ACC 200 exam 2

which of the assets listed below is considered to be the most liquid?

Cash

If a company erroneously records a $500 deposit as $50 in its records, which of the following must occur when reconciling its bank statement?

The company must increase the balance per its records by $450.

outstanding checks

a bank reconciling item that must be subtracted from the unadjusted bank balance when preparing a bank reconciliation

Nonsufficient Funds (NSF) Check

a bank reconciling item that must be subtracted from the unadjusted book balance when preparing a bank reconciliation

Petty cash

a fund used to pay for small amounts to avoid the time and expense of paying by check

cash equivalents

amounts on deposit with financial institutions and investments primarily held in money market accounts, with original maturities of less than 90 days

Cost

any expenditure necessary to acquire an asset and to prepare it for use

Book value

cost - accumulated depreciation

Cash collected and recorded by a company but not yet reflected in a bank statement are known as

deposits in transit

service charges

fees charged by the bank for checking account services

The control activity "segregation of duties" is most effective in

preventing collusion

Residual value (salvage value)

the amount of cash or trade in consideration that is expected when an asset is retired from service

Operating cycle

the elapsed time between the purchase of goods for resale and the collection of cash from customers

Cash over and short

an account used to record any discrepancies between the cash account records and the actual amount of cash received

Deposit in transit

an amount received and recorded by the business, but not yet recorded by the bank

Equipment with a residual value of $50,000 at the end of 10 years was acquired at the beginning of 2019 for $500,000. Assuming the use of the straight-line depreciation method, the journal entry to record depreciation expense for 2021 will have a debit to

Depreciation Expense and a credit to Accumulated Depreciation for $45,000.

Depreciation

the process of allocating the cost of a tangible fixed asset to expense over the assets useful life

bank reconciliation

the process of ensuring that the company's accounting records are consistent with with the banks accounting records