Question 1

A bank statement debit memo describes a transaction that increases a customer's account balance.

Accepted Answer

A) True 
 B)False  False

Question 2

On May 1, 2013, Cook Company established a petty cash fund in the amount of $200.
a) Is the establishment of the fund an asset source, asset use, or asset exchange transaction?
b) Record the establishment of the petty cash fund in the horizontal financial statements model, below. Show dollar amounts of increases and decreases; for accounts that are not affected, indicate NA. If the event affects cash flow, classify the cash flow as operating, investing, or financing.

Accepted Answer

a) Establishment of the fund is an asset exchange transaction; total assets do not change.
b)

Question 3

Which of the following is not a primary role of an independent auditor?

Accepted Answer

A) Assume legal and professional responsibilities to the public 
B) Advise client on tax strategies 
C) Determine whether a company's financial statements are materially correct 
D) All of the above are correct. 
A) Assume legal and professional responsibilities to the public 
B) Advise client on tax strategies 
C) Determine whether a company's financial statements are materially correct 
D) All of the above are correct. B

Question 4

Indicate whether each of the following statements regarding internal controls is true or false.
_____ a) Internal controls are used to provide absolute assurance that the objectives of an enterprise will be accomplished.
_____ b) Internal controls can be divided into accounting controls and administrative controls.
_____ c) The mechanics of internal control systems vary from company to company.
_____ d) Accounting controls are concerned with the evaluation of performance and the assessment of the degree of compliance with company policies and public laws.
_____ e) Administrative controls are composed of policies and procedures that are designed to safeguard the assets and to assure that accounting records contain reliable information.

Accepted Answer

a) False b) True c) True d) False e) Fal

Question 5

Which of the following is not an internal control procedure for the control of cash receipts?

Accepted Answer

A) Immediate preparation of records of all cash receipts. 
B) Customers should be given written receipts for all monies paid. 
C) Use of prenumbered checks. 
D) All cash should be deposited frequently. 
A) Immediate preparation of records of all cash receipts. 
B) Customers should be given written receipts for all monies paid. 
C) Use of prenumbered checks. 
D) All cash should be deposited frequently.

Question 6

Which of the item(s) would be subtracted from the company's unadjusted book balance to determine the true cash balance?

Accepted Answer

A) Item numbers 5 and 6. 
B) Item numbers 2, 3, and 5. 
C) Item numbers 1 and 3. 
D) Item number 5. 
A) Item numbers 5 and 6. 
B) Item numbers 2, 3, and 5. 
C) Item numbers 1 and 3. 
D) Item number 5.

Question 7

Torres Company established a petty cash fund for $300 on January 1, 2013. At the end of the month, the petty cash fund contained cash of $37.60 and vouchers for the following cash payments: freight on goods shipped to customers, $68.00; postage, $74.00; miscellaneous expense, $80.22; entertainment expense, $36.00.
Three distinct events affected the petty cash fund during January:
1. establishment of the fund;
2. making payments for various items from the fund; and
3. recognizing expenses and replenishing the fund at the end of the month
Required:
a) Record each of the events in the horizontal statements model below. Indicate with the dollar amount of the increase or decrease, or NA if the element is not affected.   b) Prepare journal entries for these events.

Accepted Answer

The answer of Torres Company established a petty cash fund...

Question 8

Even a good system of internal controls can be overridden by collusion among employees.

Accepted Answer

A) True 
 B)False

Question 9

Separation of duties in an organization should be required to reduce the likelihood of theft.

Accepted Answer

A) True 
 B)False

Question 10

On September 30, 2013, the bank statement of Gomez Company showed a balance of $7,300. The following information was revealed by the bank statement: (1) deposits in transit amounted to $3,150
(2) outstanding checks amounted to $6,200
(3) a $550 check was incorrectly drawn on Gomez's account
(4) NSF checks returned by the bank were $750
(5) bank service charge was $29
(6) credit memo for $75 for the collection of one of the company's account receivable
Based on the above information the true cash balance was:

Accepted Answer

A) $4,800. 
B) $4,846. 
C) $4,096. 
D) $6,596. 
A) $4,800. 
B) $4,846. 
C) $4,096. 
D) $6,596.

Question 11

For internal control purposes, what is meant by "separation of duties?"

Accepted Answer

The functions of authorization, recordin

Question 12

Indicate whether each of the following statements regarding internal controls is true or false.
_____ a) Cash receipts should be deposited in a bank when they reach a predetermined level of materiality.
_____ b) To improve operating efficiency, a company should make most of its disbursements in currency instead of checks.
_____ c) Supporting documents are required when checks are presented to the check signer.
_____ d) Supporting documents should not be marked "paid" until the check clears the bank.
_____ e) All spoiled and voided checks should be defaced and retained.

Accepted Answer

a) False b) False c) True d) False e) Tr

Question 13

Explain the role of the independent auditor. What certification is required of an independent auditor?

Accepted Answer

The independent auditor conducts the fin

Question 14

Ramsey Company's true cash balance at October 31, 2013 is $3,710. The following information is available for the bank reconciliation: Outstanding checks, $600
Deposits in transit, $450
Bank service charges, $90
The bank had collected an account receivable for Ramsey Company, $1,000
The bank statement included an NSF check written by one of Ramsey's customers for $600.
Based on this information Ramsey's unadjusted book balance at October 31 is:

Accepted Answer

A) $3,870. 
B) $4,400. 
C) $3,400. 
D) $3,490. 
A) $3,870. 
B) $4,400. 
C) $3,400. 
D) $3,490.

Question 15

What is meant by the term "materiality?"

Accepted Answer

While the exact answer to the materialit

Question 16

Which of the following statements regarding the Securities and Exchange Commission (SEC) is not true?

Accepted Answer

A) The SEC has no jurisdiction over closely held companies. 
B) The SEC regulates both audit standards and financial reporting. 
C) The SEC's influence has increased following passage of the Sarbanes-Oxley Act. 
D) The SEC is a private professional organization. 
A) The SEC has no jurisdiction over closely held companies. 
B) The SEC regulates both audit standards and financial reporting. 
C) The SEC's influence has increased following passage of the Sarbanes-Oxley Act. 
D) The SEC is a private professional organization.

Question 17

For which of the following bank reconciliation adjustments would an adjusting journal entry not be necessary?

Accepted Answer

A) An error in which the company's accountant recorded a check as $235 that was written correctly for $253 
B) An error in which the bank charged the company $83 for a check that had been written by another account holder 
C) A check for $37 deposited during the month, but returned for non-sufficient funds 
D) All of the above would require adjusting journal entries 
A) An error in which the company's accountant recorded a check as $235 that was written correctly for $253 
B) An error in which the bank charged the company $83 for a check that had been written by another account holder 
C) A check for $37 deposited during the month, but returned for non-sufficient funds 
D) All of the above would require adjusting journal entries

Question 18

In a company's bank reconciliation, an outstanding check is a check that:

Accepted Answer

A) is guaranteed for payment by the bank. 
B) has been issued by the company but has not been presented to the bank for payment. 
C) has been presented to the bank for payment but has not been reported on the bank statement. 
D) has been written for an amount that is greater than the balance in the account holder's bank account. 
A) is guaranteed for payment by the bank. 
B) has been issued by the company but has not been presented to the bank for payment. 
C) has been presented to the bank for payment but has not been reported on the bank statement. 
D) has been written for an amount that is greater than the balance in the account holder's bank account.

Question 19

Petty cash funds are maintained on an imprest basis. Explain the advantage of using the imprest basis in accounting for petty cash.

Accepted Answer

A petty cash fund maintained on an impre

Question 20

What is a fidelity bond and what is its purpose?

Accepted Answer

A fidelity bond is an insuranc

A bank statement debit memo describes a transaction that increases a customer's account balance.

Which of the following is not a primary role of an independent auditor?

Which of the following is not an internal control procedure for the control of cash receipts?

Which of the item(s) would be subtracted from the company's unadjusted book balance to determine the true cash balance?

Even a good system of internal controls can be overridden by collusion among employees.

Separation of duties in an organization should be required to reduce the likelihood of theft.

For internal control purposes, what is meant by "separation of duties?"

Explain the role of the independent auditor. What certification is required of an independent auditor?

What is meant by the term "materiality?"

Which of the following statements regarding the Securities and Exchange Commission (SEC) is not true?

For which of the following bank reconciliation adjustments would an adjusting journal entry not be necessary?

In a company's bank reconciliation, an outstanding check is a check that:

Petty cash funds are maintained on an imprest basis. Explain the advantage of using the imprest basis in accounting for petty cash.

What is a fidelity bond and what is its purpose?

An Introduction to Accounting

Accounting for Accruals and Deferrals

The Double-Entry Accounting System

Accounting for Merchandising Businesses

Accounting for Inventories

Accounting for Receivables

Accounting for Long-Term Operational Assets

Accounting for Current Liabilities and Payroll

Accounting for Long-Term Debt

Proprietorships, Partnerships, and Corporations

Statement of Cash Flows

Financial Statement Analysis Available Online in the Connect Library

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Exam 6: Internal Control and Accounting for Cash

A bank statement debit memo describes a transaction that increases a customer's account balance.

Which of the following is not a primary role of an independent auditor?

Which of the following is not an internal control procedure for the control of cash receipts?

Which of the item(s) would be subtracted from the company's unadjusted book balance to determine the true cash balance?

Even a good system of internal controls can be overridden by collusion among employees.

Separation of duties in an organization should be required to reduce the likelihood of theft.

For internal control purposes, what is meant by "separation of duties?"

Explain the role of the independent auditor. What certification is required of an independent auditor?

What is meant by the term "materiality?"

Which of the following statements regarding the Securities and Exchange Commission (SEC) is not true?

For which of the following bank reconciliation adjustments would an adjusting journal entry not be necessary?

In a company's bank reconciliation, an outstanding check is a check that:

Petty cash funds are maintained on an imprest basis. Explain the advantage of using the imprest basis in accounting for petty cash.

What is a fidelity bond and what is its purpose?

An Introduction to Accounting

Accounting for Accruals and Deferrals

The Double-Entry Accounting System

Accounting for Merchandising Businesses

Accounting for Inventories

Accounting for Receivables

Accounting for Long-Term Operational Assets

Accounting for Current Liabilities and Payroll

Accounting for Long-Term Debt

Proprietorships, Partnerships, and Corporations

Statement of Cash Flows

Financial Statement Analysis Available Online in the Connect Library

Filters