Chapter 5 1 According The Sarbanesoxley Act 2002 Who Primarily

Document Type
Test Prep
Book Title
Financial ACCT2 (with CengageNOWTM-- 1 term Printed Access Card) 2nd Edition
Authors
C. Wayne Alderman, Norman H. Godwin
Chapter 5--Internal Control and Cash Key
1. According to the Sarbanes-Oxley Act of 2002, who is primarily responsible for establishing and maintaining
a system of internal control over the company's financial reporting?
2. Which of the following is not a requirement of the Sarbanes-Oxley Act?
3. Which of the following is not a requirement of a company's top managers under the Sarbanes-Oxley Act?
4. Internal control systems provide assurance in each of the following areas except:
5. Which of the following is an essential element of internal control?
6. Which of the following is not a generally recognized internal control activity?
7. Which of the following is not a generally recognized internal control activity?
8. Allowing only certain employees to order goods and services on behalf of the company is an example of what
internal control activity?
9. Which internal control activity is followed when management authorizes the purchasing department to order
goods and services for the company?
10. Which internal control activity is followed when the work of one department acts as a check on the work of
another?
11. Which internal control activity is followed when inventory storage areas are secured with limited access?
12. Which internal control activity is followed when a physical count of inventory is performed under a
perpetual inventory system?
13. Having one employee prepare company checks and sign those checks is:
14. Segregation of duties is most effective in:
15. Which of the following statements best describes the act of collusion?
16. Which internal control activity is violated when the cashier at a cash register in a retail store also records the
daily receipts in a journal?
17. A company's control environment is primarily influenced by the Tone at the Top. This refers to each of the
following except:
18. The practice of monitoring activities within the internal control system is likely to be carried out by each of
the following groups except:
19. When a firm uses internal auditors, it is adhering to which one of the following internal control elements?
20. A component of internal control is:
21. A necessary element of internal control is:
22. Which component of internal control relates to the policies and procedures that management establishes to
address the risks that might prevent the organization from achieving its objectives?
23. Cash collected and recorded by a company but not yet reflected in a bank statement are known as:
24. A check returned by a bank because the issuer's cash account balance could not cover the check is called
a(n):
25. Which of the following would not appear on a bank statement for a checking account?
26. Which of the following procedures is not part of the preparation of a bank reconciliation for a checking
account?
27. While preparing a bank reconciliation, which of the following items would be added to the bank statement
balance?
28. While preparing a bank reconciliation, which of the following items would be subtracted from the balance
per the bank statement?
29. While preparing a bank reconciliation, which of the following items would be subtracted from the balance
per the company records?
30. Which of the following statements best describes the term "outstanding check" from a company's point of
view?
31. While preparing the February 28th bank reconciliation for the checking account for Willow, Inc., the
accountant identified the following items:
Balance per Willow's company records
$46,200
Outstanding checks
1,100
Interest earned on the checking account
50
A customer's NSF check returned by the bank
500
In addition, Willow made an error in recording a customer's check; the amount was recorded in cash receipts as $150, while the bank correctly
recorded the amount as $510. What amount will Willow report as its actual cash balance on February 28th?
32. While preparing the April 30th bank reconciliation for the checking account for Calvin Corporation, the
accountant identified the following items:
Balance per Calvin's company records
$15,000
Outstanding checks
2,500
Bank service charge
15
A customer's NSF check returned by the bank
100
What amount will Calvin report as its actual cash balance at April 30th?
33. Sparrow Corporation
The items listed below were identified while preparing a bank reconciliation for the checking account of
Sparrow Corporation as of March 31, 2012.
Sparrow's balance according to the general ledger
?
Bank statement balance
$18,500
Outstanding checks
2,700
A customer's NSF check returned by the bank
350
Bank service charges
100
Deposits in transit
1,000
Interest earned on the checking account
60
Refer to the information presented for Sparrow Corporation. How will the deposits in transit be handled within a bank reconciliation?
34. Sparrow Corporation
The items listed below were identified while preparing a bank reconciliation for the checking account of
Sparrow Corporation as of March 31, 2012.
Sparrow's balance according to the general ledger
?
Bank statement balance
$18,500
Outstanding checks
2,700
A customer's NSF check returned by the bank
350
Bank service charges
100
Deposits in transit
1,000
Interest earned on the checking account
60
35. Sparrow Corporation
The items listed below were identified while preparing a bank reconciliation for the checking account of
Sparrow Corporation as of March 31, 2012.
Sparrow's balance according to the general ledger
?
Bank statement balance
$18,500
Outstanding checks
2,700
A customer's NSF check returned by the bank
350
Bank service charges
100
Deposits in transit
1,000
Interest earned on the checking account
60
Refer to the information presented for Sparrow Corporation. How will the interest earned on the checking account be handled within a bank
reconciliation?
36. Sparrow Corporation
The items listed below were identified while preparing a bank reconciliation for the checking account of
Sparrow Corporation as of March 31, 2012.
Sparrow's balance according to the general ledger
?
Bank statement balance
$18,500
Outstanding checks
2,700
A customer's NSF check returned by the bank
350
Bank service charges
100
Deposits in transit
1,000
Interest earned on the checking account
60
Refer to the information presented for Sparrow Corporation. How will the outstanding checks be handled within a bank reconciliation?
37. Sparrow Corporation
The items listed below were identified while preparing a bank reconciliation for the checking account of
Sparrow Corporation as of March 31, 2012.
Sparrow's balance according to the general ledger
?
Bank statement balance
$18,500
Outstanding checks
2,700
A customer's NSF check returned by the bank
350
Bank service charges
100
Deposits in transit
1,000
Interest earned on the checking account
60
Refer to the information presented for Sparrow Corporation. How will the bank services charges be handled within a bank reconciliation?
38. Sparrow Corporation
The items listed below were identified while preparing a bank reconciliation for the checking account of
Sparrow Corporation as of March 31, 2012.
Sparrow's balance according to the general ledger
?
Bank statement balance
$18,500
Outstanding checks
2,700
A customer's NSF check returned by the bank
350
Bank service charges
100
Deposits in transit
1,000
Interest earned on the checking account
60
Refer to the information presented for Sparrow Corporation. Determine the amount of Sparrow's actual cash balance.
39. Sparrow Corporation
The items listed below were identified while preparing a bank reconciliation for the checking account of
Sparrow Corporation as of March 31, 2012.
Sparrow's balance according to the general ledger
?
Bank statement balance
$18,500
Outstanding checks
2,700
A customer's NSF check returned by the bank
350
Bank service charges
100
Deposits in transit
1,000
Interest earned on the checking account
60
Refer to the information presented for Sparrow Corporation. Determine the amount of the balance per Sparrow's records before adjustment.
40. While reconciling the checking account, an accountant with Elliter, Inc. noticed that an error had been made
in recording a check received by the company. Elliter recorded the receipt as $729 and the correct amount of the
check was $279. Which of the following reconciling adjustments is necessary?
41. A debit memorandum appeared on Mallory's bank statement for the month of May. How will Mallory treat
this amount on the May bank reconciliation?
42. A credit memorandum appeared on Arthur's September bank statement. How will Arthur treat this amount
on the September bank reconciliation?
43. Which of the following is an example of a debit memorandum?
44. Which of the following is an example of a credit memorandum?
45. Which of the following procedures is incorrect for establishing and maintaining a petty cash fund?
46. Which of the following statements is true regarding a credit memorandum and its relationship to a
company's bank reconciliation procedures?
47. If a company erroneously records a $500 deposit as $50 in its records, which of the following must occur
when reconciling its bank statement?
48. If a company erroneously records a $50 check received from a customer as $500 in its records, which of the
following must occur when reconciling its bank statement?
49. Honey Hut's unadjusted bank balance is $3,000. Outstanding checks amount to $500 and deposits in transit
total $300. Based on this information alone, Honey Hut's adjusted cash balance is:
50. If the balance on the bank statement does not equal the balance per the company's records, then it can be
assumed that:
51. Which of the following is a reconciling item when reconciling the bank balance to the correct balance?
52. In the reconciliation of a bank statement, deposits in transit should be:
53. The treasurer for Kent Enterprises was preparing a bank reconciliation as of October 31, 2012, when the
following items were identified:
Balance per Kent's company records
$32,800
Deposits in transit
4,300
Outstanding checks
2,200
Interest earned on the checking account
100
NSF check from Kent's customer
400
Kent's adjusted cash balance at October 31, 2012, is:
54. Ciao, Inc. had $962 in its cash account per the company's records as of June 30th. This included a deposit of
$87 that was in transit on June 30th. The June 30th bank statement contained the following information:
Bank statement balance
$1,089
Bank service charge
7
Collection of notes receivable
68
NSF check
16
Ciao also had outstanding checks of $169. What is Ciao's adjusted cash balance at June 30th?
55. Madrid Consulting, Inc.
Madrid Consulting, Inc. prepared a bank reconciliation as of March 31, 2011. The following items were
identified.
Madrid's bank statement balance
$31,400
Unadjusted cash balance from Madrid's records
?
Deposit in transit
1,800
Outstanding checks
4,500
Bank service charges
100
Interest earned on the bank account
85
Customer's NSF check returned by the bank
450
Refer to the information provided for Madrid Consulting, Inc. What is Madrid's adjusted cash balance at March 31st?
56. Madrid Consulting, Inc.
Madrid Consulting, Inc. prepared a bank reconciliation as of March 31, 2011. The following items were
identified.
Madrid's bank statement balance
$31,400
Unadjusted cash balance from Madrid's records
?
Deposit in transit
1,800
Outstanding checks
4,500
Bank service charges
100
Interest earned on the bank account
85
Customer's NSF check returned by the bank
450
Refer to the information provided for Madrid Consulting, Inc. What is Madrid's unadjusted cash balance in its accounting records at March 31st
before the reconciliation was completed?
57. Madrid Consulting, Inc.
Madrid Consulting, Inc. prepared a bank reconciliation as of March 31, 2011. The following items were
identified.
Madrid's bank statement balance
$31,400
Unadjusted cash balance from Madrid's records
?
Deposit in transit
1,800
Outstanding checks
4,500
Bank service charges
100
Interest earned on the bank account
85
Customer's NSF check returned by the bank
450
Refer to the information provided for Madrid Consulting, Inc. What is net amount of the adjustments to Madrid's cash balance as a result of the bank
reconciliation?
58. Which of the following journal entries is recorded as a result of the bank reconciliation process to record a
NSF check for $250?
59. During the bank reconciliation process, an accountant identified an error. This error involved a company
check written for $200 to pay a supplier for goods purchased on credit by the company. The check was
erroneously recorded in the company's records for $2,000. Which of the following entries would correct this
error in the company's records?
60. The account which records the difference between the cash needed for replenishment and amount of receipts
is called:
61. Suppose that company noted a discrepancy whereby the amount of cash deposited in the bank account
exceeded the amount included as cash sales on the cash register tapes. This overage should be recorded as a(n):
62. A petty cash custodian should always:
63. Donnay Corporation established a petty cash fund in the amount of $300. Which of the following is the
correct entry for Donnay to record this event?
64. Jillian Corporation has a $375 petty cash fund. At the end of each month, Jillian's petty cash custodian
presents the records of the petty cash transactions. On August 31, there was $33 cash remaining in the fund and
the documents supporting the following transactions were presented for reimbursement.
August 4
U.S. post office (postage)
$ 72
August 14
Callabaugh supply (office supplies)
219
August 15
Speedy delivery (package delivery)
51
Which of the following entries is necessary for recording the replenishment of the fund on August 31?
65. Which of the following is not included in cash and cash equivalents on a company's balance sheet?
66. Which of the following is not considered to be a cash equivalent?
67. How are cash equivalents reported or disclosed in the financial statements?
68. Which one of the following would never be considered a cash equivalent?
69. Each of the following items is considered a cash equivalent except:
70. Cash equivalents include:
71. Upon review of Mack's statement of cash flows, the following was noted:
Cash flows from operating activities
$ 15,000
Cash flows from investing activities
40,000
Cash flows from financing activities
(50,000)
From this information, the most likely explanation is that Mack is:
72. Upon review of Bert's statement of cash flows, the following was noted:
Cash flows from operating activities
$ 60,000
Cash flows from investing activities
(125,000)
Cash flows from financing activities
115,000
From this information, the most likely explanation is that Bert is
73. Upon review of Roepers's statement of cash flows, the following was noted:
Cash flows from operating activities
$ 60,000
Cash flows from investing activities
80,000
Cash flows from financing activities
(130,000)

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