chapter 8
Which of the following is added to the bank balance in a bank reconciliation?
deposit in transit
The journal entry to set up a Petty Cash Fund for $500 to pay incoming delivery expenses would be:
Petty Cash 500 Cash 500
Tango Company Cash account shows an ending balance of $1,500. The bank statement shows an ending balance of $790. Additional information includes: $150 Service charge $400 Deposit in transit $50 Outstanding checks What is the adjusted bank balance?
The adjusted bank balance takes the ending bank statement balance of $790 + deposits in transit of $400 - outstanding checks of $50 = $1,140. Service charge is part of the adjusted book balance.
Which of the following is NOT a component of internal control? audits information systems environment monitoring of controls
audits
The controller compares the bank deposit to the journal entry for cash receipts to ensure that the bank deposit matches the accounting records for the _________ account.
cash The controller compares the bank deposit to the journal entry for cash receipts to ensure that the bank deposit matches the accounting records for the Cash account.
After approving all documents from a shipment received, the purchaser sends a(n) ________ to the vendor. purchase order invoice check receipt
check
The Sarbanes-Oxley Act requires companies to ________.
conduct a review of internal controls and take responsibility for the accuracy and completeness of their financials reports
The ________ compares the bank deposit to the journal entry for cash receipts to ensure that the bank deposit matches the accounting records for the Cash account.
controller
Which of the following would be added to the book balance in a bank reconciliation?
interest revenue
Abbott Company completed the bank reconciliation and needs to record the $30 service charge from the bank. The journal entry to record this transaction would be:
not interest expense debit Bank Expense 30 Cash 30 To record the $30 service charge from the bank, you need to debit Bank Expense and credit Cash
For each Petty Cash payment, the custodian of the account prepares a(n) ________. invoice purchase order receipt petty cash ticket
petty cash Tickets these tickets serve as authorization and explanation
When an order is placed for merchandise, the purchaser sends a(n) ________ to the vendor.
purchase order
The ________ uses the remittance advices to record the journal entries to Cash and customer accounts.
the accounting department or bookeeper
Down Company Manufacturing has the following select financial data as of December 31. Cash $20,000 Cash Equivalents 4,000 Accounts Receivable 3,000 Total Current Liabilities 30,000 What is the cash ratio?
0.80 The cash ratio is calculated by (Cash + Cash Equivalents) / Total Current Assets. Accounts Receivable is not included in this calculation. The cash ratio is (20,000 + 4,000) / 30,000 = 0.80.
Shady Mills Company Cash account shows an ending balance of $1,200. The bank statement shows an ending balance of $770. Additional information includes: $30 Service charge $300 Deposit in transit1 $50 Outstanding checks What is the adjusted bank balance?
770 plus 300 minus 50 equals 1020
Shady Mills Company Cash account shows an ending balance of $1,000. The bank statement shows an ending balance of $680. Additional information includes: $30 Service charge $300 Deposit in transit $10 Interest earned on bank balance What is the adjusted book balance?
980 The adjusted book balance takes the ending Cash balance of $1,000 + Interest Receivable of $10 - Service Charge of $30 = $980. Deposit in transit is part of the adjusted bank balance.
Which of the following is subtracted from the book balance in a bank reconciliation?
Bank service charges are subtracted from the book balance for a bank reconciliation.
Which of the following is subtracted from the book balance in a bank reconciliation?
Banks service charges
Abbott Company completed the bank reconciliation and needs to record the $10 earned in interest from the bank balance. The journal entry to record this transaction would be:
Cash 10 Interest Revenue 10
Advanced Learning uses the net method for handling sales transactions with credit cards. Advanced Learning sells merchandise inventory (ignore Cost of Goods Sold) to a customer for $4,000 on August 1. The customer pays with a third-party credit card. Advanced Learning would record the entry, assuming the card processor assesses a 3% fee and deposits the net amount, as which of the following:
Cash 3,880 Credit Card Expense 120 Sales Revenue 4,000
The following was paid out of the Petty Cash account: $200 for Office Supplies $100 for Delivery Expense $300 is needed to replenish the Petty Cash back to the original balance. The journal entry to record the replenishing of Petty Cash would be:
Office Supplies 200 Delivery Expense 100 Cash 300 The amount to replenish Petty Cash is the same as the total of the two items paid out of Petty Cash so there is no Cash Short and Over. Therefore, you debit the Office Supplies and Delivery Expense, and credit Cash. Note: To replenish the petty cash fund for the $300 spent, the $300 must be withdrawn from the company's Cash account and put into the Petty Cash account. The Petty Cash account is unchanged and maintains a constant balance.
The following was paid out of the Petty Cash account: $200 for Office Supplies $100 for Delivery Expense After counting the cash that is left in Petty Cash, $320 is needed to replenish the Petty Cash back to the original balance. The journal entry to record the replenishing of Petty Cash would be:
Office Supplies200 Delivery Expense100 Cash Short & Over20 Cash 320
To increase the amount in the current Petty Cash fund from $1,000 to $1,200, the journal entry would be:
Petty Cash 200 Cash 200 C The current balance in Petty Cash is $1,000. To increase it to $1,200 you need to debit Petty Cash for the additional $200 and credit Cash for $200.
Which of the following is NOT a part of the definition of internal control?
encourage employees to change the company policies