Question 1

Fairly Company gathered the following reconciling information in preparing its April bank reconciliation: $\begin{array}{lr}
\text { Cash balahce per books, 4/30 } & \$ 4,400 \
\text { Deposits in transit } & 600 \
\text { Notes receivable and interest collected by bank } & 1,480 \
\text { Bank charge for check printing } & 50 \
\text { Outstanding checks } & 3,000 \
\text { NSF check } & 280
\end{array}$ The adjusted cash balance per books on April 30 is

Accepted Answer

A) $6,150. 
B) $5,880. 
C) $5,550. 
D) $6,110.

Question 2

Joe is warehouse custodian and also maintains the accounting record of the inventory held at the warehouse.An assessment of this situation indicates

Accepted Answer

A) documentation procedures are violated. 
B) independent internal verification is violated. 
C) segregation of duties is violated. 
D) establishment of responsibility is violated.

Question 3

Use the following information to answer questions . On October 2, 2011, Bienvenu Manufacturing Company established a petty cash fund by issuing a check for $€ 350$ to the custodian of the petty cash fund. On October 31, 2011, The custodian submitted the following paid petty cash vouchers for replenishment of the petty cash fund when there is $€ 15$ cash in the fund:
$\begin{array} { l r } \text { Freight-in } & € 145 \ \text { Office Supplies Expense } & 55 \ \text { Entertainment of clients } & 89 \ \text { Postage Expense } & 50 \end{array}$
-The journal entry to replenish the account would include

Accepted Answer

A) debit to Cash Over and Short for $€ 4$. 
B)  $\quad$ credit to Cash Over and Short for $€ 4$. 
C)  debit to petty Cash for $€ 339$. 
D)  $\quad$ credit to cash for $€ 350$.

Question 4

Cash which is restricted for a specific use should be separately reported.

Accepted Answer

A) True 
 B)False

Question 5

Internal control is defined, in part, as a plan that safeguards

Accepted Answer

A) all statement of financial position accounts. 
B) assets. 
C) liabilities. 
D) equity.

Question 6

Personnel who handle cash receipts should have the option of taking a vacation or not.

Accepted Answer

A) True 
 B)False

Question 7

Cash equivalents are highly liquid investments that can be converted into a specific amount of cash.

Accepted Answer

A) True 
 B)False

Question 8

In preparing a bank reconciliation, outstanding checks are

Accepted Answer

A) added to the balance per bank. 
B) deducted from the balance per books. 
C) added to the balance per books. 
D) deducted from the balance per bank.

Question 9

A company maintains the asset account, Cash in Bank, on its books, while the bank maintains an account which is

Accepted Answer

A) a contra-asset account. 
B) a liability account. 
C) also an asset account. 
D) an equity account.

Question 10

A credit balance in Cash Over and Short is reported as a(n)

Accepted Answer

A) asset. 
B) liability. 
C) miscellaneous expense. 
D) miscellaneous revenue.

Question 11

If the month-end bank statement shows a balance of $¥ 360,000$, outstanding checks are $¥ 120,000$, a deposit of $¥ 40,000$ was in transit at month end, and a check for $¥ 5,000$ was erroneously charged by the bank against the account, the correct balance in the bank account at month end is

Accepted Answer

A)  $\quad ¥ 275,000$. 
B)  $\quad ¥ 285,000$. 
C)  $\quad ¥ 205,000$. 
D)  $\quad  ¥  435,000$.

Question 12

An adjusting entry is not required for

Accepted Answer

A) outstanding checks. 
B) collection of a note by the bank. 
C) NSF checks. 
D) bank service charges.

Question 13

Each of the following items affect the cash balance per books except

Accepted Answer

A) bank service charges. 
B) notes collected by the bank. 
C) NSF checks. 
D) outstanding checks.

Question 14

When two or more people get together for the purpose of circumventing prescribed controls, it is called

Accepted Answer

A) a fraud committee. 
B) collusion. 
C) a division of duties. 
D) bonding of employees.

Question 15

Tyler, Inc.had the following bank reconciliation at March 31.2011: $\begin{array}{lr}
\text { Balance per bank statement, } 3 / 31 / 11 & € 37,200 \
\text { Add: Deposit in transit } & 10,300\&47,500\\text { Less: Outstanding checks } &12,600\
\text { Balance per books, } 3 / 31 / 11&€34,900\\\text { Data per bank for the month of April } 2011 \text { follow: }\\text { Deposits } & € 46,700 \
\text { Disbursements } & 49,700
\end{array}$
All reconciling items at March 31, 2011 cleared the bank in April. Outstanding checks at
 April 30, 2011 totaled $ € 6,000 $. There were no deposits in transit at April 30, 2011. What
is the cash balance per books at April 30, 2011 ?

Accepted Answer

A)  $  € 28,200 $ 
B)  $ € 31,900 $ 
C)  $ € 34,200 $ 
D)  $ € 38500 $

Question 16

Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency.

Accepted Answer

A) True 
 B)False

Question 17

Savings accounts are usually classified as cash on the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 18

The most important element of the fraud triangle is rationalization.

Accepted Answer

A) True 
 B)False

Question 19

An accounts payable clerk also has access to the approved supplier master file for purchases.The control principle of

Accepted Answer

A) establishment of responsibility is violated. 
B) independent internal verification is violated. 
C) documentation procedures is violated. 
D) segregation of duties is violated.

Question 20

Use the following information to answer questions 
The petty cash fund of CHF250 for the Hansen Company appeared as follows on July 31, 2011: 
$\begin{array}{lr}\text { Cash }&\text { CHF } 7.50\
\text { Petty cash vouchers }\
\text { Freight-in } & \text { CHF88.50 } \
\text { Postage } & 45.00 \
\text { Balloons for a special occasion } & 27.00 \
\text { Client entertainment } & 65.00
\end{array}$

On July 31, the office manager gives instruction to increase the petty cash fund to CHF300.
-The journal entry to replenish the petty cash fund would include a

Accepted Answer

A)  debit to petty Cash for CHF250. 
B)  credit to Cash Over and Short for CHF 17 . 
C)  credit to Cash for CHF242.50. 
D)  debit to Accounts Receivable for CHF17.

Exam 7: Fraud, Internal Control, and Cash

Joe is warehouse custodian and also maintains the accounting record of the inventory held at the warehouse.An assessment of this situation indicates

Cash which is restricted for a specific use should be separately reported.

Internal control is defined, in part, as a plan that safeguards

Personnel who handle cash receipts should have the option of taking a vacation or not.

Cash equivalents are highly liquid investments that can be converted into a specific amount of cash.

In preparing a bank reconciliation, outstanding checks are

A company maintains the asset account, Cash in Bank, on its books, while the bank maintains an account which is

A credit balance in Cash Over and Short is reported as a(n)

If the month-end bank statement shows a balance of $¥ 360,000$ , outstanding checks are $¥ 120,000$ , a deposit of $¥ 40,000$ was in transit at month end, and a check for $¥ 5,000$ was erroneously charged by the bank against the account, the correct balance in the bank account at month end is

An adjusting entry is not required for

Each of the following items affect the cash balance per books except

When two or more people get together for the purpose of circumventing prescribed controls, it is called

Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency.

Savings accounts are usually classified as cash on the statement of financial position.

The most important element of the fraud triangle is rationalization.

An accounts payable clerk also has access to the approved supplier master file for purchases.The control principle of