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Exam 6: Cash, fraud, and Internal Controls

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Question 21

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The use of electronic communication to transfer cash from one party to another is called ________.

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electronic...

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Question 22

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A company reported net sales for 2014 of $265,000 and $545,000 for 2015.The year-end balances of accounts receivable were $39,000 for 2014 and $92,000 for 2015.Calculate the days' sales uncollected at the end of each year for this company and describe any changes in the apparent liquidity of the company's receivables.

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Days' Sales Uncollected Ratio = Ending A...

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Question 23

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A petty cash fund was originally established with a check for $100.On August 31,which is the period end,the petty cash fund included the following: $\begin{array} { | l | r | } \hline \text { Petty cash receipts: } & \\\hline \text { Postage } & \$ 43.50 \\\hline \text { Office supplies } & 11.85 \\\hline \text { Office equipment repair } & 39.00 \\\hline \text { Cash } & 4.25 \\\hline\end{array}$ Prepare the general journal entry to record the replenishment of the petty cash fund on August 31.

The Petty Cash account is a separate bank account used for small amounts.

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:

If a check correctly written and paid by the bank for $272 is incorrectly recorded in the company's books for $227,how should this error be treated on the bank reconciliation?

Clearly establishing responsibilities and assigning all accounting activities to one person is an important principle of internal control.

Plenty Co.established a petty cash fund of $150 on October 1.On October 10,the petty cash fund was replenished when there was $49 remaining and there were petty cash receipts for: office supplies,$47; transportation-in on inventory purchased,$32; and postage,$22.On October 15,the petty cash fund was decreased to $125 in total.Plenty Co.uses the perpetual inventory system.Record the above transactions in general journal form.

Preparing a bank reconciliation on a monthly basis is an example of:

After preparing a bank reconciliation,adjustments must be made for items reconciling the book balance.

Signature cards,deposit tickets,checks,and bank statements are all examples of internal control devices for banking activities.

An ________ refers to the policies and procedures managers use to protect assets,ensure reliable accounting,promote efficient operations,and urge adherence to company policies.

An internal control system consists of the policies and procedures companies use to protect assets,ensure reliable accounting,promote efficient operations,and uphold company policies.

The number of days' sales uncollected is calculated by:

On August 25,Barrymore Co.purchased $5,000 worth of merchandise on terms 2/10,n/30; on September 4,the amount due was paid.Using the net method of recording purchases,prepare general journal entries to record (a)the purchase on August 25,and (b)the cash payment on September 4.

Match each of the following terms with the appropriate definitions. -A method of initially recording purchases at the invoice price less any purchase discounts offered by the seller.

Two limitations of internal control systems are ________ and ________.

The following information is available to reconcile Dibble Co.'s book balance of cash with its bank statement cash balance as of April 30.The April 30 cash balance according to the accounting records is $68,356,and the bank statement cash balance for that date is $73,525. a.The bank erroneously cleared a $480 check against the account in April that was not issued by Dibble.The check documentation included with the bank statement indicates the check was actually issued by Flushing Co. b.On April 30,the bank issued a credit memorandum for $53 interest earned on Dibble's account. c.When the April checks are compared with entries in the accounting records,it is found that Check No.1828 had been correctly drawn for $1,530 to pay for advertising but was erroneously entered in the accounting records as $1,350. d.A credit memorandum indicates that the bank collected $10,000 cash on a note receivable for Dibble,deducted a $30 collection fee,and credited the balance to the company's Cash account.Dibble did not record this transaction before receiving the statement. e.A debit memorandum of $895 is enclosed with the bank statement for an NSF check for $870 received from a customer.The bank assessed a $25 fee for processing it. f.Dibble's April 30 daily cash receipts of $5,102 were placed in the bank's night depository on that date,but do not appear on the April 30 bank statement. g.Dibble's April 30 cash disbursements journal indicates that Check No.1837 for $584 and Check No.1840 for $1,219 were both written and entered in the accounting records,but are not among the canceled checks. 1.Prepare the bank reconciliation for this company as of April 30. 2.Prepare the journal entries necessary to bring the company's book balance of cash into conformity with the reconciled cash balance as of April 30.

Which of the following procedures would weaken control over cash receipts that arrive through the mail?

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