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Exam 7: Internal Control and Cash

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Question 41

Multiple Choice

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Which of the following would be added to the balance per books on a bank reconciliation?

A) service charges
B) outstanding checks
C) deposits in transit
D) notes collected by the bank

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

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Question 42

Multiple Choice

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When a firm uses internal auditors, it is adhering to which of the following internal control elements?

A) risk assessment
B) monitoring
C) proofs and security measures
D) information and communication

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

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Question 43

Multiple Choice

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A bank reconciliation should be prepared periodically because

Which of the following could signal internal control problems within the accounting system? (1) Safeguarding inventory in a locked warehouse (2) Abuse of alcohol or drugs (3) Gaps in transactions numbers (4) Operating style of management (5) Sudden increase in slow payments

The amount of cash to be reported on the balance sheet at June 30 is the

The Sarbanes-Oxley Act requires that financial statements of all public companies report on management's conclusions about the effectiveness of the company's internal control procedures.

A voucher is usually supported by

The Scharf Company is a retailer located in a state without sales tax. The following data was given to you to complete the transactions for the day's sales to be recorded. All cash drawers start with $100 in change. Record the journal entries for EACH cash register to determine the cashier's accuracy. $\begin{array} { | l | l | l | } \hline \text { Account } & \text { Debit } & \text { Credit } \\\hline & & \\\hline & & \\\hline & & \\\hline & & \\\hline & & \\\hline & & \\\hline & & \\\hline & & \\\hline & & \\\hline & & \\\hline & & \\\hline\end{array}$

Cash equivalents include short-term investments that will be converted to cash within 120 days.

Consider the following journal entry made by Jones Company for one day's sales of a single cashier. Upon investigation, what might you find happened to create this amount of Cash Over/Short account difference? Give three possible reasons for this difference.

List the objectives of internal control and give an example of how each is implemented.

Minor Company had checks outstanding totaling $19,200 on its April bank reconciliation. In May, Minor Company issued checks totaling $64,900. The May bank statement shows that $47,600 in checks cleared the bank in May. A check from one of Minor Company's customers of $300 was also returned marked "NSF." The amount of outstanding checks on Minor Company's May bank reconciliation should be

interest revenue earned by the note above

The portion of an invoice that is returned with payment is a

After a bank reconciliation is completed, journal entries are prepared for items in the balance per company's records as well as items in the balance per bank statement.

On April 2, Granger Sales decides to establish a $125.00 petty cash fund to relieve the burden on Accounting. ​ (a) Journalize the establishment of the fund. (b) On April 10, the petty cash fund has receipts for mail and postage of $43.50, contributions and donations of $29.50, meals and entertainment of $38.25, and $13.55 in cash. Journalize the replenishment of the fund. Record any missing funds in the cash short and over account. (c) On April 11, Granger Sales decides to increase petty cash to $200.00. Journalize this event.

The amount of the "adjusted balance" appearing on the bank reconciliation as of a given date is the amount that is shown on the balance sheet for that date.

deposit in transit

The following procedures were recently implemented at the Pampered Pets, Inc. For each procedure, indicate whether the internal control over cash represents (1) a strength or (2) a weakness. If it is a weakness, please explain why. (a) At the end of the day, cash register clerks are required to use their own funds to make up any cash shortages in their registers. (b) At the end of the day, an accounting clerk compares the duplicate copy of the daily cash deposit slip with the deposit receipt obtained from the bank. (c) After necessary approvals have been obtained for the payment of a voucher, the treasurer signs and mails the check. The treasurer then stamps the voucher and supporting documentation as paid and returns the voucher and supporting documentation to the accounts payable clerk for filing. (d) Along with the petty cash receipts for postage, office supplies, etc., several postdated employee checks are in the petty cash fund.

A $150 petty cash fund has cash of $54 and receipts of $83. The journal entry to replenish the account would include a