Chapter 8 ACCT

Which of the following is NOT an internal control activity for cash?

a. All cash payments should be made with cash.

The credit recorded in the journal to reimburse the petty cash fund is to

a. Cash.

If the same person orders supplies, verifies receipt of the supplies, and pays the supplier, which of the following is a possible negative result?

a. Supplies may be stolen by employees. b. The quantity and quality of supplies received may not be verified, thus causing the company to pay for supplies not received or for poor-quality supplies. c. Orders may be placed on the basis of friendship rather than on price, quality, and quantity of supplies.

Which of the following statements concerning the Internal Control—Integrated Framework is NOT true?

a. The framework was issued by the FASB.

The petty cash fund is

a. a special cash fund. b. used to pay small amounts that occur often. c. established by estimating payments needed.

The company section of the bank reconciliation

a. ends with the adjusted balance. b. deducts debit memos that have not been recorded. c. begins with the cash balance according to the company records.

Sometimes startup companies

a. report negative net cash flows from operations. b. report losses. c. use the ratio of cash to monthly cash expenses.

A check drawn by a depositor for $540 in payment of a liability was recorded in the journal as $190. What entry is required in the depositor's accounts?

b. Debit Accounts Payable, $350; credit Cash, $350

The petty cash fund should be replenished for the

b. amount needed to bring the petty cash fund back to its established amount.

A $98 petty cash fund contains $92 in petty cash receipts and $12 in currency and coins. The journal entry for the replenishment of the fund would include a

b. credit to Cash Short and Over for $6.

A $100 petty cash fund contains $94 in petty cash receipts and $14 in currency and coins. The journal entry for the replenishment of the fund would include a

b. credit to Cash Short and Over for $8.

Journal entries affect the petty cash account when

b. decreasing the established amount of the fund.

Internal control does NOT consist of policies and procedures that

b. guarantee the company will make a profit.

Monthly cash expenses are

b. referred to as cash burn.

Grace Company gathered the following reconciling information in preparing its July bank reconciliation: Cash balance per books, July 31 $4,800 ,Deposits in transit 155, Notes receivable and interest collected by bank 850, Bank service charge for check printing 20, Outstanding checks 2,050, NSF check 175 The adjusted cash balance per the books on July 31 is

c. $5,455.

Given the following information for the year ended December 31, what is the ratio of cash to monthly cash expenses? Negative cash flow from operations$(636)Cash and cash equivalents as of year-end530

c. 10.0

Given the following information for the year ended December 31, what is the ratio of cash to monthly cash expenses? Negative cash flow from operations$(696)Cash and cash equivalents as of year-end609

c. 10.5

Which of the following is NOT a result or characteristic of the Sarbanes-Oxley Act of 2002?

c. The elimination of fraud and theft

A bank reconciliation has

c. a bank section and a company section.

Cash equivalents by definition

c. are expected to be converted to cash within 3 months.

The control environment is influenced by all of the following primary factors EXCEPT

c. changes in the personnel that make up the internal audit team.

Sarbanes-Oxley does NOT require

c. companies to turn over responsibility for establishing and maintaining internal controls for financial reporting to auditors.

A $99 petty cash fund has cash of $20 and receipts of $86. The journal entry to replenish the account would include a

c. credit to Cash Short and Over for $7.

The bank section of the bank reconciliation

c. ends with the adjusted balance.

Cash is normally listed

c. first in the Current Assets section of the balance sheet.

A bank statement

c. provides a summary of all checking account transactions recorded by the bank.

Which of the following statements reflects a weak internal control system?

d. A single employee is responsible for receiving and counting cash.

Which of the following would NOT cause a bank to debit a depositor's account?

d. Interest earned by the account

Monthly cash expenses are computed as

d. Negative Cash Flow from Operations ÷ 12.

Which of the following is NOT an internal control activity for cash?

d. The functions of cash record keeping and cash custody should be combined.

Cash equivalents

d. are highly liquid investments that earn interest.

To enhance internal control in the bank reconciliation process, the bank reconciliation should be prepared

d. by an employee who does not take part in or record cash transactions.

The credit balance in Cash Short and Over at the end of an accounting period is reported as

d. income on the income statement.

All of the following statements are true with regard to the ratio of cash to monthly cash expenses EXCEPT

d. it is computed using cash at the beginning of the year.

A special-purpose fund may be used for

d. travel expenses.