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Exam 7: Sarbanes-Oxley, Internal Control, and Cash

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Question 51

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Using the following information, prepare a bank reconciliation for Cole Co. for May 31, 2011:

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Question 52

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Which one of the following below reflects a weak internal control system?

A) all employees are well supervised
B) a single employee is responsible for comparing a receiving report to an invoice
C) all employees must take their vacations
D) a single employee is responsible for collecting and recording of cash

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Question 53

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The Sarbanes-Oxley Act requires that financial statements of all public companies report on management's conclusions about the effectiveness of the company's internal control procedures.

Derek Company gathered the following reconciling information in preparing its September bank reconciliation:

Which one of the following below is not a factor that influences a business's control environment?

A firm's internal control environment is not influenced by

Harris Company had checks outstanding totaling $15,400 on its May bank reconciliation. In June, Harris Company issued checks totaling $64,900. The June bank statement shows that $47,600 in checks cleared the bank in June. A check from one of Harris Company's customers in the amount of $300 was also returned marked "NSF." The amount of outstanding checks on Harris Company's June bank reconciliation should be

Receipts from cash sales of $3,200 were recorded incorrectly in the cash receipts journal as $2,300. What entry is required in the company's accounts?

The bank statement for Gatlin Co. indicates a balance of $7,735.00 on June 30, 2010. After the journals for June had been posted, the cash account had a balance of $4,098.00. Record the appropriate journal entries that would be necessary for Gatlin Co.

Green Valley Bank sent Comstock Industries their end of month bank statement for July. The end of month balance by the bank is $11,237.00. The statement shows that a deposit for $4,250.00 is in transit at the end of the statement period. The statement also revealed that checks for $87.00, $105.00, and $95.00 are outstanding. Green Valley collected a 90 day, 12% interest $4,000.00 note receivable charging $20.00 for the service. No interest has been accrued on the note. The bank charges a monthly account fee of $35.00. The end of month balance per company books is $11,135.00. Complete a bank/account reconciliation and write any necessary journal entries for the reconciliation.

A minimum cash balance required by a bank is called

The control environment in an internal control structure is the attitude and awareness of internal control by all employees.

The Sarbanes-Oxley Act of 2002 was passed by Congress due to the public outcry after the financial scandals of the early 2000s.

Cash equivalents

The notification accompanying a check that indicates the specific invoice being paid is called a

On April 2nd, Granger Sales decides to establish a $125.00 Petty Cash Account to relieve the burden on Accounting. (a) Journalize this event. (b) On April 10th, the petty cash fund has receipts for mail and postage of $43.50, contributions and donations of $29.50, meals and entertainment of $38.25 and $13.55 in cash. Journalize the replenishment of the fund. (c) On April 11th, Granger Sales decides to increase petty cash to $200.00. Journalize this event.

Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the customer. What entry is required in the company's accounts?

In the normal operation of business you receive a check from a customer and deposit it into your checking account. With your bank statement you are advised that this check for $775 is "NSF". The bank also informs you that due to the amount of activity on your business account the monthly service charge is $75. During a bank reconciliation, you will:

After a bank reconciliation is completed, adjusting entries are prepared for items in the balance per company's records as well as items in the balance per bank statement.

If the balance in Cash Short and Over at the end of a period is a credit, it should be reported as an "other income" item on the income statement.