Final chapter 8, 9, and 11

As interest is recorded on an interest-bearing note, the Interest Expense account is

increased; the Interest Payable account is increased.

Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them

increases the potential for errors and fraud.

Which one of the following is not a primary problem associated with accounts receivable?

Depreciating accounts receivable

check

A written order for a bank to pay money

NSF check

A check dishonored by the bank because of insufficient funds in the account of the maker of the check.

fraud

A dishonest act by an employee that results in personal benefit to the employee at a cost to the employer.

Accounts Receivable Turnover

A measure of the liquidity of accounts receivable, computed by dividing net credit sales by average net accounts receivable.

bank statement

A monthly statement from the bank that shows the depositor's bank transactions and balances.

voucher

An authorization form prepared for each expenditure in a voucher system

From an internal control standpoint, the asset most susceptible to improper diversion and use is

Cash

A $100 petty cash fund has cash of $9 and receipts of $85. The journal entry to replenish the account would include a credit to

Cash for $91

Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry:

Debit Accounts Receivable; Credit Cash

Watauga County Bank agrees to lend Hoffman Granite Company $600,000 on January 1, 2017. Hoffman Granite Company signs a $600,000, 8%, 9-month note. What is the adjusting entry required if Hoffman Granite Company prepares financial statements on June 30, 2017?

Debit Interest Expense; Credit Interest Payable

On October 1, 2016, Pennington Company issued an $800,000, 10%, 9-month interest-bearing note. Assuming interest was accrued on June 30, 2017, the entry to record the payment of the note on July 1, 2017, will include a:

Debit to Interest Payable of $60,000.

Net pay is equal to

Gross pay minus payroll deductions.

A 30-day note dated June 13 has a maturity date of

July 13

Which of the following is usually not an accrued liability?

Notes payable

Sarbanes-Oxley Act

Regulations passed by Congress to try to reduce unethical corporate behavior.

cash

Resources that consist of coins, currency, checks, money orders, and money on hand or on deposit in a bank or similar depository.

A tax levied on employers to raise funds to pay unemployment benefits is

SUTA (state unemployment tax)

cash equivalents

Short-term, highly liquid investments that can be readily converted to a specific amount of cash and which are relatively insensitive to interest rate changes.

petty cash fund

a cash fund used to pay relatively small amounts

electronic funds transfer

a disbursement system that uses wire, telephone, or computer to transfer cash from one location to another

bank service charge

a fee the bank charges for maintaining bank records and processing bank statement items for the depositor

voucher system

a network of approvals by authorized individuals, acting independently, to ensure that all disbursements by check are proper

Internal Control

a process designed to provide reasonable assurance regarding the achievement of company objectives related to operations, reporting, and compliance

A note payable is in the form of

a written promissory note

account receivable

amount owed by a customer to a company that sells on credit

Trade accounts receivable are valued and reported on the balance sheet

at net realizable value.

restricted cash

cash that must be used for a special purpose

outstanding checks

checks issued and recorded by a company that has not been paid by the bank

internal auditors

company employees who continuously evaluate the effectiveness of the company's internal control systems

deposits in transit

deposits recorded by the depositor that have not been recorded by the bank

Allowing only the treasurer to sign checks is an example of

establishment of responsibility.

Internal controls are not designed to safeguard assets from

natural disasters.

The receivable that is usually evidenced by a formal instrument of credit is a(n)

note receivable.

Bonding

obtaining insurance protection against theft by employees

Most companies pay current liabilites

out of current assets.

A petty cash fund is generally established in order to

pay relatively small expenditures.

aging the account receivable

the analysis of customer balances by the length of time they have been unpaid

bank reconciliation

the process of comparing the bank's balance of an account with the company's balance and explaining any differences to make them agree

Fraud Traingle

the three factors that contribute to fraudulent activity by employees