journal entries to record receipt of the cash and checks.

A petty cash fund was established with a $200 balance.It currently has cash of $35 and petty cash tickets as follows: Office expense $130 and Entertainment Expense $45.Which of the following would be included in the journal entry to replenish the Petty Cash fund?

Under the gross method,when the credit card processor deposits the cash proceeds from credit and debit card sales ________.

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

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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