CH 6

Cash management strategies include all of the following except _____.

maximize other assets

when reimbursing the petty cash

miscellaneous expenses merchandise inventory delivery expense office supplies expense cash

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 cash 200 The entry to record the setup of this petty cash fund includes a debit to the Petty Cash account and a credit to the Cash account for $200.

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.

A bank issues a debit memorandum to notify a depositor of:

a deduction to a depositor's account

Select the items below which must be adjusted to the book balance:

book error interest earned on checking account collections of accounts receivable by the bank NOT deposits in transit bank error outstanding checks

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 cash over and short 9 sales 1059 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).

Most large thefts in a company come from payments of:

fictitious invoices

to reimburse petty cash

miscellaneous expenses cash over and short cash

All of the following are examples of cash except:

short-term investments

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

an invoice approval initiates the recording of a purchase

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 interest revenue 150 The bank statement included interest earned. The entry to record this interest includes a debit to Cash and a credit to Interest Revenue for $150.

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:

25960 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 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. The investment in Microsoft common stock does not meet the criteria for a cash equivalent, which is a short-term, highly liquid investment asset that is readily convertible to a known cash amount and sufficiently close to its due date so that its market value is not sensitive to interest rate changes.

The listing of cash received via mail should be sent to each of the following individuals:

cashier recordkeeper mail clerk NOT customer treasurer

When establishing petty cash

petty cash cash

to increase petty cash fund amount

petty cash cash

1. employees justifying fraudulent behavior 2. internal control weaknesses in a business 3. financial, family, and societal stresses to succeed

1. rationalization 2. opportunity 3. pressure

Sarbanes-Oxley Act requires each of the following:

an effective internal control auditors must evaluate internal controls auditor's work is overseen by the Public Company Accounting Oversight Board (PCAOB) Violators receive harsh penalties-up to 25 years in prison with fines NOT light penalties for violators auditor's work overseen by Public Accounting Board

An internal control system is used to do all of the following:

protect assets ensure reliable accounting promote efficient operations uphold company policies NOT prevent all losses control the entire operation

1. The work of one person acts as a check on another person to prevent fraud and errors 2. Responsibility for a task should be clearly established and assigned to one person 3. Use of cash registers, time clocks, and personal identification scanners to improve internal control 4. Use of detailed records to help reduce the loss of assets

1. divide responsibilities 2. establish responsibilities 3. apply technological controls 4. maintain adequate records

1. used by bank employees to verify signatures on checks 2. lists items such as currency and checks along with their dollar amounts 3. a transfer of cash from one party to another that does not involve a paper document 4. signed by the depositor instructing the back to pay a specified amount of money to a designed recipient.

1. signature card 2. deposit ticket 3. electronic funds transfer 4. check

The records of Mary's Shoes included the following information: Accounts Receivable, 1/1/19: $75,000 Accounts Receivable, 12/31/19: 125,000 Net Sales: 850,000 Cost of Goods Sold: 400,000 The company's days' sales uncollected is closest to:

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

Days' sales uncollected is computed by:

dividing accounts receivable by net credit sales and multiplying by 365.

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

less extensive testing or records

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.

postage expense 140 printing expense 54 cash over and short 1 cash 193 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 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. Note that the Petty Cash account is only used when a petty cash fund is first established or when the amount of the fund is increased or decreased.