Chapter 5

In the month of November Sunland Company wrote checks in the amount of $53300. In December, checks in the amount of $72910 were written. In November, $48776 of these checks were presented to the bank for payment, and $62686 in December. What is the amount of outstanding checks at the end of December? a. $10224. b. $4524. c. $14748. d. $20448.

$14748

For which item below might a bank issue a credit memorandum to a depositor's account? a. An NSF check b. Interest earned c. Monthly service charges d. Outstanding checks

Interest earned

For which of the following might a bank issue a debit memorandum to a depositor's account? a. Interest earned b. Collection of a note receivable c. Deposits in transit d. Monthly service charges

Monthly service charges

Under which of the following do computer programs that limit unauthorized access to certain files fall? a. Human resource controls b. Independent internal verification c. Documentation procedures d. Physical controls

Physical controls

Which one of the following is not a control procedure used for over-the-counter receipts? a. A cash register where the amount rung up is clearly visible to the customer is used. b. Pre-numbered checks are used to buy supplies. c. Customers are provided with an itemized receipt. d. A cash register's tape is locked in the register and only a supervisor can access it.

Pre-numbered checks are used to buy supplies.

Which one of the following is not a primary component of an internal control system? a. Risk assessment b. Information and communication c. Monitoring d. Rationalization

Rationalization

If a check correctly written and paid by the bank for $526 is incorrectly recorded on the company's books for $562, the appropriate treatment on the bank reconciliation would be to a. deduct $36 from the bank's balance. b. subtract $36 from the book's balance. c. deduct $526 from the book's balance. d. add $36 to the book's balance.

add $36 to the book's balance.

Pharoah Company gathered the following reconciling information in preparing its August bank reconciliation: Cash balance per books, 8/31 $34700 Deposits in transit 1500 Notes receivable and interest collected by bank 8400 Bank charge for check printing 200 Outstanding checks 19800 NSF check 1690 The adjusted cash balance per books on August 31 is

$41210

For which of the following errors should the appropriate amount be subtracted from the balance per bank on a bank reconciliation? a. A returned $1000 check recorded by the bank as $100. b. Deposit of $700 recorded by the bank as $70. c. Check for $75 recorded by the company as $57. d. Check for $83 recorded by the company as $38.

A returned $1000 check recorded by the bank as $100.

How are deposits in transit treated in a bank reconciliation? a. Deducted from the book balance b. Added to the book balance c. Added to the bank balance d. Deducted from the bank balance

Added to the bank balance

For which of the following errors should the appropriate amount be subtracted from the balance per books on a bank reconciliation? a. Deposit of $900 recorded by the bank as $90. b. Check written for $73, but recorded by the company as $37. c. A returned $300 check recorded by the bank as $30. d. Check written for $56, but recorded by the company as $65.

Check written for $73, but recorded by the company as $37.

For which of the following errors should the appropriate amount be added to the balance per bank on a bank reconciliation? a. Check for $95 recorded by the company as $59. b. Check for $83 recorded by the company as $38. c. A returned $300 check recorded by the bank as $30. d. Deposit of $200 recorded by the bank as $20.

Deposit of $200 recorded by the bank as $20.

Handly Inc. permits only designated personnel such as cashiers to handle cash receipts. What principle is being applied? a. Segregation of duties b. Establishment of responsibility c. Independent internal verification d. Rotation of employees

Establishment of responsibility

Which one of the following is not a physical control? a. Safes and vaults to store cash b. Independent bank reconciliations c. Locked warehouses for inventories d. Bank safety deposit boxes for important papers

Independent bank reconciliations

Aptara Construction Supplies has a cashier who is also the accounts receivable clerk for the company. Which internal control principle is violated? a. Rotating employee duties b. Establishment of responsibility c. Segregation of duties d. Documentation procedures

Segregation of duties

Which one of the statements below is true? a. Both deposits in transit and outstanding checks are deducted from the balance per the bank statement during the bank reconciliation process. b. Both deposits in transit and outstanding checks are added to the balance per the bank statement during the bank reconciliation process. c. Deposits in transit are deducted from the balance per the bank statement, and outstanding checks are added to the balance per the bank statement during the bank reconciliation process. d. 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.

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.

Which of the following statements is correct? a. Control is most effective when two or three people are given responsibility for the same task. b. The person who has custody of assets should not perform the record keeping for the assets. c. The person who has custody of assets should also perform the record keeping for the assets. d. It is often a waste of company resources to have an employee perform independent internal verification.

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

Windsor, Inc. assembled the following information in completing its March bank reconciliation: Balance per bank $16400 Outstanding checks $3325 Deposits in transit $5400 NSF check $340 Bank service charge $110 Cash balance per books $18920 As a result of this reconciliation, Windsor will

reduce its cash account by $450.

Reasonable assurance rests on the premise that a. the costs of establishing controls should not exceed their expected benefit. b. bonding will prevent employees from stealing. c. employees are basically honest people. d. a system of internal controls will prevent errors.

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

If employees are bonded

they have been insured against misappropriation of assets.