Question 1

Which of the following is not an element of the fraud triangle?

Accepted Answer

Segregation of duties.

Question 2

Which one of the following is not a primary component of an internal control system?

Accepted Answer

Rationalization.

Question 3

Which of the following is not a reason why an organization establishes a system for internal control?

Accepted Answer

All of the above are reasons why an organization establishes a system for internal control.  -To safeguard its assets  -To increase efficiency of operations  -To ensure compliance with laws and regulations

Question 4

Which of the following statements is correct?

Accepted Answer

The person who has custody of assets should not perform the record keeping for the assets.

Question 5

Internal auditors

Accepted Answer

evaluate the system of internal controls for the companies that employ them.

Question 6

Which of the following is not a principle of internal control?

Accepted Answer

Collusion between employees.

Question 7

Under which of the following do computer programs that limit unauthorized access to certain files fall?

Accepted Answer

Physical, mechanical, and electronic controls.

Question 8

Of which of the following is obtaining insurance protection against dishonest employees an example?

Accepted Answer

Bonding.

Question 9

Reasonable assurance rests on the premise that

Accepted Answer

The costs of establishing controls should not exceed their expected benefit.

Question 10

Which one of the following statements is correct?

Accepted Answer

Internal auditors are company employees who evaluate the effectiveness of the company\'s system of internal control on a continuous basis.

Question 11

For what purpose are physical controls used in a business?

Accepted Answer

To enhance the accuracy and reliability of its accounting records and to safeguard its assets.

Question 12

Which one of the following is not one of the principles of internal control?

Accepted Answer

Financial performance measures.

Question 13

Which one of the following is not a physical control?

Accepted Answer

Independent bank reconciliations.

Question 14

Which of the following was not a result of the Sarbanes-Oxley Act?

Accepted Answer

Companies must file financial statements with the Internal Revenue Service.

Question 15

Which one of the following control activities is not relevant when a company uses a computerized (rather than manual) accounting system?

Accepted Answer

All of these control activities are relevant to a computerized system.  -Establishment of responsibility  -Segregation of duties  -Independent internal verification

Question 16

Handly Inc. permits only designated personnel such as cashiers to handle cash receipts. What principle is being applied?

Accepted Answer

Establishment of responsibility.

Question 17

Aptara Construction Supplies has a cashier who is also the accounts receivable clerk for the company. Which internal control principle is violated?

Accepted Answer

Segregation of duties.

Question 18

Which internal control principle is most important in a control system for handling cash receipts?

Accepted Answer

Segregation of duties.

Question 19

Which one of the following is not a control procedure used for over-the-counter receipts?

Accepted Answer

Pre-numbered checks are used to buy supplies.

Question 20

Which of the following is an effective internal control over cash disbursements?

Accepted Answer

All of the above are part of effective internal control over cash disbursements  -The use of prenumbered checks  -The storage of blank checks in a secure place   -The separation of authorization of checks and the actual writing of the checks

Question 21

What is an authorization form called which is prepared for each expenditure in most medium and large organizations?

Accepted Answer

Voucher.

Question 22

For which item below might a bank issue a credit memorandum to a depositor\'s account?

Accepted Answer

Interest earned.

Question 23

For which of the following might a bank issue a debit memorandum to a depositor\'s account?

Accepted Answer

Monthly service charges.

Question 24

Springer Company listed outstanding checks totaling $4,500 on its September bank reconciliation. In October, the company issued checks totaling $45,700. The October bank statement shows that checks totaling $39,800 cleared the bank. In addition, a check from one of Springer\'s customers in the amount of $500 was returned as NSF. The outstanding checks on the October bank reconciliation should total:

Accepted Answer

$10,400  (The amount of checks outstanding at the beginning of the period plus the checks issued in the period represents the total checks that should clear the bank account. Subtracting the checks that cleared results in the October outstanding checks amount.)

Question 25

Jones Company collected the following information to prepare its May bank reconciliation:  Cash balance per books, May 31 $5,300  Deposits in transit 510  Notes receivable with interest collected by bank 580  Bank service charges 30  Outstanding checks 180  NSF check 150

Accepted Answer

$5,700  (The book side of the cash reconciliation begins with $5,300 to which adjustments are made for amounts collected by the bank, which is the note receivable of $580. Deductions are made for amounts the bank deducted from the account, which include the bank service charges of $30 and the NSF check of $150, to arrive at the adjusted cash balance per books of $5,700. Outstanding check and deposits in transit affect the bank side of the reconciliation.)

Question 26

Barker Company collected the following information to prepare its November bank reconciliation:  Cash balance per bank statement, November 30 $21,000  Note receivable plus interest collected 9,000  Outstanding checks 6,000  Deposits in transit 5,400  Bank service charges 85  NSF check 2,100  How much is the cash balance per books prior to preparing the reconciliation?

Accepted Answer

$13,585  (From the bank\'s ending balance ($21,000), add the deposits in transit ($5,400) and subtract the outstanding checks ($6,000), to arrive at the adjusted bank balance totaling $20,400. The bank side will show the note receivable ($9,000), as an addition, and the service fees ($85) and the NSF checks ($2,100) as decreases. The total of the book side is the same as the total of the bank side, $20,400. You can then solve for the unadjusted book balance of $13,585.)

Question 27

For which of the following will an adjusting entry be required as the result of a bank reconciliation?

Accepted Answer

NSF checks.

Question 28

Which of the following will not require an adjusting entry?

Accepted Answer

Deposits in transit.

Question 29

Which is the adjusting entry Max Company would prepare when the bank collects a $200 note receivable from one of Max\'s customers?

Accepted Answer

Cash 200    Accounts Receivable 200

Question 30

Which of the following is the correct adjusting entry for the account holder when the bank submits a debit memorandum for a monthly service charge of $30?

Accepted Answer

Miscellaneous Expense 30    Cash 30

Question 31

Which one of the statements below is true?

Accepted Answer

The deposits in transit are added to the balance per the bank statement, and outstanding checks are deducted from the balance per the bank statement during the bank reconciliation process.

Question 32

As used in a bank reconciliation, how are deposits in transit handled?

Accepted Answer

Added to the bank balance.

Question 33

Why should a bank reconciliation be prepared?

Accepted Answer

To explain any difference between the depositor\'s balance per books and the balance per bank.

Question 34

A company\'s monthly bank statement shows a collection of a note receivable by the bank in the amount of $500. Which of the following is one part of the journal entry needed to record the note collection by the company?

Accepted Answer

Credit to Accounts Receivable for $500.

Question 35

If cash is restricted as to its use, and is expected to be used within the next year, how is it reported?

Accepted Answer

Reported as a current asset separate from Cash and Cash Equivalents on the balance sheet.

Question 36

A company has the following items at year end: cash on hand, $1,000; cash in a checking account, $3,000; cash in a savings account, $5,000; postage stamps, $50; and Treasury bills, $10,000 that mature in less than 90 days. How much should the company report as cash and cash equivalents on its balance sheet?

Accepted Answer

$19,000  (Cash equivalents are highly liquid investments that are readily convertible to known amounts of cash, and are so near their maturities that their market value is relative insensitive to changes in interest rates. $1,000 + $3,000 + $5,000 + $10,000 = $19,000)

Question 37

On which financial statement(s) will cash be reported?

Accepted Answer

Balance sheet and the statement of cash flows.

Question 38

Which of the following items in a cash drawer at November 30 is not reported as cash on the November 30 balance sheet?

Accepted Answer

A customer check dated December 1.

Question 39

Which statement correctly describes the reporting of cash?

Accepted Answer

Cash is listed first in the current assets section of the balance sheet.

Question 40

Which of the following would not be an example of good cash management?

Accepted Answer

Investing temporary excess cash into the stock of a small company.

Question 41

Which of the following is not a basic principle of cash management?

Accepted Answer

Grant customers as much time as they want to pay their receivables.

Question 42

Which of the following is not a basic principle of cash management?

Accepted Answer

Keep inventory levels high.

Question 43

With respect to cash management, most companies try to

Accepted Answer

Invest idle cash, even if only overnight.

Ch.7 Wiley Plus MC – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards