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Exam 4: Cash and Internal Controls

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Question 81

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Which of the following is an example of detective controls?

A) Separation of duties.
B) Physical controls.
C) Proper authorization.
D) Reconciliations.

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Question 82

Multiple Choice

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At the end of the month,employees have made the following expenditures from the petty cash fund and with company-issued credit cards.None of these transactions has been recorded previously.Accounting for these employee purchases would include a: Supplies (pett cash) $= \$ 50$ Delivery $($ petty cash $) = \$ 75$ Advertising (credit card) $= \$ 1,100$ Equipment (credit card) $= \$ 4,200$

A) Credit to Petty Cash for $125.
B) Debit to Accounts Payable for $5,300.
C) Credit to Cash for $1,225.

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Question 83

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When customers pay for services with a check,the company should debit Accounts Receivable and credit Service Revenue.The debit should be to Cash.

Which of the following items would cause the balance of cash in the bank statement to be greater than the balance of cash in the accounting records?

A company's plans to minimize theft and enhance the accuracy of accounting information are referred to as:

A bank reconciliation reconciles the bank statement with the company's:

Which of the following items would cause the balance of cash in the bank statement not to equal the balance of cash in the accounting records?

The balance shown in the August bank statement of Colt Company was $23,200.After examining the August bank statement and items included with it,the company's accountant found: What is the amount of cash that should be reported in the balance sheet as of August 31? $\begin{array} { | l | r | } \hline \text { Checks outstanding } & \$ 4,300 \\\hline \text { NSF check } & 140 \\\hline \text { Note collected by bank for the Colt Company } & 1,200 \\\hline \text { Deposits outstanding } & 1,800 \\\hline \text { Bank service fees } & 60 \\\hline\end{array}$

Opening mail and making a list of checks received once per week is considered a good internal control over cash receipts.These tasks should be performed each day.

Which of the following best describes restricted cash?

The amount of revenue recorded at the time of a sale will be greatest when the customer pays with a:

Terastar Corp.reports the following amounts: What is the ratio of cash to noncash assets? $\begin{array} { | c | c | c | } \hline \text { Cash } & \text { Total Assets } & \text { Total Liabilities } \\\hline \$ 10,000 & \$ 50,000 & \$ 35,000 \\\hline\end{array}$

Whether a customer uses cash,a check,or a debit card to make a purchase,the company records the transaction as a cash sale.

On May 31,Money Corporation's Cash account showed a balance of $10,000 before the bank reconciliation was prepared.After examining the May bank statement and items included with it,the company's accountant found the following items: Error: Money Corp.wrote a check for $30 but recorded it incorrectly for $300.What is the amount of cash that should be reported in the company's balance sheet as of May 31? $\begin{array} { | l | r | } \hline \text { Checks outstanding } & \$ 2,250 \\\hline \text { Deposits outstanding } & 1,900 \\\hline \text { NSF check } & 100 \\\hline \text { Serice fees } & 40 \\\hline\end{array}$

Which of the following would not be considered good internal control for cash receipts?

At the end of the month,employees have made the following expenditures from the petty cash fund and with company-issued credit cards.None of these transactions has been recorded previously.Accounting for these employee purchases would include a: Supplies (pett cash) $= \$ 50$ Delivery $($ petty cash $) = \$ 75$ Advertising (credit card) $= \$ 1,100$ Equipment (credit card) $= \$ 4,200$

Separation of duties refers to auditors not being allowed to perform both audit and nonaudit services for the same client.Separation of duties is where individuals who have physical responsibility for assets should not also have access to accounting records.

Which of the following is NOT a reason why a bank reconciliation is necessary?

Consider the following cash flow items: Pay amount owed to bank for previous borrowing.Pay utility costs.Purchase equipment to be used in operations.Purchase office supplies.Pay one year of rent in advance.Pay workers' salaries.Pay for research and development costs.Pay taxes to the IRS.Sell common stock to investors.How many of these cash flow items involve investing activities?

Providing employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties is an example of which preventive control?