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Exam 5: Fraud, Internal Control, and Cash

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Question 31

Multiple Choice

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A bank service charge should be a(n) ______ on a bank reconciliation.

A) addition to the bank balance
B) deduction from the bank balance
C) addition to the book balance
D) deduction from the book balance

E) C) and D)
F) A) and C)

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Question 32

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All of the following are goals of internal control except:

A) reducing the risk of fraud.
B) producing reliable and timely accounting information for use by people internal and external to the organization.
C) minimizing the amount of income taxes that must be paid.
D) adhering to laws and regulations.

E) A) and C)
F) B) and D)

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Question 33

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Which of the following would overstate a company's net income?

DigDug Corporation had outstanding checks totaling $5,400 on its June bank reconciliation.In July,DigDug issued checks totaling $38,900.The July bank statement shows that $26,300 in checks cleared the bank in July.The amount of outstanding checks on DigDug's July bank reconciliation should be:

Identify at least five reasons why the company's records might differ from the bank's records.Describe the purpose of a bank reconciliation and discuss why it is a key control.

Which of the following is the primary goal of internal controls for cash payments?

Flynn Company's monthly bank statement showed the ending balance of cash of $18,500.The bank reconciliation for the period showed an adjustment for a deposit in transit of $1,500, outstanding checks of $2,000, a NSF check of $700, bank service charges of $30 and the EFT from a customer in payment of the customer's account of $1,500. -Use the information above to answer the following question.What journal entry should be recorded by Flynn Company for the EFT?

The Sarbanes-Oxley Act (SOX) requires the establishment of an audit committee that includes the:

A difference between an imprest payroll account and petty cash is petty cash is:

On September 1,a company established a petty cash fund of $100.On September 10,the petty cash fund was replenished when there was $16 remaining and there were petty cash receipts for supplies,$27,and postage,$54.On September 15,the petty cash fund was increased to $125. Required: Prepare the journal entries,if any,required on September 1,September 10,and September 15.

Which of the following statements relating to restricted cash is not correct?

The company has $10,000 in its checking account,$20,000 in its savings account,$1,000 in petty cash,$25,000 in one-year Treasury bills,and $15,000 in a money market fund.What amount should be reported as cash and cash equivalents on the balance sheet?

The bank will show a customer's deposit on bank statements as a:

Which of the following bank reconciliation items would not result in a journal entry?

Which of the following situations would cause the balance per bank to be more than the balance per books?

Maple Industries Inc.deposits all cash receipts on the day when they are received and it makes all cash payments by check.At the close of business on December 31,its Cash account shows a debit balance of $18,303.The company's bank statement as of June 30 shows an ending cash balance of $15,921.The following information was also available. -Outstanding checks as of December 31 total $2,261. -Included with the bank statement was a debit memo in the amount of $35 for service charges. -Check No.2519,listed with the canceled checks,was correctly drawn for $805 in payment of a utility bill on December 16.The company mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $850. -The December 31 cash receipts of $3,425 were placed in the bank's night depository after banking hours and were not recorded on the December 31 bank statement. -The bank deducted $1,228 for an NSF check from a customer deposited on December 10. Required: Prepare the journal entries for the items that would appear on the company's bank reconciliation as of December 31.(Do not prepare the bank reconciliation.)

A company's cash receipts procedures include the following.Cashiers collect cash and issue a receipt at the point of sale.Supervisors take custody of the cash at the end of each cashier's shift and deposit it in the bank.Accounting staff then ensure the receipts from cash sales are properly recorded in the accounting system.Which internal control principle is most evident with these procedures?

Which of the following is not a correct statement regarding the Cash Shortage account?

A system used to reimburse employees for expenditures they have made on behalf of the organization is referred to as a:

Criminally minded employees have been known to override internal controls or do which of the following to get around them?