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Exam 8: Cash and Internal Controls

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Question 81

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After preparing a bank reconciliation, adjustments must be made for items reconciling the book balance.

A) True
B) False

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Question 82

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The internal document that is used to notify the appropriate person that ordered goods have been ^{received and to describe the quantities and condition of the goods is the} .

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Question 83

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The use of internal controls provides a guarantee against losses due to operating activities.

Deposits in transit are deposits made and recorded by the depositor but not yet recorded on the bank statement.

Spencer Co. decides to establish a petty cash fund with a beginning balance of $200. The company decides that any purchase under $25 can be processed through petty cash instead of the voucher system. The journal entry to record establishing the account is:

The entry to record reimbursement of the petty cash fund for postage expense should include:

Preparing a bank reconciliation on a monthly basis is an example of:

The following information is taken from Reagan Company's December 31 balance sheet: $\begin{array} { | l | r | } \hline \text { Cash and cash equivalents } & \$ 8,419 \\\hline \text { Accounts receivable } & 70,422 \\\hline \text { Merchandise inventories } & 60,362 \\\hline \text { Prepaid expens es } & 4,100 \\\hline \text { Accounts payable } & \$ 14,950 \\\hline \text { Notes payable } & 8 6 , 6 3 8 \\\hline \text { Other current liabilities } & 9,500 \\\hline\end{array}$ If net credit sales for the current year were $612,000, the firm's days' sales uncollected for the year is: (Use 365 days a year.)

On March 1, a company established a $75 petty cash fund. On March 12, the petty cash fund contains $3 in cash and the following paid petty cash receipts: transportation-in on merchandise inventory $14.25; postage, $19.50; and office supplies, $36. Give the general journal entry to reimburse the fund and to increase its amount to $150 on March 12.

________ are checks written by the depositor, deducted on the depositor's records, and sent to the payee, but not yet recorded by the bank at the bank statement date.

Describe the net method of accounting for purchases. Why might companies use the net method?

Spencer Co. has a $200 petty cash fund. At the end of the first month the accumulated receipts represent $43 for delivery expenses, $127 for merchandise inventory, and $12 for miscellaneous expenses. The fund has a balance of $18. The journal entry to record the reimbursement of the account includes a:

A company reported net sales for 2014 of $265,000 and $545,000 for 2015. The year-end balances of accounts receivable were $39,000 for 2014 and $92,000 for 2015. Calculate the days' sales uncollected at the end of each year for this company and describe any changes in the apparent liquidity of the company's receivables.

A debit memorandum on a bank statement indicates:

A debit balance in the Cash Over and Short account reflects an expense and is reported on the income statement as part of selling, general and administrative expenses.

If a check correctly written and paid by the bank for $749 is incorrectly recorded in the company's books for $794, how should this error be treated on the bank reconciliation?

The voucher system of control:

Easton Co. deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on June 30, its Cash account shows a debit balance of $60,209. Easton's June bank statement shows $58,349 on deposit in the bank. Determine the adjusted cash balance using the following information: $\begin{array} { | l | r | } \hline \text { Deposit in transit } & \$ 3,800 \\\hline \text { Outstanding checks } & \$ 1,925 \\\hline \text { Check printing fee, not yet recorded by company } & \$ 15 \\\hline \text { Interest earned on account, not yet recorded by the company } & \$ 30 \\\hline\end{array}$ The adjusted cash balance should be:

Internal control procedures for cash receipts do not require that:

Managers place a high priority on internal control systems because the systems assist managers in all of the following except: