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Exam 6: Accounting for Cash and Internal Controls

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Question 91

Multiple Choice

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A company made a bank deposit on September 30 that did not appear on the bank statement dated September 30. In preparing the September 30 bank reconciliation, the company should:

A) Deduct the deposit from the bank statement balance.
B) Send the bank a debit memorandum.
C) Deduct the deposit from the September 30 book balance and add it to the October 1 book balance.
D) Add the deposit to the book balance of cash.
E) Add the deposit to the bank statement balance.

F) A) and B)
G) C) and D)

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Question 92

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Assume that cash sales according to the register file total $705 but the amount of cash in the register is $685. This cash shortage of $20 represents a Miscellaneous Expense.

A) True
B) False

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Question 93

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A petty cash fund was originally established with a check for $150. In the petty cash fund on December 31 (the period-end), you find the following: Prepare the general journal entry to record the replenishment of the petty cash fund on December 31.

Having external auditors test the company's financial records and evaluate the effectiveness of the internal control system is part of the internal control principle of ________________________.

An NSF check for $17.50 would be recorded as a debit to Cash and a credit to Accounts Receivable.

A company established a petty cash fund in May of the current year and experienced the following transactions affecting the fund during May: May 1 Establish petty cash account in the amount of $300. May 5 Paid for miscellaneous office supplies in the amount of $53.22. May 9 Reimbursed human resource manager for business lunch, $45.09. May 15 Paid for minor landscaping services, $75.00. May 22 Paid $65.00 for postage. May 31 Counted remaining cash and discovered that $56.34 remained. Prepare the journal entry to establish the fund on May 1.

The voucher register is a journal that is used to record all approved vouchers within the company.

In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 2889 for December's utilities was correctly written and drawn for $970 but was erroneously entered in the accounting records as $790. The journal entry to adjust the books for the bank reconciliation would include which of the following for this situation?

Two limitations of internal control systems are ____________________ and ________________.

At the end of the day, the cash register's record shows $1,250, but the count of cash in the cash register is $1,245. The correct entry to record the cash sales for the day is:

Mattel had net sales of $4,235 million and ending accounts receivable of $775 million. Days' sales uncollected is equal to:

After preparing a bank reconciliation, a company must prepare journal entries to adjust the book balance to the correct balance. Only the items reconciling the _____________ balance require adjustment.

_________________________ is the electronic transfer of cash from one party to another.

Basic bank services such as bank accounts, bank deposits, and checking contribute to the control and safeguarding of cash.

Liquidity refers to a company's ability to pay its short-term obligations.

An employee is __________ when a company purchases an insurance policy against losses from theft by that employee.

Fluffy Pet Grooming deposits all cash receipts on the day when they are received and all cash payments are made by check. At the close of business on June 30, its Cash account shows a $14,811 debit balance. Fluffy Pet Grooming's June 30 bank statement shows $14,472 on deposit in the bank. Prepare a bank reconciliation for Fluffy Pet Grooming using the following information: a. Outstanding checks as of June 30 total $\$ 2,261$ . b. The June 30 bank statement included a $\$ 75$ debit memorandum for bank services. c. Check No. 919 , listed with the canceled checks, was correctly drawn for $\$ 789$ in payment of a utility bill on June 15. Fluffy Pet Grooming mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $\$ 798$ . d. The June 30 cash receipts of $\$ 2,534$ were placed in the bank's night depository after banking hours and were not recorded on the Tune 30 bank statement. What is the adjusted bank balance?

A company established a petty cash fund in May of the current year and experienced the following transactions affecting the fund during May: May 1 Establish petty cash account in the amount of $300. May 5 Paid for miscellaneous office supplies in the amount of $53.22. May 9 Reimbursed Human Resource Manager for business lunch, $45.09. May 15 Paid for minor landscaping services, $75. May 22 Paid $65.00 for postage. May 31 Counted remaining cash and discovered that $56.34 remained. The company decided to increase the petty cash balance to $450. Prepare the journal entry to increase the fund on May 31.

A check:

An internal control system refers to the policies and procedures managers use to __________, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.