Question 1

Which of the following would not be reported on the statement of financial position as a cash equivalent?

Accepted Answer

A) Money market fund 
B) Commercial paper 
C) Treasury bill 
D) Restricted cash

Question 2

A petty cash fund should not be used for

Accepted Answer

A) postage due. 
B) loans to the petty cash custodian. 
C) taxi fares. 
D) customer lunches.

Question 3

A company stamps checks received in the mail with the words "For Deposit Only".This endorsement is called a(n)

Accepted Answer

A) blank endorsement. 
B) rubber stamp. 
C) restrictive endorsement. 
D) operational endorsement.

Question 4

The cash account shows a balance of $45,000 before reconciliation.The bank statement does not include a deposit of $2,300 made on the last day of the month.The bank statement shows a collection by the bank of $940 and a customer's check for $320 was returned because it was NSF.A customer's check for $450 was recorded on the books as $540, and a check written for $79 was recorded as $97.The correct balance in the cash account was

Accepted Answer

A) $45,512. 
B) $45,548. 
C) $45,728. 
D) $45,848.

Question 5

Collusion may result when one individual circumvents prescribed controls and may significantly impair the effectiveness of a system.

Accepted Answer

A) True 
 B)False

Question 6

A check returned by the bank marked "NSF" means

Accepted Answer

A) no service fee. 
B) no signature found. 
C) not satisfactorily filled-out. 
D) not sufficient funds.

Question 7

The most important element of the fraud triangle is rationalization.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Related selling activities do not include

Accepted Answer

A) ordering the merchandise. 
B) making a sale. 
C) shipping the goods. 
D) billing the customer.

Question 10

All of the following would involve a debit memorandum except

Accepted Answer

A) a bank service charge. 
B) an NSF check. 
C) the cost of printing checks. 
D) interest earned.

Question 11

In the month of May, Grimm Company Inc.wrote checks in the amount of $46,250.In June, checks in the amount of $63,290 were written.In May, $42,340 of these checks were presented to the bank for payment, and $54,415 in June.What is the amount of outstanding checks at the end of May?

Accepted Answer

A) $8,875 
B) $3,910 
C) $12,785 
D) $17,750

Question 12

The responsibility for keeping the records for an asset should be separate from the physical custody of that asset.

Accepted Answer

A) True 
 B)False

Question 13

Certificates of deposit are currently classified as cash on the statement of financial position.

Accepted Answer

A) True 
 B)False

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

Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them

Accepted Answer

A) increases the potential for errors and irregularities. 
B) decreases the potential for errors and irregularities. 
C) is an example of good internal control. 
D) is a good example of safeguarding the company's assets.

Question 16

Tang Company assembled the following information in completing its June bank reconciliation: balance per bank HK$21,460; outstanding checks HK$12,325; deposits in transit HK$13,750; NSF check HK$2,240; bank service charge HK$85; cash balance per books HK$25,210.As a result of this reconciliation, Tang will

Accepted Answer

A) Reduce its cash account by $3,750. 
B) Increase its cash account by $1,425. 
C) Increase its cash account by $2,240. 
D) Reduce its cash account by ₤2,325.

Question 17

The size of the petty cash fund is dependent on

Accepted Answer

A) the wishes of the custodian of the fund. 
B) anticipated disbursements for the year. 
C) anticipated disbursements for a three- to four-week period. 
D) the size of the regular cash account.

Question 18

Longfellow Company gathered the following reconciling information in preparing its April bank reconciliation:  The adjusted cash balance per books at April 30 is

Accepted Answer

A) ₤8,320. 
B) ₤8,170. 
C) ₤6,470. 
D) ₤4,090.

Question 19

Use the following information to answer questions 
On May 1, 2011, Vuitton Company established a petty cash fund by issuing a check for €250 to Antoinette Mercier, the custodian of the petty cash fund.On May 31, 2011, Mercier submitted the following paid petty cash vouchers for replenishment of the petty cash fund when there is €10 cash in the fund: 
-The journal entry to replenish the account would include a

Accepted Answer

A) debit to Cash Over and Short for €5. 
B) credit to petty Cash for €235. 
C) debit to cash for €235. 
D) credit to cash for €250.

Question 20

Having different individuals receive cash, record cash receipts, and hold the cash is an example of

Accepted Answer

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

Exam 7: Fraud, Internal Control, and Cash

Which of the following would not be reported on the statement of financial position as a cash equivalent?

A petty cash fund should not be used for

A company stamps checks received in the mail with the words "For Deposit Only".This endorsement is called a(n)

Collusion may result when one individual circumvents prescribed controls and may significantly impair the effectiveness of a system.

A check returned by the bank marked "NSF" means

The most important element of the fraud triangle is rationalization.

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

Related selling activities do not include

All of the following would involve a debit memorandum except

In the month of May, Grimm Company Inc.wrote checks in the amount of $46,250.In June, checks in the amount of $63,290 were written.In May, $42,340 of these checks were presented to the bank for payment, and $54,415 in June.What is the amount of outstanding checks at the end of May?

The responsibility for keeping the records for an asset should be separate from the physical custody of that asset.

Certificates of deposit are currently classified as cash on the statement of financial position.

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

Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them

The size of the petty cash fund is dependent on

Longfellow Company gathered the following reconciling information in preparing its April bank reconciliation: The adjusted cash balance per books at April 30 is

Having different individuals receive cash, record cash receipts, and hold the cash is an example of