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Exam 6: Cash, fraud, and Internal Controls

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Question 71

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Maintaining adequate records is an important internal control principle.

A) True
B) False

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Question 72

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The document the purchasing department sends to the vendor that is used to place an order is the ________.

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Question 73

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Outstanding checks refer to checks that have been:

Match each of the following terms with the appropriate definitions. -A document the purchasing department uses to place an order with a supplier.

Great Falls Co.'s bank reconciliation as of February 28 is shown below. $\begin{array} { | l | r | l|r| } \hline \text { Bank balance } & \$ 37,643& \text { Book balance } & \$ 38,153 \\\hline + \text { Deposit in transit } & 2,950& \text { Note collection } & + 745 \\\hline \text { - Outstanding checks } & \underline { - 1,730 }&\text { Check printing } & \underline { - 35 } \\\hline \text { Adjusted bank balance } & \$ 38,863 &\text { Adjusted book balance } & \$ 38,863 \\\hline\end{array}$ One of the adjusting journal entries that Great Falls must record as a result of the bank reconciliation includes:

The following information is available for the Victor Company for its March 31 bank reconciliation: From the March 31 bank statement: NSF: A check from a customer,Booker Co.in payment of their account. IN: Interest earned on the account. From the Victor Company's accounting records: $\text { Cash Receipts Deposited }$ $\begin{array} { | l | c | r | } \hline \text { Date } && \text { Cash Debit } \\\hline \text { March } & 7 & 4,340 \\\hline & 27 & 7,270 \\\hline & 31 & \underline { 2,090 } \\\hline & & \underline { 13,700 } \\\hline & & \\\hline & & \\\hline & & \\\hline\end{array}$ $\text { Cash Disbursements }$ $\begin{array} { | r | r | } \hline \text { Check No. } & \text { Cash Debit } \\\hline 2905 & 170 \\\hline 2906 & 3,850 \\\hline 2907 & 460 \\\hline 2908 & 1,350 \\\hline 2909 & 725 \\\hline 2910 & 340 \\\hline & 6,895 \\\hline\end{array}$ 1.Based on the above information,prepare a bank reconciliation for the Victor Company. 2.Prepare the necessary general journal entries to adjust cash to the reconciled balance.

A company records purchase invoices at net amounts.On March 5,the company recorded merchandise purchased,invoice price $17,000,terms 2/15,n/60.On March 24,this company discovered that the invoice had been incorrectly filed and the discount had been lost.The invoice was paid on April 1.Prepare journal entries to record these events.

The principles of internal control include:

An income statement account that is used to record cash overages and cash shortages arising from petty cash transactions or from errors in making change is titled:

Electronic funds transfers (EFTs)are decreasingly used by companies due to the inconvenience and high cost.

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.

Human fraud is driven by the triple-threat of fraud: Opportunity,collusion,and rationalization.

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 means of recording purchases under the assumption that the cash discount for prompt payment will be taken is called the ________.

Match each of the following terms with the appropriate definitions. -A report explaining any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement.

If a check that was outstanding on last period's bank reconciliation was not among the cancelled checks returned by the bank this period,in preparing this period's reconciliation,the amount of this check should be:

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.

Two clerks sharing the same cash register is a violation of which internal control principle?

Clayborn Company deposits all cash receipts on the day they are received and makes all cash payments by check.At the close of business on May 31,its Cash account shows a debit balance of $17,025.Clayborn's May bank statement shows $15,800 on deposit in the bank.Determine the adjusted cash balance using the following information: $\begin{array} { | l | r | } \hline \text { Deposit in transit } & \$ 5,200 \\\hline \text { Outstanding checks } & \$ 4,600 \\\hline \text { Bank service fees, not yet recorded by company } & \$ 25 \\\hline \text { A NSF check from a customer, not yet recorded by the company } & \$ 600 \\\hline\end{array}$ The adjusted cash balance should be:

Vouchers should be used for purchases of inventory and all other expenditures made within a company.