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Exam 7: Internal Control and Cash

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Question 1

Multiple Choice

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Which of the following items will NOT appear on the book side of the reconciliation?

A) The bank collected a note receivable of $1,000.
B) A nonsufficient funds check of $75 was returned to the bank.
C) A deposit was in transit.
D) The bank charged a service fee of $20.

E) All of the above
F) None of the above

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Question 2

True/False

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As long as the same person deposits customer checks and records the deposits into the ledger,there will be good internal control over cash receipts.

A) True
B) False

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Question 3

Multiple Choice

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Which of the following items would require an adjusting entry after preparation of the bank reconciliation?

A basic principle of internal control over cash receipts is that the deposit of the cash and the recording of the receipts into the ledger should be separated.

Which of the following is NOT one of the benefits provided by internal control?

The following information is needed to reconcile the cash balance for Woods Paper Products. • A deposit of $5,794.62 is in transit. • Outstanding checks total $1,533.25. • The book balance is $5,695.62. • The bookkeeper recorded a $1,524.00 check as $15,240 in payment of the current month's rent. • The bank balance at February 28,2008 was $16,500.25. • A deposit of $300 was credited by the bank for $3,000. • A customer's check for $1,280 was returned for nonsufficient funds. • The bank service charge is $70. - Which of the following journal entries is needed to adjust for the NSF check?

Which of the following items does NOT cause a difference in the bank balance and the book balance on a bank reconciliation?

A company has a petty cash fund amount of $200.When replenished,it has petty cash receipts of $15 for gas expense,$23 for postage expense,$18 for supplies expense and $12 for miscellaneous expenses.In the journal entry,Cash would be credited for:

The bank statement reveals an EFT payment made to one of the company's suppliers that has not yet been recorded in the ledger.How would this information be included on the bank reconciliation?

An imprest system is a way to account for petty cash by maintaining a constant balance in the petty cash account,supported by the fund (cash plus payment tickets)totaling the same amount.

Which of the following items found on a bank reconciliation does NOT require an adjusting entry?

If the bank reconciliation includes a bank service charge,a journal entry is required which debits Cash and credits Miscellaneous expense.

A malicious program that enters program code or destroys data without authorization is an example of:

In the following situation,which internal control procedure needs strengthening? - Hofstra Services hired a new accounting manager.He signed a contract for a new accounting information system,but his position did not specify whether he was authorized to do so or not.

A petty cash fund was established with a $400 balance.It currently has cash of $9 and petty cash tickets as shown below. $\begin{array}{|l|r|}\hline \text { Travel expense } & \$ 120 \\\hline \text { Office supplies } & \$ 200 \\\hline \text { Equipment rental expense } & \$ 70\\\hline \end{array}$ The journal entry to replenish the account would be which of the following:

A company received a bank statement showing a balance of $62,300.Reconciling items were outstanding checks of $1,450 and a deposit in transit of $8,500.What is the company's adjusted bank balance?

An accountant is under pressure to maximize the company's net income at year-end.He is told to delay orders of important services until the following year.This action would be considered unethical because it is a misrepresentation of actual transactions.

Sarbanes-Oxley was passed in response to which of the following?

Under the Sarbanes-Oxley Act,the outside auditor must issue an internal control report.

Please refer to the following bank reconciliation: $\begin{array}{lr}\begin{array}{lr}\text { BANK }\\\hline\text { Balance, June } 30,2014 & \$ 10,241.43 \\\text { ADD: } & \\\text { Deposit in transit } & 5,113.40 \\\\\\\text { LESS: } & \\\text { Outstanding Check\# 506 } & (1,948.52)\\\text { Outstanding Check\# 510 } & (1,800.25) \\\\\text { Adjusted balance, June 30,2014 }&\underline{ \$ 11,606.06 }\\\end{array}\begin{array}{|lr}\text { BOOK }\\\hline \text { Balance, June } 30,2014 & \$ 9,745.06 \\\text { ADD: } & \\\text { Note collected by bank } &1,900.00 \\ \text { Interest revenue } & 75.00 \\& \\\text { LESS: } & \\\text { NSF check } &(79.00) \\\text { Bank service charge } & (35.00) \\\\\text { Adjusted balance, June } 30,2014 & \underline{\$ 11,606.06} \\\end{array}\end{array}$ - Please prepare the adjusting entry for the fourth reconciling item (bank service charge.) $\begin{array} { | l | r | r | } \hline \quad\quad\quad&\quad&\quad \\\hline \\\hline\end{array}$