FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 8: Cash and Internal Controls

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Essay

Review LaterAdd Note

Review Later

The following account balances are taken from Everest Events at December 31. $\begin{array} { | l | r | r | } \hline & 2016 & 2015 \\\hline \text { Accounts receivable } & 170,230 & 260,450 \\\hline \text { Net sales } & 1,500,750 & 1,450,600 \\\hline\end{array}$ Calculate the number of days' sales uncollected for both years. According to this analysis, is the company's collection of receivables improving? Explain.

Correct Answer

verified

Days' Sales Uncollected Ratio = Ending A...

View Answer

Show Answer

Question 2

Multiple Choice

Review LaterAdd Note

Review Later

In the process of reconciling its bank statement for January, Maxi's Clothing's accountant compiles the following information: $\begin{array} { | l | l | } \hline \text { Cash balance per company books on January 30 } & \$ 4,725 \\\hline \text { Deposits in transit at month-end } & { \$ 1,800 } \\\hline \text { Outstanding checks at month-end } & \$ 520 \\\hline \text { Bank service charges } & \$ 25 \\\hline \text { EFT automatically deducted monthly, not yet recorded by Maxi } & \$ 380 \\\hline \text { An NSF check returned on a customer account } & \$ 265\\\hline \\\hline \text { An NSF check returned on a customer account } & \$ 265\\\hline\end{array}$

A) $4,055
B) $4,585
C) $5,335
D) $4,815
E) $5,855

F) A) and C)
G) A) and E)

Correct Answer

verified

Show Answer

Question 3

Multiple Choice

Review LaterAdd Note

The number of days' sales uncollected is used to:

When a petty cash fund is in use:

Technologically advanced accounting systems rarely need monitoring for errors because computers always process transactions correctly.

Maintaining adequate records is an important internal control principle.

The account is used to record the effects of cash overages and shortages from errors in making change or managing a petty cash fund.

When reimbursing the petty cash fund:

For each of the independent cases below, identify the principle of internal control that is violated, and recommend what should be done to remedy the violation. 1. In order to save money, Indigo Company has decided to drop its property insurance on assets; and stop bonding the cashiers who handle upwards of $5,000 in cash each day. 2. Jobs Company records each sale on a preprinted invoice. Because invoices are sometimes damaged in the process of preparation, the invoices are not prenumbered. Instead, the sales clerk writes the next number on each invoice as it is prepared. 3. Keegan Company is a very small business. Dylan Epps, one of the two office clerks, opens the mail each day and removes the cash receipts that come in the mail. Dylan also records the receipts in the cash records and the customer's account and deposits the cash in the bank. 4. Ludwig Company prides itself on hiring only the most competent employees. The owner, Jeremy Ludwig, believes that since the employees are highly competent he can show he trusts them completely by not checking up on their performance. 5. Maple Industries is a small business with three accounting employees. Each employee is well-trained and able to perform any of the accounting tasks, including handling cash receipts and cash disbursements, and preparing the bank reconciliation. Because of this cross-training, the employees share responsibilities for all of the tasks.

The following information is available for the Victor Company for its March 31 bank reconciliation: From the March 31 bank statement: $\begin{array} { | r | r | r | r | } \hline \text { Previous } & \text { Total Checks and } & \text { Total Deposits and } & \text { Current } \\\text { Balance } & \text { Debits } & \text { Credits } & \text { Balance } \\\hline \$ 9,908 & \$ 7,805 & \$ 11,905 & \$ 14,008 \\\hline\end{array}$ NSF: A check from a customer, Booker Co. in payment of their account. 100 IN: Interest earned on the account. From the Victor Company's accounting records: $\begin{array}{c}{ \text { Cash Receipts Depasited } } \\\begin{array} { | l | c | r | } \hline \text { Date } && \text { Cash Debit } \\\hline \text { March } & 7 & 4,340 \\\hline & 27 & 7,270 \\\hline & 31 & \underline { 2,090 } \\\hline & & \underline { 13,700 } \\\hline & & \\\hline & & \\\hline & & \\\hline\end{array}\end{array}$ $\begin{array} {c}{ \text { Cash Disbursements } } \\\begin{array} { |r | r | } \hline \text { Check No. } & \text { Cash Debit } \\\hline 2905 & 170 \\\hline 2906 & 3,850 \\\hline 2907 & 460 \\\hline 2908 & 1,350 \\\hline 2909 & 725 \\\hline 2910 & \underline { 340 } \\\hline & \underline { 6.895 } \\\hline\end{array}\end{array}$ 1. Based on the above information, prepare a bank reconciliation for the Victor Company. 2. Prepare the necessary general journal entries to adjust cash to the reconciled balance.

Identify whether each of the following items 1 through 10 would on appear on the bank side or the book side of a bank reconciliation. _____ 1. Bank service charges _____ 2. Outstanding checks _____ 3. Deposits in transit _____ 4. NSF check _____ 5. Interest on a checking account _____ 6. The company properly wrote a check for $95.80 that the bank incorrectly paid as $9.58. 7. The bank printed checks for the depositor for a fee. _____ 8. Bank debit memorandum _____ 9. Bank credit memorandum _____ 10. The bank collected a $1,000 note for the depositor.

If the Cash Over and Short account has a credit balance at the end of the period, the amount is commonly reported as miscellaneous revenue.

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.

A properly designed internal control system:

A ________ fund is used to make cash disbursements of small amounts to avoid the time and cost of writing checks.

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

A voucher is an external document used to accumulate information to control cash disbursements and to ensure that a transaction is properly recorded.

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

Canceled checks are checks the bank has paid and deducted from the customer's account during the period.

Umber Company's bank reconciliation for September is presented below. Prepare the necessary adjusting journal entries based on the reconciliation report. $\begin{array}{c}\text {UMBER COMPANY}\\\text {Bank Reconciliation}\\\text { September 30}\\\begin{array}{|l|r|l|r|r}\hline\text { Bank statement balance } & \$ 1,350 & \text { Book balance of cash } & & \$ 995 \\\hline \text { Add: } & &\text { Add: } & & \\\hline \text { Deposit in transit } & 1,250 & \text { Proceeds of note } & 900 & \\\hline \text { Bank error } & 275 & \text { Less note collection fee } & 25 & \underline{875} \\\hline & \$ 2,875 & & & 1,870 \\\hline \text { Deduct: } && \text { Deduct: } & & \\\hline \text { Outstanding checks } & \underline{1,145} & \text { NSF check plus processing fee } & & 125 \\\hline & & \text { Bank service charge } & & \underline{15} \\\hline \text { Reconciled balance } & \$ 1,730 & \text { Reconciled balance } & & \underline{\$ 1,730} \\\hline\end{array}\end{array}$