76) The following information is available for Birch Company at December 31:
Money market fund balance
$
2,790
Certificate of deposit maturing June 30 of next year
$
10,000
Postdated checks from customers
$
1,475
Cash in bank account
$
21,430
NSF checks from customers returned by bank
$
650
Cash in petty cash fund
$
200
Inventory of postage stamps
$
24
U.S. Treasury bill purchased on December 15 and maturing on February
28 of following year
$
5,000
Based on this information, Birch Company should report Cash and Cash Equivalents on
December 31 of:
A) $29,420
B) $41,345
C) $31,345
D) $39,420
E) $38,770
77) The following information is available for Fenton Manufacturing Company at June 30:
Cash in bank account
$
11,455
Inventory of postage stamps
$
74
Money market fund balance
$
10,400
Petty cash balance
$
350
NSF checks from customers returned by bank
$
867
Postdated checks received from customers
$
791
Money orders
$
290
A nine-month certificate of deposit maturing on December 31 of current
year
$
6,000
Based on this information, Fenton Manufacturing Company should report Cash and Cash
Equivalents on June 30 of:
A) $28,495
B) $29,286
C) $23,286
D) $12,095
E) $22,495
78) The following information is available for Montrose Company at December 31:
Cash in bank account
$
8,540
Petty cash
$
250
Short-term investment
$
10,400
Checks from customers
$
1,350
Equipment
$
805
Treasury bill maturing in 60 days
$
10,000
Money orders
$
290
A three-year certificate of deposit maturing in three years
$
6,000
Based on this information, the amounts considered Cash and Cash Equivalents, respectively on
December 31 are:
A) Cash $10,430; Cash equivalents $20,400
B) Cash $8,540; Cash equivalents $22,290
C) Cash $8,790; Cash equivalents $26,400
D) Cash $19,190; Cash equivalents $16,000
E) Cash $11,235; Cash equivalents $26,400
79) Basic bank services do not include:
A) Bank accounts.
B) Bank deposits.
C) Checking.
D) Electronic funds transfer.
E) Petty cash management.
80) The three parties involved with a check are:
A) The writer, the cashier, and the bank.
B) The maker, the payee, and the bank.
C) The maker, the manager, and the payee.
D) The bookkeeper, the payee, and the bank.
E) The signer, the cashier, and the company.
81) A remittance advice is a(n):
A) Explanation for a payment by check.
B) Bank statement.
C) Internal voucher.
D) Electronic funds transfer.
E) Cancelled check.
82) A bank statement provided by the bank includes:
A) A list of outstanding checks.
B) A list of petty cash amounts.
C) The beginning and the ending balance of the depositor’s account.
D) A listing of deposits in transit.
E) A reconciliation to the depositor cash account.
83) A bank does not reduce the account of the depositor of which of the following?
A) All withdrawals through an ATM.
B) A fee assessed to the depositor’s account.
C) An uncollectible check.
D) Periodic payments arranged in advance, by a depositor.
E) A deposit to their account.
84) Preparing a bank reconciliation on a monthly basis is an example of:
A) Establishing responsibility.
B) Separation of duties.
C) Protecting assets by proving the accuracy of cash records.
D) A technological control.
E) Poor internal control.
85) The number of days’ sales uncollected:
A) Is used to evaluate the liquidity of receivables.
B) Is calculated by multiplying accounts receivable by sales.
C) Measures a company’s ability to pay its bills on time.
D) Measures a company’s debt to income.
E) Is calculated by dividing sales by accounts receivable.
86) The number of days’ sales uncollected is used to:
A) Measure how many days of sales remain until the end of the year.
B) Determine the number of days that have passed without collecting on accounts receivable.
C) Identify the likelihood of collecting sales on account.
D) Estimate how much time is likely to pass before the current amount of accounts receivable is
received in cash.
E) Measure the amount of cash sales during a period.
87) The number of days’ sales uncollected is calculated by:
A) Dividing accounts receivable by net sales.
B) Dividing accounts receivable by net sales and multiplying by 365.
C) Dividing net sales by accounts receivable.
D) Dividing net sales by accounts receivable and multiplying by 365.
E) Multiplying net sales by accounts receivable and dividing by 365.
88) All of the following are true of the number of days’ sales uncollected ratio except:
A) Is most effective in evaluating the cash sales of a company.
B) Can be used for comparisons to other companies in the same industry.
C) Can be used for comparisons between current and prior periods.
D) Reflects the liquidity of receivables.
E) Measures how much time is likely to pass before the current amount of accounts receivable is
received in cash.
89) A company had net sales of $21,500 and ending accounts receivable of $2,700 for the current
period. Its days’ sales uncollected equals: (Use 365 days a year.)
A) 8.0 days.
B) 58.9 days.
C) 45.8 days.
D) 7.4 days.
E) 45.2 days.
90) Freeman Co. had net sales of $4.2 million and ending accounts receivable of $0.8 million. Its
days’ sales uncollected equals:
A) 5.3 days.
B) 69.5 days.
C) 19.2 days.
D) 11.5 days.
E) 292 days.
91) The following information is taken from Reagan Company’s December 31 balance sheet:
Cash and cash equivalents
$
8,419
Accounts receivable
70,422
Merchandise inventories
60,362
Prepaid expenses
4,100
Accounts payable
$
14,950
Notes payable
86,638
Other current liabilities
9,500
If net sales for the current year were $612,000, the firm’s days’ sales uncollected for the year is:
(Use 365 days a year.)
A) 60 days
B) 85 days
C) 42 days
D) 154 days
E) 70 days
92) 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:
A) Cash Lost.
B) Bank Reconciliation.
C) Petty Cash.
D) Cash Over and Short.
E) Cash Receivable.
93) A set of procedures and approvals for verifying, approving and recording liabilities for
eventual cash payment, and for issuing checks for payment only of verified, approved, and
recorded liabilities is referred to as a(n):
A) Internal cash system.
B) Petty cash system.
C) Cash disbursement system.
D) Voucher system.
E) Cash control system.
94) Internal control procedures for cash receipts do not require that:
A) Custody over cash is kept separate from its recordkeeping.
B) All collections for sales are received immediately upon making the sales.
C) Clerks having access to cash in a cash register should not have access to the register tape or
file.
D) An employee with no access to cash receipts should compare the total cash recorded by the
register with the record of cash receipts reported by the cashier.
E) Cash sales should be recorded on a cash register at the time of each sale.
95) The Cash Over and Short account:
A) Is used when the cash account reports a credit balance.
B) Is used to record the income effects of errors in making change and/or processing petty cash
transactions.
C) Is not necessary in a computerized accounting system.
D) Can never have a debit balance.
E) Can never have a credit balance.
96) The voucher system of control:
A) Is a set of procedures and approvals designed to control cash receipts and the acceptance of
liabilities.
B) Establishes procedures for verifying, approving, and recording liabilities for eventual cash
payment.
C) Establishes procedures for receiving checks for the sale of verified, approved, and recorded
activities.
D) Applies only when multiple purchases are made from the same supplier.
E) Is required in large companies but not beneficial for small to mid-sized companies.
97) A voucher is an internal document or file:
A) Prepared after an invoice is received.
B) Used as a substitute for an invoice if the supplier fails to send one.
C) Used to accumulate information needed to control cash payments and to ensure that
transactions are properly recorded.
D) Takes the place of a bank check.
E) Prepared before the company orders goods to make sure that all goods are being ordered from
an approved vendor list.
98) Which of the following procedures would weaken control over cash receipts that arrive
through the mail?
A) After the mail is opened, a list (in triplicate) of the money received is prepared with a record
of the sender’s name, the amount, and an explanation of why the money is sent.
B) The bank reconciliation is prepared by a person who does not handle cash or record cash
receipts.
C) For safety, only one person should open the mail, and that person should immediately deposit
the cash received in the bank.
D) The cashier deposits the money in the bank and the recordkeeper records the amounts
received in the accounting records.
E) The employees handling the cash receipts are bonded.
99) 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
A) Debit Cash $2,058; credit Sales $2,058.
B) Debit Cash $2,058; credit Cash Over and Short $8; credit Sales $2,050.
C) Debit Cash $2,050; credit Sales $2,050.
D) Debit Cash $2,050; debit Cash Over and Short $8; credit Sales $2,058.
E) Debit Cash Over and Short $8, credit Sales $8.
100) At the end of the day, the cash register tape shows $1,000 in cash sales but the count of cash
in the register is $1,010. The proper entry to account for this excess is:
A) Debit Cash $1,000; credit Sales $1,000.
B) Debit Cash $1,010; credit Sales $1,010.
C) Debit Cash $1,010; credit Sales $1,000; credit Cash Over and Short $10.
D) Debit Cash $1,000; debit Cash Over and Short for $10; credit Sales $1,010.
E) Debit Cash Over and Short $10; credit Cash $10.
101) A key factor in a voucher system includes all of the following except:
A) Only approved departments and individuals are authorized to incur a liability that will result
in the payment of cash.
B) Procedures for purchasing, receiving, and paying for merchandise are divided among several
departments.
C) The system limits the individuals that can incur cash payment liabilities for a company.
D) It is applied to purchases of merchandise inventory and all other expenses.
E) It is not necessary if the supplier provides both receiving report and invoice with the
merchandise shipped.
102) The entry to establish a petty cash fund includes:
A) A debit to Cash and a credit to Petty Cash.
B) A debit to Cash and a credit to Cash Over and Short.
C) A debit to Petty Cash and a credit to Cash.
D) A debit to Petty Cash and a credit to Accounts Receivable.
E) A debit to Cash and a credit to Petty Cash Over and Short.
103) Spencer Co. decides to establish a petty cash fund with a beginning balance of $200. The
company decides that any purchase under $25 can be processed through petty cash instead of the
voucher system. The journal entry to record establishing the account is:
A) Debit Cash $200 and credit Petty Cash $200.
B) Debit Cash $200 and credit Cash Over and Short $200.
C) Debit Petty Cash $200 and credit Cash $200.
D) Debit Petty Cash $200; credit Cash $175; and credit Cash Over and Short $25.
E) Debit Cash $200 and credit Petty Cash Over and Short $200.
104) The entry to record reimbursement of the petty cash fund for postage expense should
include:
A) A debit to Postage Expense.
B) A debit to Petty Cash.
C) A debit to Cash.
D) A debit to Cash Short and Over.
E) A debit to Supplies.
105) Spencer Co. has a $200 petty cash fund. At the end of the first month the accumulated
receipts represent $43 for delivery expenses, $127 for merchandise inventory, and $12 for
miscellaneous expenses. The fund has a balance of $18. The journal entry to record the
reimbursement of the account includes a:
A) Debit to Petty Cash for $200.
B) Debit to Cash Over and Short for $18.
C) Credit to Cash for $182.
D) Credit to Inventory for $127.
E) Credit to Cash Over and Short for $18.
106) When a petty cash fund is in use:
A) Expenses paid with petty cash are recorded when the fund is replenished.
B) Petty Cash is debited when funds are replenished.
C) Petty Cash is credited when funds are replenished.
D) Expenses are not recorded.
E) Cash is debited when funds are replenished.
107) When reimbursing the petty cash fund:
A) Cash is debited.
B) Petty Cash is credited.
C) Petty Cash is debited.
D) Appropriate expense accounts are debited.
E) No expenses are recorded.
108) Assume that the custodian of a $450 petty cash fund has $65 in coins and currency plus
$382 in receipts at the end of the month. The entry to replenish the petty cash fund will include:
A) A debit to Cash for $382.
B) A credit to Cash Over and Short for $3.
C) A debit to Petty Cash for $385.
D) A credit to Cash for $385.
E) A debit to Cash for $450.
109) Assume that the custodian of a $450 petty cash fund has $62 in coins and currency plus
$383 in receipts at the end of the month. The entry to replenish the petty cash fund will include:
A) A debit to Cash for $378.
B) A debit to Cash Over and Short for $5.
C) A debit to Petty Cash for $383.
D) A credit to Cash for $383.
E) A credit to Cash Over and Short for $5.
110) A company wants to decrease its $200 petty cash fund to $175. The entry to reduce the fund
is:
A) Debit Cash Over and Short for $25; credit Petty Cash $25.
B) Debit to Cash $25; credit Petty Cash $25.
C) Debit Miscellaneous Expenses $25; credit Cash $25.
D) Debit Petty Cash for $175; debit Cash Over and Short $25; credit Cash $200.
E) Debit Petty Cash $25; credit Cash $25.
111) A company had $43 missing from petty cash that was not accounted for by petty cash
receipts. The correct procedure is to:
A) Debit Cash Over and Short for $43.
B) Credit Cash Over and Short for $43.
C) Debit Petty Cash for $43.
D) Credit Petty Cash for $43.
E) Debit Cash for $43.
112) On a bank reconciliation, a bank fee for check printing not yet recorded by the company is:
A) Noted as a memorandum only.
B) Added to the book balance of cash.
C) Deducted from the book balance of cash.
D) Added to the bank balance of cash.
E) Deducted from the bank balance of cash.
113) Bank fees for check printing are recorded by the bank as:
A) An increase in the bank’s asset account.
B) A decrease in the bank’s asset account.
C) A decrease in the depositor’s bank account.
D) An increase in the depositor’s bank account.
E) An increase in the bank’s expense account.
114) Interest earned on the cash balance in the bank is recorded by the bank as:
A) An increase in the bank’s asset account.
B) A decrease in the bank’s asset account.
C) A decrease in the depositor’s bank account.
D) An increase in the depositor’s bank account.
E) An increase in the bank’s expense account.
115) Childers Company, which uses a perpetual inventory system, has an established petty cash
fund in the amount of $400. The fund was last reimbursed on November 30. At the end of
December, the fund contained the following petty cash receipts:
December 4
Freight charge for merchandise purchased
$
62
December 7
Delivery charge for shipping to customer
$
46
December 12
Purchase of office supplies
$
30
December 18
Donation to charitable organization
$
51
If, in addition to these receipts, the petty cash fund contains $201 of cash, the journal entry to
reimburse the fund on December 31 will include:
A) A debit to Transportation-In of $62.
B) A debit to Petty Cash of $189.
C) A credit to Office Supplies of $30.
D) A credit to Cash Over and Short of $10.
E) A credit to Cash of $199.
Correct journal entry:
Merchandise Inventory
Delivery Expense
Office Supplies
Miscellaneous Expense
Cash Over and Short
Cash
116) An analysis that explains differences between the checking account balance according to
the depositor’s records and the balance reported on the bank statement is a(n):
A) Internal audit.
B) Bank reconciliation.
C) Bank audit.
D) Trial reconciliation.
E) Analysis of debits and credits.
117) Outstanding checks refer to checks that have been:
A) Written, recorded, sent to payees, and received and paid by the bank.
B) Written and not yet recorded in the company books.
C) Held as blank checks.
D) Written, recorded on the company books, sent to the payee, but not yet paid by the bank.
E) Issued by the bank.
118) On a bank reconciliation, the amount of an unrecorded bank service charge should be:
A) Added to the book balance of cash.
B) Deducted from the book balance of cash.
C) Added to the bank balance of cash.
D) Deducted from the bank balance of cash.
E) Noted in memorandum form only.