Question 1

An imprest system is a way to account for petty cash by maintaining a constant balance in the petty cash account.

Accepted Answer

A) True 
 B)False

Question 2

A deposit receipt is ________.

Accepted Answer

A)  retained by the customer as proof of a deposit transaction 
B)  the same as a signature card 
C)  used by the bank as an alternative to a remittance advice 
D)  given by the customer to the bank as a proof of deposit 
A)  retained by the customer as proof of a deposit transaction 
B)  the same as a signature card 
C)  used by the bank as an alternative to a remittance advice 
D)  given by the customer to the bank as a proof of deposit

Question 3

The bank charged a service fee of $55.How would this information be included on the bank reconciliation?

Accepted Answer

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

Question 4

For the following situation,state whether it represents a strength or weakness in internal control and give the reason for your answer.
The movie theater has the following policy.Tickets are sold by the cashier.The ticket stubs are collected by the ticket taker.The ticket stubs are stored in a locked box,and the accounting personnel match the number of ticket stubs to the number of tickets sold.

Accepted Answer

Strength
The operations are ke

Question 5

The security measures are the same for any type of cash receipts.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Which of the following is a requirement of the Sarbanes-Oxley Act?

Accepted Answer

A)  An outside auditor must evaluate the client's internal controls and report on the internal controls as part of the audit report. 
B)  The Public Company Accounting Oversight Board must conduct audits of public companies. 
C)  The accounting firm that audits a public client must also provide consulting services for the same client. 
D)  The Public Company Accounting Oversight Board must create new accounting standards. 
A)  An outside auditor must evaluate the client's internal controls and report on the internal controls as part of the audit report. 
B)  The Public Company Accounting Oversight Board must conduct audits of public companies. 
C)  The accounting firm that audits a public client must also provide consulting services for the same client. 
D)  The Public Company Accounting Oversight Board must create new accounting standards.

Question 8

A petty cash fund was established with a $525 balance.It currently has cash of $35 and petty cash tickets as shown below: $$\begin{array} { | l | r } 
\hline \text { Travel expense } & \$ 105 \
\hline \text { Office supplies expense } & 250 \
\hline \text { Equipment rental expense } & 100 \
\hline
\end{array}$$ 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 $35 
B)  credit to Cash Short & Over for $35 
C)  debit to Petty Cash for $35 
D)  credit to Petty Cash for $35 
A)  debit to Cash Short & Over for $35 
B)  credit to Cash Short & Over for $35 
C)  debit to Petty Cash for $35 
D)  credit to Petty Cash for $35

Question 9

The ________ is a measure of a company's ability to pay its current liabilities from cash and cash equivalents.

Accepted Answer

A)  cash conversion cycle 
B)  cash ratio 
C)  gross profit 
D)  debt equity ratio 
A)  cash conversion cycle 
B)  cash ratio 
C)  gross profit 
D)  debt equity ratio

Question 10

A petty cash fund was established with a $600 balance.It currently has cash of $19 and petty cash tickets as shown below: $$\begin{array} { | l | r | } 
\hline \text { Travel expense } & \$ 100 \
\hline \text { Office supplies expense } & 285 \
\hline \text { Equipment rental expense } & 78 \
\hline
\end{array}$$ 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 $118 
B)  credit to Cash Short & Over for $118 
C)  debit to Petty Cash for $118 
D)  credit to Petty Cash for $118 
A)  debit to Cash Short & Over for $118 
B)  credit to Cash Short & Over for $118 
C)  debit to Petty Cash for $118 
D)  credit to Petty Cash for $118

Question 11

Goldman Services hired a new clerk to keep custody of and maintain all the equipment in the equipment yard.The clerk has not yet been adequately trained on the maintenance needs of the 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 12

For good controls over cash payments,the person who orders goods from a supplier should always be different from the person who approves the payment.

Accepted Answer

A) True 
 B)False

Question 13

A company received a bank statement showing a balance of $76,000.Reconciling items included outstanding checks of $2,000 and a deposit in transit of $9,100.What is the company's adjusted bank balance?

Accepted Answer

A)  $64,900 
B)  $68,900 
C)  $83,100 
D)  $66,900 
A)  $64,900 
B)  $68,900 
C)  $83,100 
D)  $66,900

Question 14

A company's Cash account shows an ending balance of $4,200.Reconciling items included a bookkeeper error of $50 (a $550 check recorded as $600),two outstanding checks totaling $810,a service charge of $25,a deposit in transit of $280,and interest revenue of $33.What is the adjusted book balance?

Accepted Answer

A)  $4,142 
B)  $3,670 
C)  $4,258 
D)  $4,730 
A)  $4,142 
B)  $3,670 
C)  $4,258 
D)  $4,730

Question 15

A point-of-sale terminal provides control for over the counter cash receipts.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is TRUE of the Sarbanes-Oxley Act?

Accepted Answer

A)  Accounting firms are allowed to provide both auditing services and a full range of consulting services to their public company clients. 
B)  Those who commit securities fraud must be sentenced to 10 years in prison. 
C)  All private and foreign companies must issue an internal control report evaluated by an outside auditor. 
D)  The Public Company Accounting Oversight Board oversees the work of auditors of public companies. 
A)  Accounting firms are allowed to provide both auditing services and a full range of consulting services to their public company clients. 
B)  Those who commit securities fraud must be sentenced to 10 years in prison. 
C)  All private and foreign companies must issue an internal control report evaluated by an outside auditor. 
D)  The Public Company Accounting Oversight Board oversees the work of auditors of public companies.

Question 17

Which of the following is described as a system where customers send their checks directly to a post office box that belongs to a bank?

Accepted Answer

A)  an encryption system 
B)  an imprest system 
C)  a lock-box system 
D)  a firewall system 
A)  an encryption system 
B)  an imprest system 
C)  a lock-box system 
D)  a firewall system

Question 18

The petty cash fund has a current balance of $250,which is the established fund balance.Based on activity in the fund,it is determined that the balance needs to be changed to $600.Which journal entry is needed to make this change?

Accepted Answer

A)  Debit the Petty Cash account and credit the Cash account for $600. 
B)  No journal entry is needed because this change only involves cash. 
C)  Debit the Petty Cash account and credit the Cash account for $350. 
D)  Debit the Cash account and credit the Petty Cash account for $350. 
A)  Debit the Petty Cash account and credit the Cash account for $600. 
B)  No journal entry is needed because this change only involves cash. 
C)  Debit the Petty Cash account and credit the Cash account for $350. 
D)  Debit the Cash account and credit the Petty Cash account for $350.

Question 19

The Sarbanes-Oxley Act requires all private companies in the United States to maintain an internal control system.

Accepted Answer

A) True 
 B)False

Question 20

A cash ratio below 1.0 implies that the company has an insufficient amount of cash and cash equivalents to pay current liabilities.

Accepted Answer

A) True 
 B)False

Exam 8: Internal Control and Cash

An imprest system is a way to account for petty cash by maintaining a constant balance in the petty cash account.

A deposit receipt is ________.

The bank charged a service fee of $55.How would this information be included on the bank reconciliation?

The security measures are the same for any type of cash receipts.

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

Which of the following is a requirement of the Sarbanes-Oxley Act?

A petty cash fund was established with a $525 balance.It currently has cash of $35 and petty cash tickets as shown below: Travel expense \ 105 Office supplies expense 250 Equipment rental expense 100 Which of the following would be included in the journal entry to replenish the Petty Cash fund?

The ________ is a measure of a company's ability to pay its current liabilities from cash and cash equivalents.

A petty cash fund was established with a $600 balance.It currently has cash of $19 and petty cash tickets as shown below: Travel expense \ 100 Office supplies expense 285 Equipment rental expense 78 Which of the following would be included in the journal entry to replenish the Petty Cash fund?

Goldman Services hired a new clerk to keep custody of and maintain all the equipment in the equipment yard.The clerk has not yet been adequately trained on the maintenance needs of the equipment.Which internal control procedure needs strengthening?

For good controls over cash payments,the person who orders goods from a supplier should always be different from the person who approves the payment.

A company received a bank statement showing a balance of $76,000.Reconciling items included outstanding checks of $2,000 and a deposit in transit of $9,100.What is the company's adjusted bank balance?

A company's Cash account shows an ending balance of $4,200.Reconciling items included a bookkeeper error of $50 (a $550 check recorded as $600),two outstanding checks totaling $810,a service charge of $25,a deposit in transit of $280,and interest revenue of $33.What is the adjusted book balance?

A point-of-sale terminal provides control for over the counter cash receipts.

Which of the following statements is TRUE of the Sarbanes-Oxley Act?

Which of the following is described as a system where customers send their checks directly to a post office box that belongs to a bank?

The petty cash fund has a current balance of $250,which is the established fund balance.Based on activity in the fund,it is determined that the balance needs to be changed to $600.Which journal entry is needed to make this change?

The Sarbanes-Oxley Act requires all private companies in the United States to maintain an internal control system.

A cash ratio below 1.0 implies that the company has an insufficient amount of cash and cash equivalents to pay current liabilities.

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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