Question 1

Internal control over cash receipts ensures that all cash received is properly recorded and deposited.

Accepted Answer

A) True 
 B)False

Question 2

A bank reconciliation explains the difference between the balance of a chequing account on the customer's books and the balance on the bank statement.

Accepted Answer

A) True 
 B)False

Question 3

The following information pertains to Z-Mart, its competitors, and the industry standards.   The industry standard for the current ratio is 1.8 to 1Calculate the current ratio and quick ratio for each firmRank the firms in decreasing order of liquidity.(3)Comment on Z-Mart's relative position.

Accepted Answer

The answer of The following information pertains to Z-Mart, its...

Question 4

Z-Mart established a petty cash fund recently and the following transactions affecting the fund occurred during February:  Prepare the journal entry to reimburse the fund and to reduce its size.

Accepted Answer

The answer of Z-Mart established a petty cash fund recently...

Question 5

Discuss how the principles of internal control apply to cash receipts.

Accepted Answer

The answer of Discuss how the principles of internal control...

Question 6

Internal control policies and procedures are standard across companies.

Accepted Answer

A) True 
 B)False

Question 7

EFT is the use of electronic communication to transfer cash from one party to another.

Accepted Answer

A) True 
 B)False

Question 8

Cash sales total $705 and the amount of cash in the register is $685. The shortage of$20 represents an expense.

Accepted Answer

A) True 
 B)False

Question 9

The Crown Company established a $1,000 petty cash fund by issuing a cheque to the custodian on October 1. On October 15, the petty cash fund was replenished and increased to $1,500. The contents of the petty cash fund prior to the October15 replenishment were:  Prepare the general journal entry to record the reimbursement and increasing of the fund on October 15.

Accepted Answer

The answer of The Crown Company established a $1,000 petty...

Question 10

The payee is the person who signs a cheque.

Accepted Answer

A) True 
 B)False

Question 11

The quick assets are:

Accepted Answer

A) Cash, short-term investments, accounts receivable. 
B) Accounts receivable, inventory, prepaid expenses. 
C) Cash, accounts receivable, prepaid expenses. 
D) Cash, short-term investments, prepaid expenses. 
E) Cash, inventory, accounts receivable.

Question 12

The common rule of thumb is that a company's quick ratio should be at least 1.5 to 1.

Accepted Answer

A) True 
 B)False

Question 13

Risks involved in e-commerce include: credit card theft, computer viruses and impersonation.

Accepted Answer

A) True 
 B)False

Question 14

Liquidity problems exist for a company when its quick ratio:

Accepted Answer

A) Is less than the industry average. 
B) Is higher than 1 to 1. 
C) Is 1 to 1. 
D) Is lower than 1 to 1. 
E) Is less than the industry average and is lower than 1 to 1.

Question 15

Bank service charges are treated as a reconciling item on the book side of a bank reconciliation.

Accepted Answer

A) True 
 B)False

Question 16

Collusion occurs when a person embezzles money from a company and tries to hide the evidence.

Accepted Answer

A) True 
 B)False

Question 17

When a petty cash fund is in use:

Accepted Answer

A) Expenses paid with petty cash are recorded when the fund is replenished. 
B) Petty Cash is credited when funds are replenished. 
C) Petty Cash is debited when funds are replenished. 
D) Expenses paid with petty cash are recorded when the fund is replenished and petty cash is debited when funds are replenished. 
E) Expenses paid with petty cash are recorded when the fund is replenished and petty cash is credited when funds are replenished.

Question 18

When preparing a bank reconciliation, if the adjusted book balance and the adjusted bank balance are equal, then there is no need to have an external auditor test internal controls for the "cash" account.

Accepted Answer

A) True 
 B)False

Question 19

Z-Mart's current assets were $17,980. Its quick assets were $11,420. Its current liabilities were $12,190. Its quick ratio is:

Accepted Answer

A) 1.48. 
B) 1.57. 
C) 2.40. 
D) .94. 
E) 1.07.

Question 20

If Cash Over and Short has a debit at the end of the period, the dollar amount represents miscellaneous revenue.

Accepted Answer

A) True 
 B)False

Exam 7: Internal Control and Cash

Internal control over cash receipts ensures that all cash received is properly recorded and deposited.

A bank reconciliation explains the difference between the balance of a chequing account on the customer's books and the balance on the bank statement.

The following information pertains to Z-Mart, its competitors, and the industry standards. The industry standard for the current ratio is 1.8 to 1Calculate the current ratio and quick ratio for each firmRank the firms in decreasing order of liquidity.(3)Comment on Z-Mart's relative position.

Z-Mart established a petty cash fund recently and the following transactions affecting the fund occurred during February: Prepare the journal entry to reimburse the fund and to reduce its size.

Discuss how the principles of internal control apply to cash receipts.

Internal control policies and procedures are standard across companies.

EFT is the use of electronic communication to transfer cash from one party to another.

Cash sales total $705 and the amount of cash in the register is $685. The shortage of$20 represents an expense.

The payee is the person who signs a cheque.

The quick assets are:

The common rule of thumb is that a company's quick ratio should be at least 1.5 to 1.

Risks involved in e-commerce include: credit card theft, computer viruses and impersonation.

Liquidity problems exist for a company when its quick ratio:

Bank service charges are treated as a reconciling item on the book side of a bank reconciliation.

Collusion occurs when a person embezzles money from a company and tries to hide the evidence.

When a petty cash fund is in use:

When preparing a bank reconciliation, if the adjusted book balance and the adjusted bank balance are equal, then there is no need to have an external auditor test internal controls for the "cash" account.

Z-Mart's current assets were $17,980. Its quick assets were $11,420. Its current liabilities were $12,190. Its quick ratio is:

If Cash Over and Short has a debit at the end of the period, the dollar amount represents miscellaneous revenue.