Name:
Class:
Date:
Indicate whether the statement is true or false.
1. A petty cash fund is used to pay relatively large amounts.
a.
True
b.
False
2. The control environment in an internal control structure is the overall attitude of management and employees about the
importance of internal control.
a.
True
b.
False
3. The sum of the money on hand and petty cash receipts in a petty cash fund will always be equal to the balance in the
petty cash account.
a.
True
b.
False
4. Depositing all cash, checks, etc., in a bank and paying with checks is an internal control procedure over cash.
a.
True
b.
False
5. For a strong internal control system over cash, it is important to have the duties related to cash receipts and cash
payments divided among different employees.
a.
True
b.
False
6. 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.
True
b.
False
7. Money market accounts, commercial paper, and U.S. Treasury bills are examples of cash equivalents.
a.
True
b.
False
8. In preparing a bank reconciliation, the amount of a canceled check omitted from the journal is added to the balance per
company’s records.
a.
True
b.
False
9. A check outstanding for two consecutive months will appear only on the first month’s bank reconciliation.
a.
True
b.
False
10. Cash equivalents include short-term investments that will be converted to cash within 120 days.
a.
True
b.
False
Name:
Class:
Date:
11. Separating the responsibilities for purchasing, receiving, and paying for equipment is an example of the control
procedure: separating operations, custody of assets, and accounting.
a.
True
b.
False
12. Sarbanes-Oxley requires sole proprietorships to maintain strong and effective internal controls and thus deter fraud
and prevent misleading financial statements.
a.
True
b.
False
13. Expenditures from a petty cash fund are documented by a petty cash receipt.
a.
True
b.
False
14. A check for $342 was erroneously charged by the bank as $432. In order for the bank reconciliation to balance, you
must add $90 to the bank statement balance.
a.
True
b.
False
15. Businesses that have several bank accounts, petty cash, and cash on hand would maintain a separate ledger account for
each type of cash.
a.
True
b.
False
16. An adjustment for a customer’s NSF check is included in a company’s bank reconciliation as a deduction from the
cash balance according to the bank statement.
a.
True
b.
False
17. A voucher is a form on which is recorded pertinent data about a liability and the particulars of its payment.
a.
True
b.
False
18. The bank often informs the company of bank service charges by including a credit memo with the monthly bank
statement.
a.
True
b.
False
19. In establishing a petty cash fund, a check is written for the amount of the fund and is journalized as a debit to
Accounts Payable and a credit to Petty Cash.
a.
True
b.
False
20. In preparing a bank reconciliation, the amount of an error indicating the recording of a check in the journal for an
amount larger than the amount of the check is added to the balance per company’s records.
a.
True
b.
False
Name:
Class:
Date:
21. The bank reconciles its statement to the company’s records.
a.
True
b.
False
22. A voucher is a written authorization to make a cash payment.
a.
True
b.
False
23. Money orders are considered cash.
a.
True
b.
False
24. An example of good internal controls over cash payments is the taking of all cash discounts offered.
a.
True
b.
False
25. Bank customers are considered creditors of the bank so the bank shows their accounts with credit balances on the
bank’s records.
a.
True
b.
False
26. 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.
a.
True
b.
False
27. In preparing a bank reconciliation, the amount of outstanding checks is added to the balance per bank statement.
a.
True
b.
False
28. All bank memos reported on the bank reconciliation require entries in the company’s accounts.
a.
True
b.
False
29. The petty cash fund eliminates the need for a bank checking account.
a.
True
b.
False
30. When the voucher system is used, the amount due on each voucher represents the credit balance of an account payable
if the voucher is in full payment to a creditor.
a.
True
b.
False
31. A compensating balance occurs when a bank may require a company to maintain a maximum cash balance.
a.
True
Name:
Class:
Date:
b.
False
32. In preparing a bank reconciliation, the amount of deposits in transit is deducted from the balance per bank statement.
a.
True
b.
False
33. If the balance in Cash Short and Over at the end of a period is a credit, it indicates that cash shortages have exceeded
cash overages for the period.
a.
True
b.
False
34. A voucher system is an example of an internal control procedure over cash payments.
a.
True
b.
False
35. Internal control is enhanced by separating the control of a transaction from the record-keeping function.
a.
True
b.
False
36. If the balance in Cash Short and Over at the end of a period is a credit, it should be reported as “Other Income” on the
income statement.
a.
True
b.
False
37. When the petty cash fund is replenished, the petty cash account is credited for the total of all expenditures made since
the fund was last replenished.
a.
True
b.
False
38. To enhance internal control, the bank reconciliation should be prepared by an employee who does not take part in or
record cash transactions.
a.
True
b.
False
39. The bank reconciliation is an important part of the system of internal controls.
a.
True
b.
False
40. For efficiency of operations and better control over cash, a company should maintain only one bank account.
a.
True
b.
False
41. The ratio of cash to monthly cash expenses includes both cash and cash equivalents in the numerator.
a.
True
b.
False
Name:
Class:
Date:
42. Sarbanes-Oxley’s purpose is to maintain public confidence and trust in the financial reporting of companies.
a.
True
b.
False
43. There are three internal control objectives and they are to safeguard the company’s reputation, ensure accurate
financial reports, and ensure compliance with applicable laws.
a.
True
b.
False
44. In preparing a bank reconciliation, the amount indicated by a credit memo for a note receivable collected by the bank
is added to the balance per company’s records.
a.
True
b.
False
45. A backlog in recording transactions is an example of a warning sign from the accounting system.
a.
True
b.
False
46. The Sarbanes-Oxley Act applies only to companies whose stock is traded on public exchanges.
a.
True
b.
False
47. In preparing a bank reconciliation, the amount indicated by a debit memo for bank service charges is added to the
balance per company’s records.
a.
True
b.
False
48. After a bank reconciliation is completed, journal entries are prepared for all adjusting items appearing in the bank
section and the company section of the bank reconciliation.
a.
True
b.
False
49. A customer’s check received in settlement of an account receivable is considered cash.
a.
True
b.
False
50. Most companies that have several bank accounts, petty cash, and cash on hand would list each separately on the
balance sheet.
a.
True
b.
False
51. A business that requires all cash payments be made by check cannot use a petty cash system.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
Name:
Class:
Date:
52. Cash equivalents include
a.
checks
b.
coins and currency
c.
money market accounts and commercial paper
d.
stocks and short-term bonds
53. Which of the following is not an element of internal control?
a.
risk assessment
b.
monitoring
c.
information and communication
d.
cost-benefit considerations
54. An element of internal control is
a.
risk assessment
b.
journals
c.
subsidiary ledgers
d.
controlling accounts
55. A $200 petty cash fund has cash of $20 and receipts of $177. The journal entry to replenish the account would include
a credit to
a.
Cash for $20
b.
Cash Short and Over for $3
c.
Petty Cash for $190
d.
Cash for $180
56. Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the customer.
What entry is required in the company’s accounts?
a.
debit Notes Receivable; credit Cash
b.
debit Cash; credit Miscellaneous Income
c.
debit Cash; credit Notes Receivable and Interest Revenue
d.
debit Accounts Receivable; credit Cash
57. Entries are made to the petty cash account when
a.
making payments out of the fund
b.
recording shortages in the fund
c.
replenishing the petty cash fund
d.
establishing the fund
58. A bank statement
a.
is a credit reference letter written by the company’s bank
b.
shows a company the financial position of the bank as of a certain date
c.
is a bill from the bank for services rendered
d.
shows the activity that increased or decreased the company’s account balance
59. Credit memos from the bank
Name:
Class:
Date:
a.
decrease a bank customer’s account
b.
are used to show a bank service charge
c.
show that a company has deposited a customer’s NSF check
d.
show that the bank has collected a note receivable for the customer
60. What entry is required in the company’s accounts to record outstanding checks?
a.
debit Accounts Receivable; credit Cash
b.
debit Cash; credit Accounts Receivable
c.
debit Cash; credit Accounts Payable
d.
no entry required
61. Cash equivalents
a.
are illegal in some states
b.
will be converted to cash within two years
c.
will be converted to cash within 90 days
d.
will be converted to cash within 120 days
62. A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. This item would
be included on the bank reconciliation as a(n)
a.
addition to the balance per the company’s records
b.
addition to the balance per the bank statement
c.
deduction from the balance per the bank statement
d.
deduction from the balance per the company’s records
63. The amount of cash to be reported on the balance sheet at June 30 is the
a.
total of the Cash column in the cash receipts journal as of June 30
b.
adjusted balance appearing in the bank reconciliation for June 30
c.
total of the Cash column in the cash payments journal as of June 30
d.
balance as of June 30 on the bank statement
64. The portion of an invoice that is returned with payment is a
a.
remittance advice
b.
voucher
c.
debit memo
d.
credit memo
65. A firm’s internal control environment is not influenced by
a.
management’s operating style
b.
organizational structure
c.
personnel policies
d.
monitoring policies
66. A bank reconciliation should be prepared periodically because
a.
the company’s records and the bank’s records are in agreement
Name:
Class:
Date:
b.
the bank has not recorded all of its transactions
c.
any differences between the company’s records and the bank’s records should be determined, and any errors
made by either party should be discovered and corrected
d.
the bank must make sure that its records are correct
67. A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695. This item would
be included in the bank reconciliation as a(n)
a.
deduction from the balance per the company’s records
b.
addition to the balance per the bank statement
c.
deduction from the balance per the bank statement
d.
addition to the balance per the company’s records
68. Which of the following should not be considered cash by an accountant?
a.
money orders
b.
bank checking accounts
c.
postage stamps
d.
travelers’ checks
69. Which of the following would be subtracted from the balance per bank on a bank reconciliation?
a.
outstanding checks
b.
deposits in transit
c.
notes collected by the bank
d.
service charges
70. Which of the following would be added to the balance per company records on a bank reconciliation?
a.
service charges
b.
outstanding checks
c.
deposits in transit
d.
notes collected by the bank
71. A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. What entry is
required in the company’s accounts?
a.
debit Accounts Payable; credit Cash
b.
debit Cash; credit Accounts Receivable
c.
debit Cash; credit Accounts Payable
d.
debit Accounts Receivable; credit Cash
72. Jamison Company gathered the following reconciling information in preparing its June bank reconciliation. Determine
the cash balance per company records (before adjustment) on June 30.
Cash balance per bank, June 30
$13,000
Note receivable collected by bank
4,000
Outstanding checks
7,000
Deposits in transit
2,500
Bank service charge
35
NSF check
1,900
Name:
Class:
Date:
a.
$8,065
b.
$10,565
c.
$15,065
d.
$6,435
73. Savannah Company gathered the following reconciling information in preparing its October bank reconciliation.
Determine the adjusted balance on October 31.
Balance per bank
$16,750
Balance per company records
16,125
Bank service charges
80
Deposit in transit
2,195
NSF check
950
Outstanding checks
3,850
a.
$14,470
b.
$10,705
c.
$15,095
d.
$15,720
74. Internal control does not consist of policies and procedures that
a.
protect assets from misuse
b.
ensure employees and managers comply with laws and regulations
c.
guarantee the company will earn a profit
d.
ensure that business information is accurate
75. The bank reconciliation
a.
should be prepared by an employee who records cash transactions
b.
is part of the internal control system
c.
is for information purposes only
d.
is sent to the bank for verification
76. Accompanying the bank statement was a debit memo for bank service charges. What entry is required in the
company’s accounts?
a.
debit Miscellaneous Expense; credit Cash
b.
debit Cash; credit Other Income
c.
debit Cash; credit Accounts Payable
d.
debit Accounts Payable; credit Cash
77. A $135 petty cash fund has cash of $18 and receipts of $120. The journal entry to replenish the account would include
a
a.
credit to Petty Cash for $120
b.
debit to Cash for $120
c.
credit to Cash Short and Over for $3
d.
credit to Cash for $102
78. Which of the following items that appeared on the bank reconciliation did not require a journal entry?
Name:
Class:
Date:
a.
bank service charges
b.
deposits in transit
c.
NSF checks
d.
a check for $630, recorded in the check register for $360
79. During the year, Tempo Inc. has monthly cash expenses of $115,000. On December 31, its cash balance is $1,437,500.
The ratio of cash to monthly cash expenses is
a.
8.0 months
b.
12.5 months
c.
87.5 months
d.
11.5 months
80. The cash account in the company’s ledger is a(n)
a.
asset with a normal debit balance
b.
asset with a normal credit balance
c.
liability with a normal debit balance
d.
liability with a normal credit balance
81. The objectives of internal control are to
a.
control the internal organization of the Accounting Department personnel and equipment
b.
provide reasonable assurance that assets are safeguarded and used for business purposes, financial reports are
accurate, and laws and regulations are complied with
c.
prevent fraud and promote the social interest of the company
d.
provide control over “internal-use only” reports and employee internal conduct
82. Accompanying the bank statement was a debit memo for an NSF check received from a customer. What entry is
required in the company’s accounts?
a.
debit Other Income; credit Cash
b.
debit Cash; credit Other Income
c.
debit Cash; credit Accounts Receivable
d.
debit Accounts Receivable; credit Cash
83. Thompson Company gathered the following reconciling information in preparing its October bank reconciliation.
Determine the cash balance per company records (before adjustment) on June 30.
Cash balance per bank, October 31
$17,000
Note receivable collected by bank
4,800
Outstanding checks
6,500
Deposits in transit
3,000
Bank service charge
50
NSF check
2,300
a.
$11,050
b.
$19,450
c.
$15,950
d.
$11,150
Name:
Class:
Date:
84. Journal entries based on the bank reconciliation are required in the company’s accounts for
a.
outstanding checks
b.
deposits in transit
c.
bank errors
d.
book errors
85. Accompanying the bank statement was a debit memo for an NSF check received from a customer. This item would be
included on the bank reconciliation as a(n)
a.
deduction from the balance per company’s records
b.
addition to the balance per bank statement
c.
deduction from the balance per bank statement
d.
addition to the balance per company’s records
86. A special form on which is recorded pertinent data about a liability and the particulars of its payment is called a(n)
a.
invoice
b.
voucher
c.
debit memo
d.
remittance advice
87. Which of the following is not a factor that influences a business’s control environment?
a.
management’s philosophy and operating style
b.
organizational structure
c.
proofs and security measures
d.
personnel policies
88. A minimum cash balance required by a bank is called
a.
cash in bank
b.
a cash equivalent
c.
a compensating balance
d.
an EFT
89. Procedures designed to protect cash from theft and misuse from the time it is received until it can be deposited in a
bank are called
a.
accounting controls
b.
cash controls
c.
FASB controls
d.
GAAP controls
90. Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the company.
This item is a(n)
a.
deduction from the balance per company’s records
b.
addition to the balance per bank statement
c.
deduction from the balance per bank statement
d.
addition to the balance per company’s records
Name:
Class:
Date:
91. Sarbanes-Oxley applies to
a.
publicly held companies
b.
not-for-profit organizations
c.
privately held businesses
d.
All of these choices
92. Which of the following would be subtracted from the balance per company records on a bank reconciliation?
a.
outstanding checks
b.
deposits in transit
c.
notes collected by the bank
d.
error in recording a check issued for $732 as $723
93. EFT
a.
means efficient funds transfer
b.
can process certain cash transactions at less cost than using the mail would incur
c.
makes it easier to document purchase and sale transactions
d.
means effective funds transfer
94. In the normal operation of business, you receive a check from a customer and deposit it into your checking account.
With your bank statement, you are advised that this check for $775 is “NSF.” The bank also informs you that due to the
amount of activity on your business account the monthly service charge is $75. During a bank reconciliation, you will
a.
subtract both values from the cash balance according to the bank statement
b.
add both values to the cash balance according to the company’s records
c.
add both values to the cash balance according to the bank statement
d.
subtract both values from the cash balance according to the company’s records
95. 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
of $300 from one of Minor Company’s customers was also returned marked “NSF.” The amount of outstanding checks on
Minor Company’s May bank reconciliation should be
a.
$28,400
b.
$66,800
c.
$17,300
d.
$36,500
96. Receipts from cash sales of $3,200 were recorded incorrectly in the cash receipts journal as $2,300. This item would
be included on the bank reconciliation as a(n)
a.
deduction from the balance per company’s records
b.
addition to the balance per bank statement
c.
deduction from the balance per bank statement
d.
addition to the balance per company’s records
97. The amount of deposits in transit is included on the bank reconciliation as a(n)
a.
deduction from the balance per the company records
b.
deduction from the balance per bank statement
Name:
Class:
Date:
c.
addition to the balance per bank statement
d.
addition to the balance per company records
98. “To maintain public confidence and trust in the financial reporting of companies” is the purpose of
a.
the FASB
b.
the IRS
c.
Sarbanes-Oxley
d.
GAAP
99. Which of the following would not be included with the cash and cash equivalents on the balance sheet?
a.
commercial paper
b.
short-term receivables
c.
certificates of deposit
d.
money market mutual funds
100. Gunnar Company gathered the following reconciling information in preparing its September bank reconciliation.
Determine the adjusted balance on September 30.
Cash balance per company records, September 30
$2,750
Deposits in transit
200
Notes receivable and interest collected by bank
630
Bank charge for check printing
50
Outstanding checks
1,250
NSF check
290
a.
$5,130
b.
$3,690
c.
$3,040
d.
$1,590
101. The debit balance in Cash Short and Over at the end of an accounting period is reported as
a.
an expense on the income statement
b.
income on the income statement
c.
an asset on the balance sheet
d.
a liability on the balance sheet
102. A $150 petty cash fund has cash of $54 and receipts of $83. The journal entry to replenish the account would include
a
a.
credit to Petty Cash for $29
b.
debit to Cash for $83
c.
debit to Cash Short and Over for $13
d.
credit to Cash for $54
103. Which of the following would be deducted from the balance per company records on a bank reconciliation?
a.
service charges
b.
outstanding checks
Name:
Class:
Date:
c.
deposits in transit
d.
notes collected by the bank
104. A bank reconciliation should be prepared
a.
whenever the bank refuses to lend the company money
b.
to explain any difference between the balance per company records with the balance per bank records
c.
by the company’s bank
d.
by the person who is authorized to sign checks
105. Consider the following information taken from the cash account. Assume cash payments were 80% of collections.
Cash
??
Beginning balance
$115,375
Deposits
??
Checks
$80,275
Ending balance
How much was the beginning balance of the cash account?
a.
$57,200
b.
$92,300
c.
$103,350
d.
$35,100
106. Pilger Corporation has cash on hand at year-end of $201,000 and a negative cash flow from operations of $144,000.
What is the ratio of cash to monthly cash expenses?
a.
12.0 months
b.
7.2 months
c.
1.4 months
d.
16.8 months
107. Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the item
is a(n)
a.
deduction from the balance per company’s records
b.
addition to the balance per bank statement
c.
deduction from the balance per bank statement
d.
addition to the balance per company’s records
108. During a bank reconciliation process,
a.
outstanding checks and deposits in transit are added to the bank statement balance
b.
outstanding checks are subtracted and deposits in transit are added to the bank statement balance
c.
outstanding checks and deposits in transit are subtracted from the bank statement balance
d.
outstanding checks are added and deposits in transit are subtracted from the bank statement balance
109. A necessary element of internal control is
a.
a database
b.
systems design
Name:
Class:
Date:
c.
systems analysis
d.
information and communication
110. Which of the following reflects a weak internal control system?
a.
All employees are well supervised.
b.
A single employee is responsible for comparing a receiving report to an invoice.
c.
All employees must take their vacations.
d.
A single employee is responsible for collecting and recording cash.
111. A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695. What entry is
required in the company’s accounts?
a.
debit Accounts Payable; credit Cash
b.
debit Cash; credit Accounts Receivable
c.
debit Cash; credit Accounts Payable
d.
debit Accounts Receivable; credit Cash
112. The amount of the outstanding checks is included on the bank reconciliation as a(n)
a.
deduction from the balance per company’s records
b.
addition to the balance per bank statement
c.
deduction from the balance per bank statement
d.
addition to the balance per company’s records
113. A voucher is usually supported by
a.
a supplier’s invoice
b.
a purchase order
c.
a receiving report
d.
All of these choices
114. The type of account and normal balance of Petty Cash is a(n)
a.
revenue, credit
b.
asset, debit
c.
liability, credit
d.
expense, debit
115. The debit made in the journal to reimburse the petty cash fund is to
a.
Petty Cash
b.
Accounts Receivable
c.
Cash
d.
various accounts for which the petty cash was disbursed
116. Rodgers Company gathered the following reconciling information in preparing its May bank reconciliation.
Determine the adjusted balance on May 31.
Cash balance per company records, May 31
$5,400
Deposits in transit
375
Name:
Class:
Date:
Notes receivable and interest collected by bank
650
Bank charge for check printing
40
Outstanding checks
2,400
NSF check
140
a.
$5,870
b.
$6,245
c.
$4,930
d.
$3,845
117. A debit or credit memo describing entries in the company’s bank account may be enclosed with the bank statement.
An example of a credit memo is
a.
a deposited check returned for insufficient funds
b.
collection of a note receivable for the company
c.
a service charge
d.
notification that a customer’s check for $375 was recorded by the company as $735 on the deposit ticket
118. When there are major changes in a company’s strategy, business structure, or operations, evaluations of controls are
usually performed by
a.
external auditors
b.
internal auditors
c.
senior management
d.
the Securities and Exchange Commission
Match each of the following activities to an element of internal control (a–c). Each letter may be used more than once.
a.
Risk assessment
b.
Control procedures
c.
Monitoring
119. Rotating duties
120. Observing employee behavior and the accounting system for indicators of control problems
121. Separating responsibilities for related operations
122. Analyzing the significance of changes in economic factors
123. Hiring and properly training competent personnel
Match each of the following elements of internal control to a phrase (a–e) that applies to it.
a.
Provides reasonable assurance that business goals will be achieved
b.
Used by management for guiding operations and ensuring compliance with requirements
c.
Overall attitude of management and employees
d.
Used to locate weaknesses and improve controls
e.
Identifies, analyzes, and assesses likeliness of vulnerabilities
Name:
Class:
Date:
124. Control environment
125. Risk assessment
126. Control procedures
127. Monitoring
128. Information and communication
Match each of the following reconciling items to its proper treatment (a–d) on the bank reconciliation. Each letter may be
used more than once.
a.
Added to the cash balance according to the company’s records
b.
Subtracted from the cash balance according to the company’s records
c.
Added to the cash balance according to the bank statement
d.
Subtracted from the cash balance according to the bank statement
129. Outstanding checks
130. Bank service charge
131. Deposit in transit
132. NSF check
133. EFT deposit from a customer
134. Charges for some other company’s safe deposit box posted by the bank to the company’s account
135. A $1,000 note from a customer collected by the bank
136. Interest revenue earned on a note receivable collected by the bank
137. Check issued for $690 incorrectly recorded by the company as $960
138. Check issued for $420 incorrectly recorded by the company as $240
Match each of the following reconciling items to its proper placement (a–d) on the bank statement. Each letter may be
used more than once. Some letters may not be used.
a.
Bank statement adjustment
b.
Company’s records adjustment
c.
Either
d.
Neither
139. Outstanding checks
140. NSF check
141. Error in recording a check
Name:
Class:
Date:
142. Bank charges
143. Note collected by the bank
144. Interest revenue
145. Deposit in transit
Match each of the following items with how it would appear on the bank statement (a–d). Each letter may be used more
than once. Some letters may not be used.
a.
With a debit memo entry that increases the account balance
b.
With a debit memo entry that decreases the account balance
c.
With a credit memo entry that increases the account balance
d.
With a credit memo entry that decreases the account balance
146. EFT payment
147. Bank correction of an error due to posting another customer’s check to your account
148. Bank service charge
149. Note and interest collected for the company
150. Customer’s NSF check
151. Correction of the bank’s error recording a $250 deposit as $520
152. EFT deposit
153. Correction of the bank’s error recording a $300 check as $30
154. Accompanying a bank statement for Marsh Land Properties is a credit memo for payment on a $15,000 one-year note
receivable and $900 of interest collected by the bank. Marsh Land Properties had been notified by the bank at the time of
collection, but had made no entries. Journalize the entry that should be made by Marsh Land to bring the accounting
records up to date.
155. The following information is from Madison Corporation’s accounting records for May. Check No. 3269 was returned
as a double payment and voided. Checks that have not cleared the bank include No. 3252, No. 3260, and series No. 3275–
3278.
Check No.
Amount
Check No.
Amount
3247
$ 32.64
3263
$ 24.87
3248
400.00
3264
45.00
3249
309.22
3265
33.78
3250
256.00
3266
756.77
3251
3,212.17
3267
84.34
3252
56.89
3268
789.00
3253
98.02
3269
48.90
Name:
Class:
Date:
3254
47.55
3270
34.41
3255
1,124.77
3271
872.00
3256
250.00
3272
22.00
3257
68.00
3273
562.38
3258
215.56
3274
512.00
3259
38.55
3275
603.50
3260
92.65
3276
67.00
3261
44.61
3277
301.61
3262
72.96
3278
47.88
In addition to the list of checks, Madison had Check No. 2264 for $32.98 and Check No. 2655 for $45.99 outstanding
previously that have not cleared.
a. Create an outstanding checks list for Madison at the end of May.
b. What is the total amount of checks that cleared the bank (written in May)?
156. The bank statement for Farmer Co. indicates a balance of $7,735 on June 30. After the journals for June were posted,
the cash account had a balance of $4,098. Prepare a bank reconciliation on the basis of the following reconciling items:
(1)
Cash sales of $742 were erroneously recorded in the cash receipts journal as $724.
(2)
Deposits in transit not recorded by bank, $425.
(3)
Bank debit memo for service charges, $35.
(4)
Bank credit memo for note collected by bank, $2,475 including $75 interest.
(5)
Bank debit memo for $256 NSF (not sufficient funds) check from Janice Smith, a customer.
(6)
Checks outstanding, $1,860.
157. The following selected transactions relate to cash collections for a firm that maintains a $100 change fund at all
times. Journalize the transactions for each of the two days of cash receipts from sales.
a.
Actual cash in cash register, $5,412.36; cash receipts per cash register tally, $5,413.07.
b.
Actual cash in cash register, $3,712.95; cash receipts per cash register tally, $3,712.16.
158. You began your new job as the accountant at Bolivar Industries during the month of December. During your first
month, you found several warning signs related to control issues, as follows:
(1) While looking through the invoices, you found Invoices 213–242, 245–271, and 275–290. It appears that invoices 243,
244, 272, 273, and 274 are missing.
(2) During the month, Clerk #3 issued $250 in refunds as compared to Clerks #1, #2, and #4 who issued less than $50
each.
(3) The daily cash receipts and bank deposits reconcile, except on Tuesdays during the month.
(4) Business is generally brisk during the holiday season, but two weeks before Christmas there was a sudden increase in
slow payments.
a. What kinds of issues could be associated with these warning signs?
b. List three controls that could be put in place regarding the cash refunds mentioned in (a) (2).
159. The actual cash received during the week ended June 7 for cash sales was $18,632, and the amount indicated by the
cash register total was $18,628. Journalize the entry for the cash receipts and cash sales.
160. On August 3, Sonar Sales decides to establish a $275 petty cash fund to relieve the burden on Accounting.
Name:
Class:
Date:
a. Journalize the establishment of the fund.
b. On August 11, the petty cash fund has receipts for mail and postage of $124.75, contributions and donations
of $53.25, meals and entertainment of $63.85, and $32.75 in cash. Journalize the replenishment of the fund.
c. On August 12, Sonar Sales decides to increase petty cash to $400. Journalize this transaction.
161. The bank statement for Jeffrey Co. indicates a balance of $8,785 on October 31. The cash balance according to the
company’s records is $8,998. The following additional data were gathered to use in reconciling the bank account:
(1)
Cash sales of $945 had been erroneously recorded in the cash receipts journal as $495.
(2)
Deposits in transit not recorded by bank, $778.
(3)
Bank debit memo for service charges, $40.
(4)
Bank credit memo for note collected by bank, $23,985 plus $885 interest.
(5)
Bank debit memo for $756 NSF (not sufficient funds) check from Calin Sams, a customer.
(6)
Checks outstanding, $1,860.
Journalize any necessary entries for Jeffrey Co. based on the bank reconciliation data.
162. Consider the following information from the company’s records. Assume cash payments (checks) were 84% of
collections (deposits).
Cash
??
Beg. balance
$245,000
Deposits
??
Checks
$80,275
End. balance
How much was the beginning balance of the cash account?
163. The bank statement for Gatlin Co. indicates a balance of $7,735 on June 30. The cash balance according to the
company’s records is $4,098. The following additional data were gathered to use in reconciling the bank account:
(1)
Cash sales of $742 had been erroneously recorded in the cash receipts journal as $724.
(2)
Deposits in transit not recorded by bank, $425.
(3)
Bank debit memo for service charges, $35.
(4)
Bank credit memo for note collected by bank, $2,475 including $75 interest.
(5)
Bank debit memo for $256 NSF (not sufficient funds) check from Janice Smith, a customer.
(6)
Checks outstanding, $1,860.
Journalize any necessary entries for Gatlin Co. based on the bank reconciliation data.
164. The following data were gathered to use in reconciling the bank account of Savannah Company:
Balance per bank
$16,750
Balance per company records
16,125
Bank service charges
80
Deposit in transit
2,195
NSF check
950
Outstanding checks
3,850
What is the adjusted balance on the bank reconciliation?
165. On April 3, Snappy Sales decides to establish a $135 petty cash fund to relieve the burden on Accounting.
Name:
Class:
Date:
a. Journalize the establishment of the fund.
b. On April 11, the petty cash fund has receipts for mail and postage of $32.75, contributions and donations of
$25.25, meals and entertainment of $68.00, and $9.75 in cash. Journalize the replenishment of the fund.
c. On April 12, Snappy Sales decides to increase petty cash to $175. Journalize this transaction.
166. The following data were gathered to use in reconciling the bank statement of Build-A-Lot:
Balance per bank
$14,355
Balance per company records
14,010
Bank service charges
80
Deposits in transit
4,100
NSF checks
775
Outstanding checks
5,300
a. What is the adjusted balance on the bank reconciliation?
b. Journalize any necessary entries for Build-A-Lot based on the bank reconciliation.
167. Scharf Company is a retailer located in a state without sales tax. The following data were given to you to complete
the transactions for the day’s sales to be recorded. All cash drawers start with $100 in change.
Reg. 1
Reg. 2
Reg. 3
Reg. 4
Cash in drawer
$974.50
$1,383.66
$939.46
$1,137.91
Sales reading
879.50
1,298.16
839.46
1,030.33
Journalize the entries for the cash receipts and cash sales for EACH cash register separately.
168. Using the following information, prepare a bank reconciliation for Miller Co. for August 31:
(1)
The bank statement balance is $4,690.
(2)
The cash account balance is $5,080.
(3)
Outstanding checks amounted to $715.
(4)
Deposits in transit are $1,020.
(5)
The bank service charge is $40.
(6)
A check for $72 for supplies was recorded as $27 in the ledger.
169. Farm Store, Inc., reported the following data in its December 31 annual report:
Cash and cash equivalents
$1,050,000
Cash flow from operations
(420,000)
a. What is the company’s “cash burn” per month?
b. What is the company’s ratio of cash to monthly cash expenses?
c. Interpret the ratio you computed in part (b). What are the implications for Farm Store, Inc.?
170. Journalize the following transactions related to petty cash:
a.
Established a petty cash fund of $235.
b.
The petty cash fund now has a balance of $42.80. Replenished the fund, based on the
following disbursements as indicated by a summary of the petty cash receipts: office
supplies, $74.50; miscellaneous administrative expense, $92.75; and miscellaneous selling
expense, $18.60.
c.
Increased the petty cash fund to $300.
Name:
Class:
Date:
171. The following data are from the Muffin Shoppe for the past four years.
Year Ending December 31
Year 1
Year 2
Year 3
Year 4
Cash and cash equivalents
$
38,788
$
65,216
$
70,691
$
78,274
Cash flow from operations
(39,264)
(50,580)
(45,768)
(57,744)
Compute the following:
Year Ending December 31
Year 1
Year 2
Year 3
Year 4
Monthly cash
expenses
Ratio of cash to
monthly cash
expenses
172.
a.
Where are cash equivalents disclosed in the financial statements?
b.
List three examples of cash equivalents.
173. You began your new job as the accountant for Morton Company. You were surprised to find that the company had a
$2,000 petty cash fund, which sits in the break room. The president of the company told you: “Our petty cash system here
works quite smoothly. Since everyone is honest here, everyone has access to the fund for incidentals that might pop up in
the course of the business day. Most of these situations don’t have any receipts tied to them, so I just put the money back
in the fund when my secretary tells me that we have run out of petty cash and we debit the amount to Miscellaneous
Expense.”
Answer the following:
a. Should you implement some controls on petty cash? Why?
b. If so, what controls could be used for petty cash?
174. Groceries R Us, Inc., reported the following data in its annual report.
Cash and cash equivalents $2,280,000
Cash flow from operations (240,000)
a. What is the company’s “cash burn” per month?
b. What is the company’s ratio of cash to monthly cash expenses?
c. Interpret the ratio you computed in part (b). What are the implications for Groceries R Us, Inc.?
175. The last custodian of the petty cash fund was hospitalized, and you have been asked to take stock of the fund and
replenish it. When you receive the fund, it has $299 in cash and receipts as follows:
Office supplies
$295
Advertising
120
Transportation by taxi
75
The petty cash fund was established to have $800 in it.
Based on what you have found, what journal entry should be recorded to replenish the fund?
176. Why would a bank require a company to maintain a compensating balance?
Name:
Class:
Date:
177. Using the following information, prepare a bank reconciliation for Candace Co. for May 31:
(1)
The bank statement balance is $2,936.
(2)
The cash account balance is $3,194.
(3)
Outstanding checks amounted to $465.
(4)
Deposits in transit are $655.
(5)
The bank service charge is $50.
(6)
A check for $97 for supplies was recorded as $79 in the ledger.
178. Consider the following journal entry made by Jones Company for one day’s sales of a single cashier. What might
have happened to create this amount of Cash Short and Over difference? Give three possible reasons for this difference.
Cash
2,235
Cash Short and Over
100
Sales
2,135
179. Journalize the entries for the following transactions:
June 1
Established a petty cash fund of $200.
30
The amount of cash in the petty cash fund is now $57. The fund is
replenished based on the following receipts: postage, $25;
entertainment, $100; and miscellaneous, $20.
180. The actual cash received during the week ended October 31 for cash sales was $23,447, and the amount indicated by
the cash register total was $23,457. Journalize the cash receipts and cash sales.
181. List and define each of the five elements of internal control.
182. Aspen, Inc. reported the following data in its annual report:
Cash and cash equivalents $ 460,000
Cash flow from operations (240,000)
a. What is the company’s “cash burn” per month?
b. What is the company’s ratio of cash to monthly cash expenses?
183. Journalize the entries for the following transactions:
Sept. 1
Established a petty cash fund of $350.
30
The amount of cash in the petty cash fund is now $130. The fund is replenished based on
the following receipts: office supplies, $116; postage, $100.
184. Journalize the entries for the following transactions:
Mar. 1
Established a petty cash fund of $300.
31
The amount of cash in the petty cash fund is now $64. The fund is replenished based
on the following receipts: office supplies, $137; selling expenses, $112.
Journalize any discrepancy in the cash short and over account.
185. The cash account for Santiago Co. on May 31 indicated a balance of $20,915. The March bank statement indicated
an ending balance of $25,645. Comparing the bank statement, the canceled checks, and the accompanying memos with
Name:
Class:
Date:
the records revealed the following reconciling items:
(1)
Checks outstanding totaled $5,975.
(2)
A deposit of $3,796 had been made too late to appear on the bank statement.
(3)
A check for $1,482 returned with the statement had been incorrectly recorded as
$482. The check was originally issued to pay on account.
(4)
The bank collected $4,515 on a note left for collection of which $515 was interest revenue.
(5)
Bank service charges for May amounted to $70.
(6)
A check for $894 was returned by the bank because of insufficient funds.
a. Prepare a bank reconciliation as of May 31.
b. Journalize any necessary entries based on the bank reconciliation.
186. Two features of internal control are presented in the following sections. Each is followed by a list of four
irregularities that occurred in processing data. Identify the one irregularity from each list that would be discovered or
prevented by the feature of internal control described.
a.
The sum of the balances of the accounts in the accounts receivable subsidiary ledger is
compared at the end of each month with the balance of the accounts receivable account in
the general ledger by a person who has no responsibility for maintaining either the general
ledger or the subsidiary ledger.
(1)
Five hours of services were rendered but the customer was only billed for four hours.
(2)
A cash receipt of $750 was recorded correctly in the accounts receivable controlling
account but was posted to the customer’s ledger as $75.
(3)
A bill for services rendered to Cole Co. was erroneously posted to the account of
Coleman Co. in the accounts receivable subsidiary ledger.
(4)
No entry was made in the accounting records for services rendered to a customer.
b.
Both cash and credit charges for services rendered are recorded on prenumbered invoices.
At the end of the day, all invoices are accounted for before the duplicate copies of the
invoices are routed to the Accounting Department for entry into the accounts and the cash is
sent to the Cashier’s Department for deposit.
(1)
Some charge customers complained that the monthly statements of account did not
add all amounts correctly.
(2)
Some clerks used incorrect hourly rates in preparing invoices.
(3)
Some clerks destroyed duplicate copies of cash invoices and misappropriated the
cash.
(4)
Some charge customers complained that the monthly statement of account did not
indicate credits for payments made.
187. Stephanie Jo Company established a petty cash fund of $300 on May 1. At the end of the month, the petty cash fund
has $42 in cash and receipts for postage, $39; entertainment, $146; and office supplies, $70. Journalize the necessary
entries related to petty cash. Record any discrepancy in the cash short and over account.
188. Bank reconciliation information for Kaden Co. for May 31 is as follows:
(1)
The bank statement balance is $2,936.
(2)
The cash account balance is $3,194.
(3)
Outstanding checks amounted to $465.
(4)
Deposits in transit are $655.
(5)
The bank service charge is $50.
Name:
Class:
Date:
(6)
A check for $97 for supplies was recorded as $79 in the ledger.
Journalize any necessary entries related to the reconciliation data.
189. Roper Electronics received its bank statement for the month of August with an ending balance of $11,775. Roper
determined that Check No. 613 for $155 and Check No. 601 for $420 were both outstanding. A $6,900 deposit for August
30 was in transit as of the end of the month. Northern Regional Bank also collected $5,250 on a note receivable, which
included interest of $250. The bank statement reveals a bank service charge of $20. A customer check for $68 was
returned with the bank statement marked “NSF.” The ending balance of the Roper cash account is $12,938.
a. Prepare a bank reconciliation as of August 31.
b. Journalize any necessary entries based on the bank reconciliation.
190. The following procedures were recently implemented at Pampered Pets, Inc. For each procedure, indicate whether
the internal control over cash represents a strength or a weakness. If it is a weakness, explain how the control can be
strengthened.
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.
191. The actual cash received during the week ended June 6 for cash sales was $8,276, and the amount indicated by the
cash register total was $8,262. Journalize the cash receipts and cash sales.
192. On April 2, Granger Sales decides to establish a $125 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.
c. On April 11, Granger Sales decides to increase petty cash to $200. Journalize this event.
193. The following procedures were recently implemented at Health Station, Inc. For each procedure, indicate whether the
internal control over cash represents a strength or a weakness. If it is a weakness, explain how the control can be
strengthened.
a. All mail is opened by the mail clerk, who forwards all cash remittances to the cashier. The cashier prepares a
listing of the cash receipts and forwards a copy of the list to the accounts receivable clerk for
recording in the accounts.
b. The accounts payable clerk prepares a voucher for each disbursement. The voucher along with the supporting
documentation is forwarded to the treasurer’s office for approval.
c. At the end of each day, all cash receipts are placed in the bank’s night depository.
d. The bank reconciliation is prepared by the cashier, who works under the supervision of the treasurer.
Name:
Class:
Date:
194. The following data are from Autumn Company for the past four years.
Year Ending December 31
Year 1
Year 2
Year 3
Year 4
Cash and cash equivalents
$ 23,788
$ 45,776
$ 52,899
$ 82,744
Cash flow from operations
(32,556)
(47,880)
(32,357)
(16,450)
Compute the following:
Year Ending December 31
Year 1
Year 2
Year 3
Year 4
Monthly cash
expenses
Ratio of cash to
monthly cash
expenses
195. List the principal advantages of electronic funds transfers.
196. Garden Gate, Inc. reported the following data in its August 31 annual report:
Cash and cash equivalents
$ 485,625
Cash flow from operations
(630,000)
a. What is the company’s “cash burn” per month?
b. What is the company’s ratio of cash to monthly cash expenses?
c. Interpret the ratio you computed in (b). What are the implications for Garden Gate, Inc.?
197. Describe the features of a voucher system, and list typical supporting documents for a voucher.
198. Jackson Industries has collected the following information but needs assistance completing the table. The cash
payments (checks) were 90% of collections (deposits).
Cash
??
Beg. balance
$511,770
Deposits
??
Checks
$102,275
End. balance
How much was the beginning balance of the cash account?
199. For each of the following, explain whether the issue would require you to prepare a journal entry for your company,
assuming any original entry is correct. If an entry is required, please include it as part of your answer.
(1) The bank recorded your deposit as $91 rather than the actual amount of $191.
(2) Two outstanding checks amounted to $450.
(3) Company Check No. 538 for postage was recorded incorrectly by the company bookkeeper as $50 instead of $59.
(4) The bank paid a check for $500 after the company had issued a stop payment and voided the check.
(5) An EFT deposit was made by one of the company’s customers, Atlas Design, for merchandise received. The sale had
previously been recorded when shipped and was equal to the payment amount of $125.
200. List the objectives of internal control, and provide three examples of control procedures.
Name:
Class:
Date:
201. Green Valley Bank sent Comstock Industries its end-of-month bank statement for July. The end-of-month balance by
the bank is $11,237. The statement shows that a deposit for $4,250 is in transit at the end of the statement period. The
statement also revealed that checks for $87, $105, and $95 are outstanding. Green Valley collected a $4,000 note
receivable plus $120 of interest revenue. The bank charged monthly service fees of $55. The end-of-month balance per
company records is $11,135.
a. Prepare a bank reconciliation as of July 31.
b. Journalize any necessary entries based on the bank reconciliation.
Name:
Class:
Date:
Name:
Class:
Date:
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Date:
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