Question 1 A $100 petty cash fund contains $89 in petty cash receipts, and $7.50 in currency and coins. The journal entry to record the replenishment of the fund would include a Answer cr

Question 1

A $100 petty cash fund contains $89 in petty cash receipts, and $7.50 in currency and coins. The journal entry to record the replenishment of the fund would include a

Answer

credit to Petty Cash for $96.50.

credit to Cash for $89.

debit to Cash Short and Over for $3.50.

credit to Cash Short and Over for $3.50.

2 points

Question 2

A bank reconciliation should be prepared

Answer

whenever the bank refuses to lend the company money.

to explain any difference between the company’s balance per books with the balance per bank.

when an employee is suspected of fraud.

by the person who is authorized to sign checks.

2 points

Question 3

A bank reconciliation should be prepared periodically because

Answer

the company’s records and the bank’s records are in agreement

the bank has not recorded all of its transactions

any differences between the company’s records and the bank’s records should be determined, and any errors made by either party should be discovered and corrected

the bank must make sure that its records are correct

2 points

Question 4

A check drawn by a company for $270 in payment of a liability was recorded in the journal as $720. This item would be included on the bank reconciliation as a(n)

Answer

addition to the balance per the company’s records

addition to the balance per the bank statement

deduction from the balance per the bank statement

deduction from the balance per the company’s records

2 points

Question 5

A check drawn by a company for $270 in payment of a liability was recorded in the journal as $720. What entry is required in the company’s accounts?

Answer

debit Accounts Payable; credit Cash

debit Cash; credit Accounts Receivable

debit Cash; credit Accounts Payable

debit Accounts Receivable; credit Cash

2 points

Question 6

A debit or credit memo describing entries in the company’s bank account may be enclosed with the bank statement. An example of a credit memo is

Answer

deposited checks returned for insufficient funds

a promissory note left for collection

a service charge

notification that a customer’s check for $375 was recorded by the company as $735 on the deposit ticket

2 points

Question 7

A firm’s internal control environment is not influenced by

Answer

management’s operating style

organizational structure

personnel policies

monitoring policies

2 points

Question 8

A minimum cash balance required by a bank is called

Answer

cash in bank

cash equivalent

compensating balance

EFT

2 points

Question 9

A necessary element of internal control is

Answer

database

systems design

systems analysis

information and communication

2 points

Question 10

A voucher is usually supported by

Answer

a supplier’s invoice

a purchase order

a receiving report

all of the above

2 points

Question 11

Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the company. This item is a(n)

Answer

deduction from the balance per company’s records

addition to the balance per bank statement

deduction from the balance per bank statement

addition to the balance per company’s records

2 points

Question 12

Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the item is

Answer

a deduction from the balance per company’s records

an addition to the balance per bank statement

a deduction from the balance per bank statement

an addition to the balance per company’s records

2 points

Question 13

Accompanying the bank statement was a debit memo for an NSF check received from a customer. What entry is required in the company’s accounts?

Answer

debit Other Income; credit Cash

debit Cash; credit Other Income

debit Cash; credit Accounts Receivable

debit Accounts Receivable; credit Cash

2 points

Question 14

Accompanying the bank statement was a debit memo for bank service charges. What entry is required in the company’s accounts?

Answer

debit Miscellaneous Administrative Expense; credit Cash

debit Cash; credit Other Income

debit Cash; credit Accounts Payable

debit Accounts Payable; credit Cash

2 points

Question 15

Cash equivalents

Answer

are illegal in some states

will be converted to cash within two years

will be converted to cash within 90 days

will be converted to cash within 120 days

2 points

Question 16

During 2010, Tempo Inc has monthly cash expenses of $120,000. On December 31, 2010, their cash balance is $1,860,000. The ratio of cash to monthly cash expenses is

Answer

6.5

15.5

77.4

12.0

2 points

Question 17

During a bank reconciliation process,

Answer

Outstanding checks and deposits in transit are added to the bank statement balance.

Outstanding checks are subtracted and deposits in transit are added to the bank statement balance.

Outstanding checks and deposits in transit are subtracted from the bank statement balance.

Outstanding checks are added and deposits in transit are subtracted from the bank statement balance.

2 points

Question 18

Internal control does not consist of policies and procedures that

Answer

protect assets from misuse

aid management in directing operations toward achieving business goals

guarantee the company will not go bankrupt

ensure that business information is accurate

2 points

Question 19

The objectives of internal control are to

Answer

control the internal organization of the accounting department personnel and equipment

provide reasonable assurance that operations are managed to achieve goals, financial reports are accurate, and laws and regulations are complied with

prevent fraud, and promote the social interest of the company

provide control over “internal-use only” reports and employee internal conduct

2 points

Question 20

The type of account and normal balance of Petty Cash is a(n)

Answer

revenue, credit

asset, debit

liability, credit

expense, debit

2 points

Question 21

Which of the following is not an internal control activity for cash?

Answer

The number of persons who have access to cash should be limited.

All cash receipts should be recorded promptly.

The functions of record keeping and maintaining custody of cash should be combined.

Surprise audits of cash on hand should be made occasionally.

2 points

Question 22

Which one of the following below reflects a weak internal control system?

Answer

all employees are well supervised

a single employee is responsible for comparing a receiving report to an invoice

all employees must take their vacations

a single employee is responsible for collecting and recording of cash

2 points

Question 23

Journal entries based on the bank reconciliation are required in the company’s accounts for

Answer

outstanding checks

deposits in transit

bank errors

book errors

2 points

Question 24

The amount of the outstanding checks is included on the bank reconciliation as a(n)

Answer

deduction from the balance per company’s records

addition to the balance per bank statement

deduction from the balance per bank statement

addition to the balance per company’s records

2 points

Question 25

The debit balance in Cash Short and Over at the end of an accounting period is reported as

Answer

an expense on the income statement

income on the income statement

an asset on the balance sheet

a liability on the balance sheet

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