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Exam 6: Internal Control and Accounting for Cash

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Question 41

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In establishing a strong internal control system at Banks Company,management is concerned with administrative controls.Administrative controls include:

A) performance evaluation
B) accuracy of the recording procedures.
C) keeping cash in a safe.
D) maintenance of accurate inventory records.

E) B) and C)
F) A) and D)

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Question 42

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The unadjusted cash account balance for Carson Company at December 31,2016 is $12,615.The bank statement showed an ending balance of $18,250 at December 31,2016.The following information is available from an examination of the bank statement and the company's accounting records: Check #433 for the purchase of inventory was written correctly and paid by the bank correctly for $432,but was recorded on the books at $234.Carson uses the perpetual inventory system. Required: 1)Prepare a bank reconciliation for December,2016. 2)Prepare the necessary journal entries at December 31,2016.

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Question 43

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The true cash balance can only be determined if both the unadjusted bank balance and the unadjusted cash balance are known.

Use the following to answer questions Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -In preparing the bank reconciliation for Heath Company,an employee discovered that the bank had collected one of the company's notes receivable in the amount of $20,000 and had deposited this amount in the company's account at the bank.This amount does not include interest.

What documentation issued by a bank increases a company's checking account balance at the bank?

Which of the following is not a primary role of an independent auditor?

List three of the five interrelated components of the internal control framework established by The Committee of Sponsoring Organizations of the Treadway Commission (COS0)that serve as the standards for Sarbanes-Oxley compliance.

Use the following to answer questions Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -In preparing the bank reconciliation for Heath Company,an employee found that a certified check that the company had used to settle an account payable remained outstanding.

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

Use the following to answer questions Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -In preparing the bank reconciliation for Heath Company,a company employee found that the bank statement included an NFS check that the company had received from a customer paying its account at Heath Company.

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

On September 30,2016,the bank statement of Fine Company showed a balance of $7,800.The following information was revealed by comparing the bank statement to the cash balance in Fine's accounting records: (1) deposits in transit amounted to $3,150 (2) outstanding checks amounted to $6,200 (3) a $550 check was incorrectly drawn on Fine's account (4) NSF checks returned by the bank were $750 (5) bank service charge was $29 (6) credit memo for $75 for the collection of one of the company's account receivable Based on the above information the true cash balance was:

Merrifield Lawn Care's bank statement at August 31,2016 showed an ending balance of $23,716.87.The unadjusted cash account balance for Merrifield is $20,237.98.The following data were gathered by Merrifield's accountant: Check number 2143 was correctly written for $427.It was recorded in the company's books as $472 for utilities. Outstanding checks as of August 31: $7,128.71 NSF check from customer: $71.82 Debit memo related to the returned deposit: $8.00 Credit memo related to interest earned: $10.00 Deposits in transit: $3,625.00 Required: 1)Prepare a bank reconciliation for Merrifield Lawn Care at August 31,2016. 2)Prepare the required journal entries for Cash at August 31,2016.

Use the following to answer questions Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -In preparing the bank reconciliation for Heath Company,an employee found that the bank statement reported a bank service charge of $50.

What term is used for a customer's check that is returned by the bank on which it was drawn because the customer did not have enough funds to pay the check?

Petty cash funds are maintained on an imprest basis.Explain the advantage of using the imprest basis in accounting for petty cash.

After journal entries have been made related to a bank reconciliation,the book balance will be equal to the true cash balance.

Which of the following statements about materiality is not true?

For each of the following items,indicate whether it is an adjustment to the bank side,the book side,or not applicable when preparing a bank reconciliation.Use + for addition,- for subtraction,and NA for no adjustment.If an item should be adjusted,indicate whether the balance would be increased or decreased.

The April 30,2016 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 30,2016?