Question 1

An information system is one of the five components by which a company can achieve its internal control objectives.

Accepted Answer

A) True 
 B)False

Question 2

In a good internal control system,which of the following sets of documents is required for proper approval of a payment to a supplier?

Accepted Answer

A)  a journal entry, a supplier invoice, and a description of the goods being purchased 
B)  a receiving report, an invoice, and a purchase order 
C)  a purchase order, a journal entry, and a price catalog 
D)  a supplier invoice, a bill of lading, and the supplier's financial statements 
A)  a journal entry, a supplier invoice, and a description of the goods being purchased 
B)  a receiving report, an invoice, and a purchase order 
C)  a purchase order, a journal entry, and a price catalog 
D)  a supplier invoice, a bill of lading, and the supplier's financial statements

Question 3

The Metro Construction Company had the following financial data as of December 31,2018:
 $$\begin{array} { | l | r | } 
\hline \text { Cash } & \$ 90,000 \
\hline \text { Cash Equivalents } & 30,000 \
\hline \text { Accounts Receivable } & 55,000 \
\hline \text { Total current liabilities } & 80,000 \
\hline
\end{array}$$ Cash and cash equivalents $\quad \$ 120,000$
 Total current liabilities$\quad 80,000$
 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.Cash ratio = (Cash + Cash equivalents)

Question 4

Promoting operational efficiency reduces expenses and business profits.

Accepted Answer

A) True 
 B)False

Question 5

Refer to the following bank reconciliation:
   Journalize the adjusting entry for the second reconciling item: Interest revenue.Omit explanation

Accepted Answer

\[\begin{array} { | l | r | l

Question 6

When a lock-box system is used,a bank employee empties the box daily and records the deposits in the company's journal.

Accepted Answer

A) True 
 B)False

Question 7

A streamlined process that bypasses paper documents altogether and in which computers of retailers communicate directly with the computers of suppliers to automate routine business transactions is known as ________.

Accepted Answer

A)  Real Time Gross Settlement 
B)  Electronic Data Interchange 
C)  Electronic Fund Transfer 
D)  Evaluated Receipts Settlement 
A)  Real Time Gross Settlement 
B)  Electronic Data Interchange 
C)  Electronic Fund Transfer 
D)  Evaluated Receipts Settlement

Question 8

A petty cash fund was established with a $400 balance.It currently has cash of $41 and petty cash tickets totaling $359.Which of the following would be included in the entry to replenish the fund?

Accepted Answer

A)  a credit to Petty Cash for $359 
B)  a debit to Petty Cash for $41 
C)  a credit to Cash for $41 
D)  a credit to Cash for $359 
A)  a credit to Petty Cash for $359 
B)  a debit to Petty Cash for $41 
C)  a credit to Cash for $41 
D)  a credit to Cash for $359

Question 9

The cash balance in a company's general ledger and the company's bank balance on the bank statement will always be the same.

Accepted Answer

A) True 
 B)False

Question 10

Martin Company 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 11

In a bank reconciliation,a deposit in transit will be shown on the bank side of the reconciliation.

Accepted Answer

A) True 
 B)False

Question 12

For good internal control over cash payments,the company officer approving a payment voucher should be the same as the person who ordered the goods.This ensures that the correct amount of cash is paid.

Accepted Answer

A) True 
 B)False

Question 13

A key to strong control over petty cash is to ensure that several persons serve as custodian at one time.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is an attribute of the internal control procedure-assignment of responsibilities?

Accepted Answer

A)  To validate their accounting records, a company should have an audit by an external accountant. 
B)  The company should separate the custody of assets from accounting. 
C)  The external auditors will monitor internal controls. 
D)  Each position has clearly assigned responsibilities. 
A)  To validate their accounting records, a company should have an audit by an external accountant. 
B)  The company should separate the custody of assets from accounting. 
C)  The external auditors will monitor internal controls. 
D)  Each position has clearly assigned responsibilities.

Question 15

If the bank reconciliation includes a deposit in transit,a journal entry is required that includes a debit to cash.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

None

Question 17

When a check is issued,the party being paid the cash is referred to as the ________.

Accepted Answer

A)  payee 
B)  maker 
C)  bank signatory 
D)  depositor 
A)  payee 
B)  maker 
C)  bank signatory 
D)  depositor

Question 18

Discuss the roles of the internal auditors and the external auditors.

Accepted Answer

Internal auditors ensure the company's e

Question 19

The two common methods of processing credit and debit card transactions are gross and net.

Accepted Answer

A) True 
 B)False

Question 20

The following information is needed to reconcile the cash balance for Gourmet Catering Services. *A deposit of $ \$ 5,800 $ is in transit.
*Outstanding checks total $ \$ 1,200 $.
*The book balance is $ \$ 6,400 $ at February 28,2019 .
*The bookkeeper recorded a $ \$ 1,700 $ check as $ \$ 17,200 $ in payment of the current month's rent
*The bank balance at February 28,2019 was $ \$ 15,640 $.
*A deposit of $ \$ 200 $ was credited by the bank for $ \$ 2,000 $
*A customer's check for $ \$ 3,400 $ was returned for nonsufficient funds.
*The bank service charge is $ \$ 60 $.
 What was the adjusted book balance?

Accepted Answer

A)  $18,500 
B)  $18,440 
C)  $18,560 
D)  $15,700 
A)  $18,500 
B)  $18,440 
C)  $18,560 
D)  $15,700

Exam 8: Internal Control and Cash

An information system is one of the five components by which a company can achieve its internal control objectives.

In a good internal control system,which of the following sets of documents is required for proper approval of a payment to a supplier?

Promoting operational efficiency reduces expenses and business profits.

Refer to the following bank reconciliation: Journalize the adjusting entry for the second reconciling item: Interest revenue.Omit explanation

When a lock-box system is used,a bank employee empties the box daily and records the deposits in the company's journal.

A streamlined process that bypasses paper documents altogether and in which computers of retailers communicate directly with the computers of suppliers to automate routine business transactions is known as ________.

A petty cash fund was established with a $400 balance.It currently has cash of $41 and petty cash tickets totaling $359.Which of the following would be included in the entry to replenish the fund?

The cash balance in a company's general ledger and the company's bank balance on the bank statement will always be the same.

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

In a bank reconciliation,a deposit in transit will be shown on the bank side of the reconciliation.

For good internal control over cash payments,the company officer approving a payment voucher should be the same as the person who ordered the goods.This ensures that the correct amount of cash is paid.

A key to strong control over petty cash is to ensure that several persons serve as custodian at one time.

Which of the following is an attribute of the internal control procedure-assignment of responsibilities?

If the bank reconciliation includes a deposit in transit,a journal entry is required that includes a debit to cash.

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

When a check is issued,the party being paid the cash is referred to as the ________.

Discuss the roles of the internal auditors and the external auditors.

The two common methods of processing credit and debit card transactions are gross and net.

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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