Test #2
Harris Company had checks outstanding totaling $15,400 on its May bank reconciliation. In June, Harris Company issued checks totaling $64,900. The June bank statement shows that $47,600 in checks cleared the bank in June. A check from one of Harris Company's customers in the amount of $300 was also returned marked "NSF." The amount of outstanding checks on Harris Company's June bank reconciliation should be
$32,700
Jamison Company developed the following reconciling information in preparing its June bank reconciliation: Cash balance per bank, 6/30 $13,000 Note receivable collected by bank 4,000 Outstanding checks 7,000 Deposits-in-transit 2,500 Bank service charge 35 NSF check 1,900 Using the above information, determine the cash balance per books (before adjustments) for the Jamison Company.
$6,435
Deposit in transit
-bank statement adjustment -Added to the bank statement balance
Outstanding checks
-bank statement adjustment -Subtracted from the bank statement balance
EFT
-can process certain cash transactions at less cost than by using the mail -Added to the company's books
NSF check
-company books adjustment -Subtracted from the company's books
During 2010, Tempo Inc has monthly cash expenses of $115,000. On December 31, 2010, their cash balance is $1,437,500. The ratio of cash to monthly cash expenses is
12.5
After a bank reconciliation is completed, adjusting entries are prepared for items in the balance per company's records as well as items in the balance per bank statement.
False
For efficiency of operations and better control over cash, a company should maintain only one bank account.
False
If an adjustment for an NSF check is made in a company's bank reconciliation, then the company must have written a bad check during the month.
False
In preparing a bank reconciliation, the amount of outstanding checks is added to the balance per bank statement.
False
Separating the responsibilities for purchasing, receiving, and paying for equipment is an example of the control procedure: separating operations, custody of assets, and accounting.
False
The bank often informs the company of bank service charges by including a credit memo with the monthly bank statement.
False
Bank service charge
Subtracted from the company's books
A check for $342 was erroneously charged by the bank as $432. In order for the bank reconciliation to balance, you must add $90 to the bank statement balance.
True
A voucher is a form on which is recorded pertinent data about a liability and the particulars of its payment.
True
A voucher is a written authorization to make a cash payment.
True
For strong internal control system over cash, it is important to have the duties related to cash receipts and cash payments divided among different employees.
True
In preparing a bank reconciliation, the amount of an error indicating the recording of a check in the journal for an amount larger than the amount of the check is added to the balance per company's records.
True
Money market accounts, commercial paper, and United States Treasury Notes are examples of cash equivalents.
True
The Sarbanes-Oxley Act of 2002 was passed by Congress due to the public outcry after the financial scandals of the early 2000s.
True
The Sarbanes-Oxley Act requires that financial statements of all public companies report on management's conclusions about the effectiveness of the company's internal control procedures.
True
The amount of the "adjusted balance" appearing on the bank reconciliation as of a given date is the amount that is shown on the balance sheet for that date.
True
The control environment in an internal control structure is the attitude and awareness of internal control by all employees.
True
The doomsday ratio includes both cash and cash equivalents in the numerator.
True
The main reason that the bank statement cash balance and the company's cash balance do not initially balance is due to timing differences.
True
Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the item is
a deduction from the balance per company's records
A debit or credit memo describing entries in the company's bank account may be enclosed with the bank statement. An example of a credit memo is
a promissory note left for collection
Following the completion of the bank reconciliation, an adjusting entry was made that debited cash and credited Interest Revenue. Therefore the bank reconciliation must have included an item that was
added to the balance per company's records
Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the company. This item is a(n)
addition to the balance per company's records
A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. This item would be included on the bank reconciliation as a(n)
addition to the balance per the company's records
The amount of cash to be reported on the balance sheet at June 30 is the
adjusted balance appearing in the bank reconciliation for June 30
Bank charges
company books adjustment
Error in recording a check
company books adjustment
Interest revenue
company books adjustment
Note collected by the bank
company books adjustment
A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695. What entry is required in the company's accounts?
debit Accounts Payable; credit Cash
A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. What entry is required in the company's accounts?
debit Cash; credit Accounts Payable
Receipts from cash sales of $3,200 were recorded incorrectly in the cash receipts journal as $2,300. What entry is required in the company's accounts?
debit Cash; credit Sales
A $150 petty cash fund has cash of $44 and receipts of $93. The journal entry to replenish the account would include a
debit to Cash Over and Short for $13.
Businesses who have several bank accounts, petty cash, and cash on hand, would maintain a separate ledger account for each type of cash.
deduction from the balance per bank statement
The amount of the outstanding checks is included on the bank reconciliation as a(n)
deduction from the balance per bank statement
A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695. This item would be included in the bank reconciliation as a(n)
deduction from the balance per the company's records
A voucher
is normally prepared in the Accounting Department
The bank reconciliation
is part of the internal control system
When a firm uses internal auditors, it is adhering to which one of the following internal control elements?
monitoring
A firm's internal control environment is not influenced by
monitoring policies
Procedures designed to protect cash from theft and misuse from the time it is received until it can be deposited in a bank are called
preventive controls
A person authorized to write checks drawn on a checking account at a bank must sign and have on file with the bank a
signature card
A bank reconciliation should be prepared
to explain any difference between the company's balance per books with the balance per bank.
Cash equivalents
will be converted to cash within 90 days
A petty cash fund is used to pay relatively large amounts.
False
Charges for some other company's safe deposit box were posted to your account
Added to the bank statement balance
A $1,000 note from one of your customers was collected by the bank
Added to the company's books
Interest revenue earned by the note above
Added to the company's books
Accompanying the bank statement was a debit memo for bank service charges. What entry is required in the company's accounts?
Collection of a note receivable
Which one of the following would not cause a bank to debit a company's account?
Collection of a note receivable
Which of the following would be added to the balance per books on a bank reconciliation?
Notes collected by the bank
During a bank reconciliation process,
Outstanding checks are subtracted and deposits in transit are added to the bank statement balance.
