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Exam 6: Reporting and Analyzing Cash and Internal Controls

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Question 101

True/False

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

A) True
B) False

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Question 102

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Which of the following procedures would weaken the control over cash receipts that arrive through the mail?

A) After the mail is opened,a list (in triplicate) of the money received is prepared with a record of the sender's name,the amount and an explanation of why the money is sent
B) The bank reconciliation is prepared by a person who does not handle cash or record cash receipts
C) For safety,only one person should open the mail and that person should immediately deposit the cash received in the bank
D) The cashier should not also be the record keeper who records the amounts received in the accounting records
E) All of the above are good internal control procedures over cash receipts that arrive through the mail

F) A) and C)
G) C) and D)

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Question 103

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Identify each of the following items as either (a)cash or (b)cash equivalent.

Hasbro had $2,816 million in sales and $555 million in ending accounts receivable for the current period.For the same period,Mattel reported $4,885 million in sales and $491 million in ending accounts receivable.Calculate the days' sales uncollected for both companies as of the end of the current period.Which company is doing a better job in managing the collection of its receivables?

A company's internal control system:

Identify whether each of the following items would on appear on the bank side or the book side of a bank reconciliation.

Collusion is when a person embezzles money from a company and tries to hide the evidence.

The journal entry for petty cash reimbursement involves a debit to the appropriate expenses and a credit to Petty Cash.

Internal control policies and procedures are the same for all companies.

The document that the purchasing department prepares and sends to the vendor to place an order is the

Which of the following statements is true regarding the documents in a voucher system?

Highlight Hotel 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 $18,393,debit balance.Highlight Hotel's June 30 bank statement shows $15,921 on deposit in the bank.Prepare the necessary adjusting journal entries using the following information 1.Outstanding checks as of December 31 total $2,261. 2.The December 31 bank statement included a $35 debit memorandum for bank services. 3.Check No.2519,listed with the canceled checks,was correctly drawn for $850 in payment of a utility bill on December 16.Highlight Hotel mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $805. 4.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. 5.The bank statement included a check from a customer's payment of an account receivable that had been returned NSF in the amount of $1,228. Prepare the necessary adjusting journal entries.

Cash equivalents are short-term highly liquid investment assets that are easily converted to cash and have maturities of one year.

The following information is available for the Edwards Company for its March 31 bank reconciliation: From the March 31 bank statement: NSF: A check from a customer,Cook Co.in payment of their account. IN: Interest earned on the account. From the Edwards Company's accounting records: a. Based on the above information, prepare a bank reconciliation for the Edwards Company. b. Prepare the necessary general journal entries to adjust cash to the reconciled balance.

A _____________________________ fund is used for the control of small amounts of cash disbursements.

The petty cash fund should be reimbursed when it is nearing zero and at the end of the accounting period when financial statements are prepared.

The document that is an itemized statement of goods prepared by the vendor listing the customer's name,items sold,sales prices and terms of the sale is the __________________________.

A company established a petty cash fund in May of the current year and experienced the following transactions affecting the fund during May: May 1 Establish petty cash account in the amount of $300 May 5 Paid for miscellaneous office supplies in the amount of $53.22 May 9 Reimbursed Human Resource Manager for business lunch,$45.09 May 15 Paid for minor landscaping services,$75.00 May 22 Paid $65.00 for postage May 31 Counted remaining cash and discovered that $56.34 remained The company decided to increase the petty cash balance to $450.Prepare the journal entry to increase the fund on May 31.

Vouchers should be used only for purchases.Other expenditures do not need to go through the voucher system.

Match the following terms with the appropriate definition.