Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
61.
An element of internal control is
a.
risk assessment
b.
journals
c.
subsidiary ledgers
d.
controlling accounts
62.
A necessary element of internal control is
a.
database
b.
systems design
c.
systems analysis
d.
information and communication
63.
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
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
64.
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
65.
The portion of an invoice that is returned with payment is a
a.
remittance advice
b.
voucher
c.
debit memo
d.
credit memo
66.
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
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
67.
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
68.
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
69.
EFT
a.
means Efficient Funds Transfer
b.
can process certain cash transactions at less cost than by using the mail
c.
makes it easier to document purchase and sale transactions
d.
means Effective Funds Transfer
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
70.
A voucher is usually supported by
a.
a supplier’s invoice
b.
a purchase order
c.
a receiving report
d.
all of the above
71.
Credit memos from the bank
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 the bank has collected a note receivable for the customer
72.
Consider the following information taken from the cash account. Assume cash payments were 80% of collections.
Cash
??
Beg. balance
$115,375
Collections
??
Disbursements
$80,275
End balance
How much was the beginning balance of the cash account?
a. $57,200 b. $92,300
c. $103,350 d. $35,100
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
73.
A bank statement
a.
is a credit reference letter written by the company’s bank.
b.
lets a company know 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.
74.
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.
deposited checks returned for insufficient funds
b.
a promissory note left for collection
c.
a service charge
d.
notification that a customer’s check for $375 was recorded by the company as $735 on the deposit ticket
75.
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
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
76.
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
77.
A bank reconciliation should be prepared periodically because
a.
the company’s records and the bank’s records are in agreement
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
78.
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
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
79.
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
80.
Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the
item is
a.
a deduction from the balance per company’s records
b.
an addition to the balance per bank statement
c.
a deduction from the balance per bank statement
d.
an addition to the balance per company’s records
81.
Accompanying the bank statement was a debit memo for bank service charges. What entry is required in the
company’s accounts?
a.
debit Miscellaneous Administrative Expense; credit Cash
b.
debit Cash; credit Other Income
c.
debit Cash; credit Accounts Payable
d.
debit Accounts Payable; credit Cash
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
82.
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
83.
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
84.
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
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
85. 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
86.
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
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
87.
The amount of deposits in transit is included on the bank reconciliation as a(n)
a.
deduction from the balance per the company’s books
b.
deduction from the balance per bank statement
c.
addition to the balance per bank statement
d.
addition to the balance per company books
88.
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
89.
Which of the following items that appeared on the bank reconciliation did not require a journal entry?
a.
bank service charges
b.
deposits in transit
c.
NSF checks
d.
a check for $630, recorded in the check register for $360
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
90.
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.
none
91.
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
92.
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
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
93.
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
94.
Which of the following would be deducted from the balance per books on a bank reconciliation?
a.
service charges
b.
outstanding checks
c.
deposits in transit
d.
notes collected by the bank
95.
Which of the following would be added to the balance per books on a bank reconciliation?
a.
service charges
b.
outstanding checks
c.
deposits in transit
d.
notes collected by the bank
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
96.
Which of the following would be subtracted from the balance per books on a bank reconciliation?
a.
outstanding checks
b.
deposits in transit
c.
notes collected by the bank
d.
error in recording a check for $732 as $723
97.
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
98.
A bank reconciliation should be prepared
a.
whenever the bank refuses to lend the company money
b.
to explain any difference between the company‘s balance per books with the balance per bank
c.
by the company’s bank
d.
by the person who is authorized to sign checks
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
99.
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 from one of Minor Company’s customers in the amount of $300 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
100.
Rodgers Company gathered the following reconciling information in preparing its May bank reconciliation.
Calculate
the adjusted cash balance per books on May 31.
Cash balance per books, 5/31
$5,400
Deposits in transit
375
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
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
101.
Gunnar Company gathered the following reconciling information in preparing its September bank
reconciliation.
Calculate the adjusted cash balance per books on September 30.
Cash balance per books, 9/30
$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.
102.
Jamison Company gathered the following reconciling information in preparing its June bank reconciliation:
$13,000
4,000
7,000
2,500
35
1,900
Using the above information, determine the cash balance per books (before adjustments) for the Jamison
Company.
a. $8,065
b. $10,565
c. $15,065
d. $6,435
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
103.
Thompson Company gathered the following reconciling information in preparing its October bank reconciliation:
Cash balance per bank, 10/31
$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
Using the above information, determine the cash balance per books (before adjustments) for the Thompson
Company.
a. $11,050
b. $19,450
c. $15,950
d. $11,150
104.
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
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
105.
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?
a. $14,470 b. $10,705
c. $15,095 d. $15,720
106.
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 balance according to bank
b.
add both values to balance according to books
c.
add both values to balance according to bank
d.
subtract both values from balance according to books
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
107.
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 Over and Short for $13
d.
credit to Cash for $54
108.
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 Over and Short for $3
d.
credit to Cash for $102
109.
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
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
110.
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
111.
The debit recorded 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
112.
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 Over and Short for $3
c.
Petty Cash for $190
d.
Cash for $180
Chapter 8: Sarbanes-Oxley, Internal Control, and Cash
113.
Cash equivalents include
a.
checks
b.
coins and currency
c.
money market accounts and commercial paper
d.
stocks and short-term bonds
114.
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
115.
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