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Exam 7: Internal Control and Cash

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Question 21

Multiple Choice

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

A) A debit to Postage Expense
B) A debit to Petty Cash
C) A debit to Cash
D) A debit to Cash Short and Over
E) A debit to Supplies

F) C) and E)
G) A) and E)

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Question 22

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Money orders, cashier's cheques, and certified cheques are examples of cash equivalents.

A) True
B) False

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Question 23

Multiple Choice

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Z-Mart had $43 in missing petty cash receipts. The correct procedure is to

Video Buster had $62 in extra cash in the petty cash box at the end of the day. The correct procedure is

Cash consists of cash on hand and demand deposits. This includes coins, currency, and amounts on deposits in bank accounts, chequing accounts and some savings accounts.

Outstanding cheques are cheques the bank has paid and deducted from the customer's account during the month.

The quick ratio is current assets divided by current liabilities.

Cash, short-term investments, inventory, and receivables, are called quick assets.

An analysis that explains the difference between the balance of a chequing account shown in the depositor's records and the balance shown on the bank statement is a(n)

Guy Company's records revealed the following data for September: * This error relates to a deposit from a customer on account made on September 14. The correct amount of the deposit was $1,322. However, the bookkeeper had recorded it as $1,000. Prepare the general journal entries necessary to correct the Cash balance.

Z-Mart's quick assets are $147,000. With current liabilities of $143,000, Z-Mart's quick ratio is 1.03 to 1.

When a petty cash fund is in use,

When preparing a bank reconciliation, if the adjusted book balance and the adjusted bank balance are equal, then there is no need to have an external auditor test internal controls for the "cash" account.

The acid-test ratio is also called the quick ratio.

You are a supervisor in the accounting department of Finest Hours Consulting. The person you just hired shows you the bank reconciliation prepared for March 31, as shown below. In comparing the bank reconciliation to the Cash account in the General Ledger, you notice a problem. You investigate further and come up with some additional information as follows: a. The Cash account in the General Ledger showed the following: b. The $\$ 14,600$ deposit in transit represerts the February 28 deposit that cleared the bank or March 1. c. The $1,000 error deducted from the book balarce is from cheque #1012, for Office Equipment that was correctly drawn by the bank for $\$ 7,800$ but was recorded incorectly in the cash disbursements journal as $\$ 8,700$ . d. The bank paid a note on our behalf; $\$ 2,500$ principal, interest of $\$ 380$ , plus a service charge of $\$ 5$ . There were no other notes collected or paid by the bank in March. e. The $\$ 17,200$ deposit of March 31 does not appear on the bank statement. Instructions: Prepare a corrected bank reconciliation for March 31, 2020.

Make the entry to replenish the petty cash fund at the end of January.

A cheque

The quick ratio is a more accurate measure of a company's liquidity than the current ratio.

Managers place a high priority on internal control systems because the systems assist managers in the

Identify whether each of the following items affects the bank side or the book side of a bank statement reconciliation._____ (1) Bank service charges _____ (2) Outstanding cheques _____ (3) Deposits in transit _____ (4) NSF cheque _____ (5) Interest on a chequing account _____ (6) The bank recorded a cheque for $958. The company wrote the cheque for $9,580 _____ (7) The bank printed cheques for the depositor. ____ (8) Debit memo _____ (9) Credit memo _____ (10) The bank collected a $1,000 note for the depositor.