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Exam 6: Internal Control and Accounting for Cash

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Question 31

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[The following information applies to the questions displayed below.] A review of the bank statement and accounting records of Blake Company revealed the following items: $\begin{array}{|c|l|}\hline \text { Item No. } & \text { Description } \\\hline \text { 1) } & \text { Three outstanding checks } \\\hline \text { 2) } & \text { A debit memo showing a bank service charge } \\\hline \text { 3) } & \text { A deposit in transit } \\\hline \text { 4) } & \text { An NSF check written by one of Blake's customers } \\\hline \text { 5) } & \text { A certified check written by Blake that remains outstanding } \\\hline \text { 6) } & \text { A credit memo reflecting interest revenue earned by Blake } \\\hline\end{array}$ -Which of the item(s) would be subtracted from the company's unadjusted book balance to determine the true cash balance?

A) Item numbers 2 and 4
B) Item numbers 2, 4, and 5
C) Item numbers 1 and 4
D) Item numbers 1, 2, 4, and 5

E) None of the above
F) A) and B)

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Question 32

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A business learns about customers' NSF checks through debit memos that are included with the bank statement.

A) True
B) False

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Question 33

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A savings account or certificate of deposit that imposes a substantial penalty for early withdrawals should not be classified as Cash on the balance sheet.

Jasper Company accepted a check from Harp Company as payment for services rendered.Jasper's bank statement revealed that the Harp check was an NSF check.What effect will recording the NSF check have on the accounting equation of Jasper Company? $\begin{array}{|c|c|c|}\hline & \text { Total Assets } & \text { Total Equity } \\\hline \text { A } & \text { Decrease } & \text { Decrease } \\\hline \text { B. } & \text { No effect } & \text { Decrease } \\\hline \text { C. } & \text { Decrease } & \text { No effect } \\\hline \text { D. } & \text { No effect } & \text { No effect } \\\hline\end{array}$

Which of the following statements about the materiality concept is not true?

Which of the following statements is true with regards to financial statement audits?

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

Which of the following occurs when a company replenishes its petty cash fund?

The primary focus of financial statement audits is the discovery of fraud.

The owner of Barnes Company established a petty cash fund amounting to $400.What is the effect on the financial statements of recording this transaction?

Peterson Company's petty cash fund was established on January 1 with $500.On January 31,a count of the fund revealed: $105 in cash remaining and vouchers for miscellaneous expenses totaling $400.If the company records both the disbursements and the replenishments to the fund,what is the overall effect on Peterson's financial statements?

How is a customer's NSF check reflected on a bank reconciliation?

For a petty cash fund to be most useful to a business,one of the employees of the business should be designated as responsible for the fund.

Keatts Company's bank statement included an NSF check written by one of its customers.What effect will recognizing the NSF check have on the company's financial statements?

Which of the following describes an activity that reduces a company's bank account balance?

[The following information applies to the questions displayed below.] The bank statement for Tetra Company contained the following items: a bank service charge of $10; a credit memo for interest earned, $15; and a $50 NSF check from a customer. The company had outstanding checks of $100 and a deposit in transit of $300. -Which of the following will be caused by recording the customer's NSF check?

Establishment of a petty cash fund is an asset exchange transaction.

The April 30 bank statement for Trimble Corporation shows an ending balance of $34,351.The unadjusted cash account balance was $28,250.The accountant for Trimble gathered the following information: (1) There was a deposit in transit for $4,240. (2) The bank statement reports a service charge of $39. (3) A credit memo included in the bank statement shows interest earned of $95. (4) Outstanding checks totaled $10,935. (5) The bank statement included a $650 NSF check deposited in April. What is the true cash balance as of April 30?

Which internal control procedure is a deterrent to corruption?

Owen Company's unadjusted book balance at June 30 is $9,700.The company's bank statement reveals bank service charges of $45.Two credit memos are included in the bank statement: one for $900,which represents a collection that the bank made for Owen,and one for $50,which represents the amount of interest that Owen had earned on its interest-bearing account in June.What is the true cash balance?