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Exam 8: Cash and Internal Controls

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Question 51

Multiple Choice

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Basic bank services do not include:

A) Petty cash management.
B) Bank accounts.
C) Bank deposits.
D) Electronic funds transfer.
E) Checking.

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

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Question 52

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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:

A) Debit Cash $50; credit Petty Cash $50.
B) Debit Petty Cash $50; credit Cash $50.
C) Debit Petty Cash $300; credit Cash $300.
D) Debit Miscellaneous Expense $50; credit Cash $50.
E) Debit Petty Cash $50; credit Accounts Payable $50.

F) A) and E)
G) All of the above

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Question 53

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A company had the following transactions during January: $\begin{array}{|l|l|}\hline \text { Jan. 2 } & \text { Purchased merchandise, invoice price of } \$ 16,000, \text { with terms } 2 / 10, \mathrm{n} / 30 . \\\hline 4 & \begin{array}{l}\text { Received a credit memorandum for } \$ 4,000, \text { the invoice price on } \\\text { merchandise returned from the purchase of January } 2 .\end{array} \\\hline 12 & \text { Purchased merchandise, invoice price of } \$ 15,000, \text { with terms } 3 / 15, \mathrm{n} / 30 . \\\hline 26 & \text { Paid for the merchandise purchased on January } 12 . \\\hline 30 & \text { Paid for the merchandise purchased on January 2. } \\\hline\end{array}$ Using the net method of recording purchases, prepare the journal entries to record these January transactions.

Principles of internal control include all of the following except:

Cash equivalents:

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:

According to good internal control policies, a person who controls an asset also maintains that asset's accounting records.

At the end of the day, the cash register's record shows $2,050, but the count of cash in the cash register is $2,058. The correct entry to record the cash sales is

The following information is available for Montrose Company at December 31: A nine-month certificate of deposit maturing on June 30 of $\begin{array} { | l | r | } \hline \text { Cash in bank account } & \$ 8,540 \\\hline \text { Petty cash } & 250 \\\hline \text { Money market fund balance } & \$ 10,400 \\\hline \text { Checks from customers } & \$ 1,350 \\\hline \text { NSF checks from customers returned by bank } & \$ 805 \\\hline \text { Treasury bill maturing in 60 days } & \$ 10,000 \\\hline \text { Money orders } & \$ 290 \\\hline \text { A nine-month certificate of deposit maturing on June 30 of next year } & \$ 6,000 \\\hline\end{array}$ Based on this information, the amounts considered Cash and Cash Equivalents, respectively on December 31 are:

Explain the difference between cash and cash equivalents.

Gardener Company had the following transactions during January: $\begin{array}{|r|l|}\hline \text { Jan. 10 } & \begin{array}{l}\text { Purchased merchandise at a } \$ 8,900 \text { price, invoice dated January } 10 \text {, terms } 1 / 10, \\\mathrm{n} / 30 .\end{array} \\\hline 13 & \begin{array}{l}\text { Received a } \$ 900 \text { credit memorandum (at full invoice price) for the return of } \\\text { merchandise that it purchased on January } 10 .\end{array} \\\hline 18 & \begin{array}{l}\text { Purchased merchandise at a } \$ 8,500 \text { price, invoice dated January } 18, \text { terms } 2 / 10, \\\mathrm{n} / 30 .\end{array} \\\hline 27 & \text { Paid for the merchandise purchased on January 18, less the discount. } \\\hline 31 & \begin{array}{l}\text { Paid for the merchandise purchased on January 10. Payment was delayed } \\\text { because the invoice was mistakenly fled for payment today. This error caused } \\\text { the discount to be lost. }\end{array} \\\hline\end{array}$ Using the net method of recording purchases, prepare the journal entries to record these January transactions.

Approved vouchers are recorded in a journal called the voucher register.

The following information is available for Fenton Manufacturing Company at June 30: $\begin{array} { | l | r | } \hline \text { Cash in bank account } & \$ 11,455 \\\hline \text { Inventory of postage stamps } & \$ 74 \\\hline \text { Money market fund balance } & \$ 10,400 \\\hline \text { Petty cash balanes } & \$ 350 \\\hline \text { NSF checks from customers returned by bank } & \$ 867 \\\hline \text { Postdated checks received from customers } & \$ 791 \\\hline \text { Money orders } & \$ 290 \\\hline \text { A nine-month certificate of deposit maturing on December 31 of } & \$ 6,000 \\ \text { current year } & \\\hline\end{array}$ Based on this information, Fenton Manufacturing Company should report Cash and Cash Equivalents on June 30 of:

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

Norman Co. had $5,925 million in sales and $1,155 million in ending accounts receivable for the current period. For the same period, Opal Co. reported $5,885 million in sales and $790 million in ending accounts receivable. Calculate the days' sales uncollected for both companies as of the end of the current period and indicate which company is doing a better job in managing the collection of its receivables.

What is a voucher system and what are the two areas for which it establishes control procedures?

A seller (or provider) of goods or services to a business organization is known as a:

An income statement account that is used to record cash overages and cash shortages arising from petty cash transactions or from errors in making change is titled:

Ryan Company deposits all cash receipts on the day they are received and makes all cash payments by check. Ryan's June bank statement shows $18,361 on deposit in the bank. Ryan's comparison of the bank statement to its cash account revealed the following: $\begin{array} { | l | r | } \hline \text { Deposit in transit } & 1.450 \\\hline \text { Outstanding checks } & 8 3 7 \\\hline\end{array}$ Additionally, a $29 check written and recorded by the company correctly was recorded by the bank as a $92 deduction. The adjusted cash balance per the bank records should be:

Identify each of the following items 1 through 10 as either (A) cash or (B) cash equivalent. 1. Coins _____ 2. Petty cash _____ 3. Three-month certificate of deposit 4. Commercial paper _____ 5. Currency 6. Certified check 7. Cashier's check _____ 8. Money market accounts 9. Money orders _____ 10. U.S. treasury bills