Accounting 301- COV Ch 6

All of the following statements regarding the documents in a voucher system are correct except: A well-designed voucher system will eliminate all fraud and error. Department managers should not be allowed to place orders directly with suppliers. Voucher systems are commonly used in large companies as part of the system of internal control. When the accounting department receives a purchase requisition, it creates a voucher.

A well-designed voucher system will eliminate all fraud and error.

An internal control system is used to do all of the following: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) Protect assests Prevent all losses Ensure reliable accounting Control the entire operation

Correct Answers: Protect assets Ensure reliable accounting

Sarbanes-Oxley Act requires each of the following: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) An effective internal control Light penalties for violators Auditors must evaluate internal controls Auditor's work overseen by Public Accounting Board

Correct Answers: An effective internal control Auditors must evaluate internal controls

Select the items below which must be adjusted to the book balance: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) deposits in transit book error bank error outstanding checks interest earned on checking account collections of accounts receivable by the bank

Correct answers: Bank error interest earned on checking account collections of accounts receivable by the bank

The listing of cash received via mail should be sent to each of the following individuals: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) Cashier Customer Recordkeeper Mail clerk treasurer

Correct answers: Cashier Recordkeeper Mail clerk

Which of the following is a correct statement regarding control of over-the-counter cash receipts:

The supervisor should compare the register transactions with the cash receipts report to make sure that both are correct.

All of the following are true concerning an invoice except: When a shipment arrives, the receiving department counts the items received against the purchase order. The vendor ships items ordered after it receives a purchase requisition. The invoice is sent to the buyer's accounting department where it is placed in the voucher. When all copies are in the voucher, the accounting department can record the purchase and approve its payment.

The vendor ships items ordered after it receives a purchase requisition.

Cash management strategies include all of the following except _____.

maximize other assets

The following information is available for the Maribel Company for the month of June: The unadjusted balance of the company's Cash account was $26,620 at the end of June. The bank statement shows a balance on June 30 of $26,960. Outstanding checks totaled $4,000 at June 30. Deposit in transit totaled $3,000 on June 30. The bank statement included unrecorded interest earned in the amount of $150. Check #1221 (in payment of account payable) was written for $4,900, but recorded in the accounting records as $4,090. The adjusted bank and book balance is:

$25,960 Explanation: The unadjusted book balance was $26,620. To this, we will add the $150 interest earned and subtract the $810 book error in check #1221 ($4,900 − $4,090) to determine the ending balance of $25,960. The unadjusted bank balance was $26,960. Add the deposits in transit of $3,000 and subtract the outstanding checks of $4,000 to determine the ending balance of $25,960.

Meredith Company's records reflected the following as of September 30: Currency and coins $ 12,500 Customer checks on hand (not yet deposited) 37,000 Investment in 3-month U.S. Treasury bills 10,000 Investment in Microsoft common stock 15,000 The company's balance sheet on September 30, reflects cash and cash equivalents of _____.

$59,500 Explanation: Currency and coins on hand of $12,500 + Customer checks on hand (not yet deposited) of $37,000 + Investment in 3-month U.S. Treasury bills of $10,000 = Total cash and cash equivalents of $59,500.

Match the term and the definition. 1. Subtract outstanding checks from the bank balance. 2. Compute the adjusted bank balance. 3. Enter the bank statement balance from the bank statement. 4. Add any unrecorded deposits to the bank balance. 5. Compute the adjusted book balance. 6. Add any unrecorded interest earned to the book balance. 7. Enter the company's book balance from its accounting records. 8. Subtract bank fees from the book balance.

1. Step 3 2. Step 4 3. Step 1 4. Step 2 5. Step 8 6. Step 6 7. Step 5 8. Step 7

The records of Mary's Shoes included the following information: Accounts Receivable, 1/1 $ 75,000 Accounts Receivable, 12/31 125,000 Net Sales 850,000 Cost of Goods Sold 400,000 The company's days' sales uncollected is closest to:

53.7 days Explanation: Days' sales uncollected = Ending Accounts Receivable of $125,000 / Net Sales of $850,000 × 365 = 53.7 days.

At the end of business on September 1, the total displayed on the cash register tape shows $1,059 of cash sales for the day. However, when the clerk and the supervisor count the cash in the register, the count reveals that $1,050 was actually collected from customers. Complete the following journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Cash 1050 (debit) Cash over and short 9 (debit) Sales 1059 (credit) Explanation: The Cash account is debited for $1,050, the amount collected. The Sales account is credited for $1,059, the actual amount of the sales for the day, and the Cash Over and Short account is debited for $9, which is the shortage (or difference between the two amounts).

The company's bank reconciliation at June 30 included interest earned in the amount of $150. Complete the necessary journal entry by selecting the account names and dollar amounts from the drop-down menus.

Cash 150 (debit) interest revenue 150 (credit)

Select the appropriate term for its respective definition. The work of one person acts as a check on another person to prevent fraud and errors. Responsibility for a task should be clearly established and assigned to one person. Use of cash registers, time clocks and personal identification scanners to improve internal control. Use of detailed records to help prevent loss of assets.

Divide responsibilities Establish responsibilities Apply technological controls Maintain adequate records

Employees justifying fraudulent behavior. Employee has a low risk of getting caught committing fraud. A person feels pressure to commit fraud.

Rationalization Opportunity Pressure

Technology helps managers to monitor and control business activities and includes each of the following except:

Less extensive testing of records

On February 1, Derrick Company establishes a $200 petty cash fund. Complete the necessary journal entry by selecting the account names and dollar amounts from the drop-down menus.

Petty cash 200 (debit) Cash 200 (credit)

Recall on February 1, Derrick Company established a $200 petty cash fund. On February 15, when the fund balance reached $7, the petty cash custodian prepared a petty cash report that summarized receipts for postage ($140) and printing ($54). Complete the necessary journal entry by selecting the account names and dollar amounts from the drop-down menus.

Printing expense 54 (debit) Postage expense 140 (debit) cash over and short 1 (credit) cash 193 (credit) Explanation: The receipts, which totaled $194 (or $140 + $54), and the amount of cash on hand of $7 exceed the fund balance by $1 (or $194 + 7 = $201). As such, the petty cash fund is over by $1. The entry to record the reimbursement of this petty cash fund on February 15 includes a debit to Postage Expense for $140, a debit to Printing Expense for $54, a credit to the Cash Over and Short account for $1, which is the amount of the overage, and a credit to the Cash account for $193, which is the amount of the check that will be cashed to replenish the fund.

Select the appropriate term for its respective definition. Used by bank employees to verify signatures on checks. Lists items such as currency and checks along with their dollar amounts. A transfer of cash from one party to another that does not involve a paper document. Signed by the depositor instructing the bank to pay a specified amount of money to a designated recipient.

Signature card Deposit ticket Electronic funds transfer Check

All of the following statements regarding a voucher system are incorrect except _____.

an invoice approval initiates the recording of a purchase

Days' sales uncollected is computed by:

dividing accounts receivable by net sales and multiplying by 365

A completed voucher is sent to an authorized person who does all of the following except: enters information on both the inside and outside of the voucher performs a final review approves the accounts and amounts authorizes recording of the voucher

enters information on both the inside and outside of the voucher

Most large thefts in a company come from payments of:

fake invoices

All of the following are deductions on a bank statement except:

interest earned on checking account

The internal document prepared by a department manager that informs the purchasing department of its needs that lists the merchandise needed and requests that it be purchased is the:

purchase requisition

All of the following are examples of controls of cash except:

the person handling the cash is the same person who records receipt of that cash