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Exam 6: Cash and Internal Controls

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Question 91

True/False

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The clerk who has access to the cash in the cash register should not have access to the cash register tape or file.

A) True
B) False

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Question 92

Multiple Choice

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For which item does a bank NOT issue a debit memorandum?

A) To notify a depositor of all withdrawals through an ATM
B) To notify a depositor of a deduction to a depositor's account
C) To notify a depositor of a bounced check
D) To notify a depositor of periodic payments arranged in advance, by a depositor
E) To notify a depositor of a deposit to their account

F) None of the above
G) A) and B)

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Question 93

Multiple Choice

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A set of procedures and approvals that is designed to control cash disbursements and the acceptance of obligations is referred to as a(n) :

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

A company established a $400 petty cash fund by issuing a check to the custodian on October 1. On October 15, the petty cash fund was replenished and increased to $1,000 in total. The contents of the petty cash fund at the time of the October 15 replenishment were: Prepare the general journal entry to record both the reimbursement and the increase of the petty cash fund on October 15.

Internal control devices for banking activities include signature cards, deposit tickets, checks and bank statements.

Following are seven items a through g that would cause Xavier Company's book balance of cash to differ from its bank statement balance of cash. a. A service charge imposed by the bank. b. A check listed as outstanding on the previous period's reconciliation and still outstanding at the end of this month. c. A customer's check returned by the bank is marked "Not Sufficient Funds. (NSF)" d. A deposit that was mailed to the bank on the last day of the current month and is unrecorded on this month's bank statement. e. A check paid by the bank at its correct $190 amount was recorded in error in the company's Check Register at $109. f. An unrecorded credit memorandum indicated that bank had collected a note receivable for Xavier Company and deposited the proceeds in the company's account. g. A check was written in the current period that is not yet paid or returned by the bank. Indicate where each item a through g would appear on Xavier Company's bank reconciliation by placing its identifying letter in the parentheses in the proper section of the form below.

Which of the following statements is true given the data below? $\begin{array} { | l | r | r | } \hline & \text { Company A } & \text { Company B } \\\hline \text { Sales } & \$ 250,000 & \$ 400,000 \\\hline \text { Ending Accounts Receivable } & \$ 55,000 & \$ 55,000 \\\hline\end{array}$

An analysis that explains any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a (n) :

Cash receipts by mail require only two people: One to open the mail and a second person to deposit the cash in the bank and record the cash receipt in the accounting records.

A customer's check is deposited by a company. The check is uncollectible because the balance in the customer's account is not large enough to cover the check. This check is referred to as a __________ check.

Brouski had $750 million in accounts receivable and $2,900 million in net sales for the current period. Its days' sales uncollected ratio equals 3.9 days.

A sales system with pre-numbered, controlled sales slips is an example of the internal control principle of _______________________.

Highlight Hotel deposits all cash receipts on the day when they are received and it makes all cash payments by check. At the close of business on December 31, its Cash account shows a $18,393, debit balance. Highlight Hotel's June 30 bank statement shows $15,921 on deposit in the bank. Prepare the necessary adjusting journal entries using the following information 1. Outstanding checks as of December 31 total $2,261. 2. The December 31 bank statement included a $35 debit memorandum for bank services. 3. Check No. 2519, listed with the canceled checks, was correctly drawn for $850 in payment of a utility bill on December 16. Highlight Hotel mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $805. 4. The December 31 cash receipts of $3,425 were placed in the bank's night depository after banking hours and were not recorded on the December 31 bank statement. 5. The bank statement included a check from a customer's payment of an account receivable that had been returned NSF in the amount of $1,228. Prepare the necessary adjusting journal entries.

A company reported net sales for Year 1 of $285,000 and $575,000 for Year 2. The year-end balances of accounts receivable were $49,000 for Year 1 and $85,000 for Year 2. 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.

A _____________________________ fund is used for the control of small amounts of cash disbursements.

Assume that cash sales according to the register file total $705 but the amount of cash in the register is $685. This cash shortage of $20 represents a Miscellaneous Expense.

Which of the following is the most serious limitation of internal controls?

A remittance advice is:

A properly designed internal control system is a key part of accounting information systems design, analysis and performance.