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Exam 7: Internal Control and Cash

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Question 101

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Select best of the following reconciling items as (a) an addition to the cash balance according to the bank statement, (b) deduction from the cash balance according to the bank statement, (c) an addition to the cash balance according to the company's records, or (d) a deduction from the cash balance according to the company's records. Assume that none of the transactions reported by bank debit and credit memos have been recorded by the company. Also, indicate by writing "entry" by those items that will require a journal entry in the company's accounts.

Premises

Responses

Bank service charges.

an addition to the cash balance according to the bank statement

NSF check.

deduction from the cash balance according to the bank statement

Check for $420 incorrectly recorded by the company as $240.

an addition to the cash balance according to the company’s records

Outstanding checks.

a deduction from the cash balance according to the company’s records.

Check for $690 incorrectly recorded by the company as $960.

Deposits in transit.

Premises

Bank service charges.

NSF check.

Check for $420 incorrectly recorded by the company as $240.

Outstanding checks.

Check for $690 incorrectly recorded by the company as $960.

Deposits in transit.

Responses

an addition to the cash balance according to the bank statement

deduction from the cash balance according to the bank statement

an addition to the cash balance according to the company’s records

a deduction from the cash balance according to the company’s records.

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Correct Answer

Premises

Responses

Bank service charges.

NSF check.

Check for $420 incorrectly recorded by the company as $240.

Outstanding checks.

Check for $690 incorrectly recorded by the company as $960.

Deposits in transit.

Premises

Bank service charges.

NSF check.

Check for $420 incorrectly recorded by the company as $240.

Outstanding checks.

Check for $690 incorrectly recorded by the company as $960.

Deposits in transit.

Responses

Question 102

True/False

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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

Correct Answer

verified

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Question 103

Multiple Choice

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Cash equivalents include

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)

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)

The bank statement for Gatlin Co. indicates a balance of $7,735 on June 30. After the journal entries for June had been posted, the cash account had a balance of $4,098. ​ (a) Cash sales of $\$ 742$ had been erroneously recorded in the cash receipts journal as $\$ 724$ . (b) Deposits in transit not recorded by bank, $\$ 425$ . (c) Bank debit memo for service charges, $\$ 35$ . (d) Bank credit memo for note collected by bank, $\$ 2,475$ including $\$ 75$ interest. (e) Bank debit memo for $\$ 256 \mathrm { NSF }$ (not sufficient funds) check from Janice Smith, a customer. (f) Checks outstanding, $\$ 1,860$ . ​ Record the appropriate journal entries that would be necessary for Gatlin Co.

Bank reconciliation information for Kaden Co. for May 31 is as follows: ​ (a) The bank statement balance is $\$ 2,936$ . (b) The cash account balance is $\$ 3,194$ . (c) Outstanding checks amounted to $\$ 465$ . (d) Deposits in transit are $\$ 655$ . (e) The bank service charge is $\$ 50$ . (f) A check for $\$ 97$ for supplies was recorded as $\$ 79$ in the ledger. ​ Record the appropriate journal entry for Kaden Co.

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.

If the balance in Cash Short and Over at the end of a period is a credit, it should be reported as an "other income" item on the income statement.

In preparing a bank reconciliation, the amount of outstanding checks is added to the balance per bank statement.

Expenditures from a petty cash fund are documented by a petty cash receipt.

A business that requires all cash payments be made by check can not use a petty cash system.

Journalize the entries to record the following: 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. Record any missing funds in the cash short and over account. Journal

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 entry to record the cash receipts and cash sales. $\begin{array} { | c | c | c | c | c | } \hline & & { \text { Journal } } \\\hline \text { Date } & \text { Description } & \text { P ost. Ref. } & \text { Debit } & \text { Credit } \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline\end{array}$

Money orders are considered cash.

The amount of the outstanding checks is included on the bank reconciliation as a(n)

In preparing a bank reconciliation, the amount of a canceled check omitted from the journal is added to the balance per company's records.

The following information is from Madison Corporation's accounting records for May. Check #3269 was returned as a double payment and voided. Checks that have not cleared the bank include #3252, #3260, and series #3275-3278. ​ In addition to the above list of the checks, Madison had check #2264 for $32.98 and check #2655 for $45.99 outstanding previously that have not cleared. 1. Create an outstanding checks list for Madison at the end of May. 2. What is the total amount of checks that cleared the bank (written in May)?

Accompanying the bank statement was a debit memo for bank service charges. What entry is required in the company's accounts?

On April 3, Snappy Sales decides to establish a $135.00 petty cash fund to relieve the burden on Accounting. ​ ​ ​