From this information, the most likely explanation is that Roeper is
74. The primary purpose of the statement of cash flows is to provide information about:
75. Bloom’s Garden Center Company
Selected data from the financial statements of Bloom’s Garden Center are provided below.
2012
2011
Cash and cash equivalents
$ 75,000
$ 62,000
Inventory
28,000
32,000
Total assets
680,000
565,000
Cash flow from operations
850,000
639,000
Dividends
84,200
70,000
Capital expenditures
112,000
95,000
Refer to the selected data provided for Bloom’s Garden Center Company. Which of the following would result from a horizontal analysis of Bloom’s
cash and cash equivalents?
76. Bloom’s Garden Center Company
Selected data from the financial statements of Bloom’s Garden Center are provided below.
2012
2011
Cash and cash equivalents
$ 75,000
$ 62,000
Inventory
28,000
32,000
Total assets
680,000
565,000
Cash flow from operations
850,000
639,000
Dividends
84,200
70,000
Capital expenditures
112,000
95,000
Refer to the selected data provided for Bloom’s Garden Center Company. Which of the following would result from a vertical analysis of Bloom’s
77. Drucker Dynamics Inc.
The current assets section of the balance sheets of Drucker Dynamics as of December 31, 2012 and 2011, is
presented below.
2012
2011
Cash and
cash
equivale
nts
$ 87,000
$ 66,560
Account
s
receivabl
e, net
189,000
231,840
Inventor
y
249,040
304,080
Other
current
assets
26,000
21,000
Total current assets
$ 551,040
$ 623,480
Total Assets
$ 3,490,000
$4,450,000
78. Max’s Tire Center Company
Selected data from the financial statements of Max’s Tire Center are provided below.
2012
2011
Cash and cash equivalents
$ 120,000
$ 104,000
Inventory
85,000
68,000
Total assets
1,400,000
1,230,000
Cash flow from operations
550,000
449,000
Dividends
315,000
300,000
Capital expenditures
200,000
142,000
79. Max’s Tire Center Company
Selected data from the financial statements of Max’s Tire Center are provided below.
2012
2011
Cash and cash equivalents
$ 120,000
$ 104,000
Inventory
85,000
68,000
Total assets
1,400,000
1,230,000
Cash flow from operations
550,000
449,000
Dividends
315,000
300,000
Capital expenditures
200,000
142,000
Refer to the selected data provided for Max’s Tire Center. Which of the following would result from a vertical analysis of Max’s cash and cash
equivalent in 2012?
80. Max’s Tire Center Company
Selected data from the financial statements of Max’s Tire Center are provided below.
2012
2011
Cash and cash equivalents
$ 120,000
$ 104,000
Inventory
85,000
68,000
Total assets
1,400,000
1,230,000
Cash flow from operations
550,000
449,000
Dividends
315,000
300,000
Capital expenditures
200,000
142,000
Refer to the selected data provided for Max’s Tire Center. What is Max’s Free Cash Flow in 2012?
81. List and define each of the five elements of internal control.
82. A company’s bank statement balance shows that there is $6,330 in the checking account at the end of the
month. Comparing the company’s records with the bank statement reveals several additional items, such as
outstanding checks of $1,200, deposits in transit of $4,300, an NSF check of $250, and a bank service charge of
$55. Calculate the adjusted cash balance for this checking account.
83. A company’s bank statement balance shows that there is $4,190 in the checking account at the end of the
month. Comparing the company’s records with the bank statement reveals several additional items, such as
outstanding checks of $1,860, deposits in transit of $2,080, an NSF check of $209, interest earned of $21.52, a
bank service charge of $40, and a check for $120 recorded twice by the company. Calculate the adjusted cash
balance for this checking account.
84. A company’s records indicate the balance in its checking account at the end of the month is $3,918.
Comparing the company’s records with the monthly bank statement reveals several additional cash transactions,
such as deposits in transit of $4,022, three outstanding checks totaling $497, a $30 bank service charge, a
$1,000 note receivable collected by the bank plus interest earned of $35, and an NSF check for $150. Determine
the company’s adjusted cash balance and prepare the journal entries necessary to adjust the account balance.
$3,918 (Book balance) + 1,000 (Note) + 35 (Interest) – 150 (NSF check) – 30 (Service charge) = $4,773
85. The accounting records for Erismann, Inc. shows a cash balance of $14,134 on February 28, 2011. On the
evening of February 28, company receipts of $1,250 were placed in the bank’s night deposit drop box; this
deposit was processed by the bank on March 1. The February 28 bank statement shows balance of $18,877,
including collection of a $6,000 note receivable plus $55 of interest earned, a service charge of $40, and a
$1,550 debit memo for the payment of the company’s utility bill. All of the checks that the company had written
during January were listed on the bank statement except for check #1908 in the amount of $1,528.
Prepare a bank reconciliation to calculate the adjusted cash balance for Erismann’s checking account at
February 28, 2011. Prepare the journal entries that Erismann must record to adjust its cash records as a result of
the bank reconciliation procedures.
Erismann, Inc.
Bank Reconciliation
February 28, 2011
Balance per bank statement
$18,877
Add: deposits in transit
1,250
Less: outstanding checks
1,528
Actual cash balance
$18,599
Balance per company records
$14,134
Add: collection of note receivable
6,000
Add: interest earned
55
Less: monthly service charges
40
Less: debit memo (utility bill)
1,550
Actual cash balance
$18,599
Entries
Cash
6,000
Note Receivable
6,000
(To record the collection of a note receivable by the bank)
Cash
Interest Income
55
(To record the interest earned)
Cash
40
(To record monthly expense for bank account)
Cash
1,550
86. Finch Corporation prepares monthly bank reconciliation of its checking account balance. The bank
statement for December 2011 indicated the following:
Balance, December 31, 2011
$7,920
Bank service charges for December
20
Interest earned during December
30
NSF Check from a customer which had been previously deposited by Finch
32
Collection of note ($1,000) and the related interest ($40) from Finch’s customer
1,040
An analysis of canceled checks and deposits and the records of Finch revealed the following items:
Checking account balance per Finch’s accounting records
$7,170
Outstanding checks as of December 31
952
Deposits in transit on December 31
1,310
Error in recording check # 267 issued by Finch
90
Prepare a bank reconciliation in proper form for December 31, 2011.
What amount would Finch report its cash balance on its December 31, 2011, balance sheet?
What adjusting entries will Finch record as a result of this bank reconciliation process?
87. The accountant for Don Gray & Associates prepared the firm’s bank reconciliation and noted several
reconciling items as listed below. Indicate whether the firm should add or subtract each item below on its
balance per bank statement or on its balance per its own records.
Balance per
Balance per
Reconciling Items
Bank Statement
Company Records
1.
Deposits in transit
2.
NSF checks
3.
Check recorded twice by the company
4.
Interest earned
5.
Outstanding checks
6.
Bank service charges
7.
Bank debit memos
8.
Bank credit memos
Balance per
Balance per
Reconciling Items
Bank Statement
Company Records
1.
Deposits in transit
Add
2.
NSF checks
Subtract
3.
Check recorded twice by the company
Add
4.
Interest earned
Add
5.
Outstanding checks
Subtract
6.
Bank service charges
Subtract
7.
Bank debit memos
Subtract
8.
Bank credit memos
Add
Cash
90
Merchandise Inventory
90
(To correct error)
ble
Cash
32
(To reinstate customer receivable)
Cash
(To record monthly expense for bank account)
88. Jennitt Inc. established a petty cash fund for $400 on May 1, 2011. By the end of the month, the petty cash
custodian requested reimbursement of $322 for the following expenditures from the fund:
Office supplies
$118
Deliveries
40
Fuel
76
Postage
88
Record the entry to establish Jennitt’s petty cash fund, then record the entry to recognize expenses paid from the fund as of the end of May and
increase the fund balance to $500.
89. During April, Stephen’s Erectors engaged in the following transactions involving it petty cash fund:
Date
Description
Amount
April 1
Established the petty cash fund by issuing a check to the fund’s custodian.
$300
April 4
The custodian paid for freight charges on new equipment.
150
April 13
The custodian paid for postage services on the mailing of blueprints.
41
April 21
The custodian paid for office supplies.
96
April 25
The custodian requested reimbursement of the petty cash expenditures during the month.
287
April 30
Stephen issued a check to the custodian to replenish the fund.
287
Cash
400
(To establish $400 petty cash fund)
Cash
422
90. Drucker Dynamics Inc.
The current assets section of the balance sheets of Drucker Dynamics as of December 31, 2012 and 2011, is
presented below.
2012
2011
Cash and
cash
equivale
nts
$ 87,000
$ 66,560
Account
s
receivabl
e, net
189,000
231,840
Inventor
y
249,040
304,080
Other
current
assets
26,000
21,000
Total current assets
$ 551,040
$ 623,480
Total Assets
$ 3,490,000
$4,450,000
Refer to the information provided for Drucker Dynamics. Complete a horizontal analysis of cash and cash equivalents for 2012. Your answers
should be expressed as percentages and rounded to one decimal place. Provide a short explanation of this analysis.
Cash and cash equivalents
30.7%
April 1
Petty
Cash
Fund
Cash
(To establish $300 petty cash fund)
Postage
Expense
Cash
287
(To replenish petty cash fund and record various expenses)
91. During 2012, Delivery Systems Inc. net cash provided by operating activities of $2,160,000, capital
expenditures of $972,000, dividends of $468,000, and average maturities of long-term debt over the next five
years of $1,170,000.
Compute free cash flow for 2012 for Delivery Systems Inc.
92. Refer to the information provided for Drucker Dynamics. Complete a vertical analysis of cash and cash
equivalents for 2012. Your answers should be expressed as percentages and rounded to one decimal place.
Provide a short explanation of this analysis.
93. Explain some internal control procedures that a fast food restaurant like McDonald’s may use to control cash
receipts.
94. Robert and Karen are planning to open a coffee shop near the local college campus. They will make both
cash and credit sales. They will hire college students to make coffee and to operate the coffee makers and cash
registers. Either Robert or Karen will act as manager during most hours that the business will be open. One
student will be designated as assistant manager when they cannot be present.
Describe at least five procedures that Robert and Karen might use to provide adequate internal control over cash
and credit sales and bank deposits.
95. What adjustments are often necessary after the reconciliation of a bank account?
96. Explain how a company can control small cash payments that are made in cash rather than by check.
97. What is meant by the term “cash equivalents”?
98. Annual report in which management states its responsibility for internal control and provides an assessment
of its internal control is called a(n) ____________________.
99. Under the ____________________ Act, management of publicly-traded corporations has increased
responsibility for a system of internal controls that ensures reliability of financial statements.
100. An internal control activity that separates responsibilities so that no one person handles all the tasks for a
particular activity is referred to as ____________________.
101. A(n) ____________________ is the process used by an accountant to ensure consistency between the
balance shown on the bank statement for a particular account and the balance shown on the accounting records.
102. A check written by a company but not yet presented to the bank for payment is called a(n)
____________________.
103. Items that are included on a bank statement and increase the bank account balance are called
____________________.
104. An amount recorded as an increase in the company’s cash account at the end of the period, but which has
not yet been reflected on the bank statement is called a(n) ____________________.
105. Items that are included on a bank statement and decrease the bank account balance are called
____________________.
106. The account used to record the discrepancies that will occasionally occur between the amounts deposited
and amounts shown on cash register tapes is called ____________________.
107. ____________________ are those investments and deposits with financial institutions that are readily
convertible into known amounts of cash and that have original maturities of three months or less.
108. ____________________ represents the cash flow that a company is able to generate after considering the
maintenance or expansion of its assets (capital expenditures) and payment of dividends.
109. The financial statement that summarizes the operating, investing, and financing activities of a business
over a period of time is the ____________________.
110. In ____________________ analysis, cash balance is expressed as a percent of the total assets.