FA Chapter 4 RAWR

Which of the assets listed below is considered the most liquid? a. Cash b. Accounts receivable c. Prepaid insurance d. Inventory

a. Cash

Which of the following procedures is not part of the preparation of a bank reconciliation for a checking account? a. Reversing all the transactions recorded on the company's records that do not yet appear on the bank statement. b. Looking for bank services charges and other items on the bank statement that have not yet been included in the cash account. c. Comparing deposits listed on the bank statement to the cash account to identify deposits in transit d. Comparing canceled checks returned with the bank statement to the cash account to identify outstanding checks

a. Reversing all the transactions recorded on the company's records that do not yet appear on the bank statement.

Which of the following is an example of a credit memo? a. notice of interest earned on a checking account b. notice of a bank service charge c. outstanding checks d. a company's transposition error in the recording of a customer's check

a. notice of interest earned on a checking account

A treasurer preparing the October bank reconciliation identified the following items: Cash balance per the company's records $32,800 Deposits in transit 4,300 Outstanding checks 2,200 Interest earned on the checking account 100 NSF check from customer 400 What is the company's adjusted cash balance at October 31? a. $34,900 b. $32,500 c. $34,600 d. $32,800

b. $32,500

Checks presented for payment and paid by the bank are known as a. outstanding checks. b. canceled checks. c. certified checks. d. NSF checks.

b. Canceled Checks

Which one of the following statements is true? a. The person handling cash should also prepare the bank reconciliation. b. Sound internal control practice dictates that disbursements should be made by check. c. Petty cash can be substituted for a checking account to expedite the payment of all disbursements. d. Good cash management practice dictates that large cash balances should be maintained.

b. Sound internal control practice dictates that disbursements should be made by check.

Which of the following items would be added to the company's cash balance on a bank reconciliation? a. deposits in transit b. interest earned on the bank account c. outstanding checks d. bank service charges

b. interest earned on the bank account

While preparing a bank reconciliation, which of the following items would be subtracted from the balance per the bank statement? a. bank service charges b. interest earned on the bank account c. outstanding checks d. deposits in transit

c. outstanding checks

Each of the following represents an effective cash management practice except a. short-term investments should be purchased with excess cash in order to maximize the interest-earning potential. b. payments should be delayed as long as possible (without compromising the relationship with the payee) in order to maximize the interest-earning potential. c. payments should be expedited in order to simplify record keeping. d. receivable collections should be expedited or receivables should be sold in order to minimize the costs associated with accounting for customer accounts and servicing delinquent accounts.

c. payments should be expedited in order to simplify record keeping.

Which of the following statements best describes the term "outstanding check" from a company's point of view? a. A check written by a customer to the company, and the check has been presented to the bank for payment. b. A check written by a customer to the company, but it has not yet been presented to the bank for payment. c. A check written by the company and presented to the bank for payment. d. A check written by the company but not yet presented to the bank for payment.

d. A check written by the company but not yet presented to the bank for payment.