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Exam 6: Cash and Internal Controls

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Question 71

Multiple Choice

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The days' sales uncollected ratio is used to:

A) Measure how many days of sales remain until the end of the year.
B) Determine the number of days that have passed without collecting on accounts receivable.
C) Identify the likelihood of collecting sales on account.
D) Estimate how much time is likely to pass before the current amount of accounts receivable is received in cash.
E) Measure the amount of cash sales during a period.

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

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Question 72

Multiple Choice

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At the end of the day, the cash register tape shows $1,020 in cash sales but the count of cash in the register is $1,035. The proper entry to account for this excess is:

A) Debit Cash $1,020; credit Sales $1,020.
B) Debit Cash $1,035; credit Sales $1,035.
C) Debit Cash $1,035; credit Sales $1,020; credit Cash Over and Short $15.
D) Debit Cash $1,020; debit Cash Over and Short for $15; credit Sales $1,035.
E) Debit Cash Over and Short $15; credit Cash $15.

F) C) and E)
G) B) and E)

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Question 73

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What is the purpose of the days' sales uncollected ratio?

Most large thefts occur from payment of fictitious invoices, which makes control of cash disbursements especially important for companies.

On a bank statement, deposits are listed as credits because the bank increases its liability to the depositor when the deposit is made.

Explain the difference between cash and cash equivalents.

When reimbursing the petty cash fund:

Which of the following is not one of the policies and procedures that make up an internal control system?

________________ includes currency, coins, and amounts on deposit in checking accounts and savings accounts.

The Discounts Lost account represents the cost of not taking advantage of purchase discounts.

Internal control systems are subject to limitations that usually arise from either (1) human error or human fraud, or (2) the cost-benefit principle.

Petty cash reimbursement requires a journal entry that involves a debit to the appropriate expenses and a credit to Cash.

Discuss how the principles of internal control apply to cash receipts over-the-counter by giving several examples of good control measures that should be implemented.

If 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:

The three parties involved with a check are:

The use of internal controls provides a guarantee against losses due to operating activities.

The itemized statement of goods prepared by a vendor listing the customer's name, items sold, sales prices, and terms of the sale is called the

Havermill Co. establishes a $250 petty cash fund on September 1. On September 30, the fund is replenished. The accumulated receipts on that date represent $73 for Office Supplies, $137 for merchandise inventory, and $22 for miscellaneous expenses. The fund has a balance of $18. On October 1, the accountant determines that the fund should be increased by $50. The journal entry to record the increase in the fund balance on October 1 is:

The internal document prepared to notify the appropriate persons that goods ordered have been received, describing the quantities and condition of the goods is the

Quibble Company established a $300 petty cash fund by issuing a check to the custodian on February 1. On February 15, the petty cash fund was replenished and increased to $800 in total. The contents of the petty cash fund at the time of the February 15 replenishment were: $\begin{array} { | l | r | r | } \hline \text { Currency and coins } & & \$ 12 \\\hline \text { Petty cash receipts for: } & & \\\hline \text { Transportation-in for inventory } & \$ 39 & \\\hline \text { Delivery expense } & 88 & \\\hline \text { Repairs to office equipment } & 47 & \\\hline \text { Postage } & 64 & \\\hline \text { Entertainment of customers } & 53 & 299 \\\hline \text { Total } & & \$ 303 \\\hline\end{array}$ Prepare Quibble's general journal entry to record both the reimbursement and the increase of the petty fund on February 15.