MGMT Chap4

Financing cash flows would include which of the following? a. Payment of salaries to employees. b. Sale of services to customers for cash. c. Repayment of long-term borrowing to the bank. d. Purchase of equipment for cash for company operations.

c

Cash equivalents refer to: a) Short term investments that have a maturity date no longer than three months form the date of purchase b) Amounts receivable from customers that have a very high probability of collection c) Short-term investments that have increased in value since the date of purchase, and therefore have generated additional cash for the company d) The total of amount of cash a company would have if all assets were sold.

a

One benefit of internal controls is a greater reliance by investors on reported financial statements. a. True b. False

a

Operating cash flows would include which of the following? a. Payment for prepaid insurance. b. Receipt of cash from selling a building. c. Payment of dividends to stockholders. d. Receipt of cash from bank borrowing.

a

The following information was taken from the bank reconciliation for Hanging Leaf Art Center at the end of the year: Bank balance: $10,000 Checks outstanding: $6,200 Note collected by the bank: $2,000 Service fee: $100 Deposits outstanding: $5,500 NSF check (bad check) returned for $200 What is the correct cash balance that should be reported in Hanging Leaf's balance sheet at the end of the year? a) $9, 300 b) $9,000 c) $11,000 d) $15,500

a

What is a direct purpose of internal controls? a. To improve the accuracy and reliability of accounting information. b. To help managers determine which projects are likely to be more profitable. c. To assist top executives in planning employment capacity. d. To minimize tax payments to the Internal Revenue Service (IRS).

a

What is the concept behind separation of duties in establishing internal control? a. Employee fraud is less likely to occur when access to assets and access to accounting records are separated. b. The company's financial accountant should not share information with the company's tax accountant. c. Duties of middle-level managers of the company should be clearly separated from those of top executives. d. The external auditors of the company should have no contact with managers while the audit is taking place.

a

Sarbanes-Oxley Act (SOX) was passed in response to: a. Increasing inflation. b. Corporate scandals involving unethical behavior of top executives. c. Increasing pressure of foreign competition for American products and services. d. The establishment of the Securities and Exchange Commission (SEC).

b

The two types of controls are detect and correct. a. True b. False

b

What are the two types of fraud? a. Financial reporting and misapplication of cash. b. Financial reporting and misappropriation of assets c. Lying to the Internal Revenue Service (IRS) and misappropriation of assets d. Tax shelters and financial reporting.

b

Which of the following generally would be considered a good internal control over cash payments? a. Employees responsible for making cash disbursements should also be in charge of cash receipts. b. Ensure checks are serially numbered and signed only by authorized employees. c. The employee who authorizes payment should also be the employee who prepares the check. d. Require only one signature for larger checks.

b

How many of the following events would require an expense to be recorded? Ordering office supplies Hiring a receptionist Paying employees' salaries for the current month Receiving but not paying a current utility bill Paying for insurance in advance a) Three b) One c) Two d) Four

c

Managers should act: a. As creditors of the company. b. As owners of the company. c. As stewards of the company's assets. d. In their own best interest.

c

When preparing a bank reconciliation, nonsufficient funds (NSF) checks would be: a. Added to the company's cash balance. b. Added to the bank's cash balance. c. Subtracted from the company's cash balance. d. Subtracted from the bank's cash balance.

c

E. A. Poe Industries reports the following amounts: Cash Total Assets Total Liabilities $10,000 $50,000 $35,000 What is the ratio of cash to noncash assets? a. 67% b. 25% c. 20% d. 75%

c?

Fraudulent reporting by management could include: a. Fictitious revenues from a fake customer. b. Improper asset valuation. c. Mismatching revenues and expenses. d. All the above

d

When preparing a bank reconciliation, outstanding checks would be: a. Added to the company's cash balance. b. Added to the bank's cash balance. c. Subtracted from the company's cash balance. d. Subtracted from the bank's cash balance.

d

Which of the following is considered cash for financial reporting purposes? a. Inventory that is likely to be sold within three months. b. Amounts to be collected from customers. c. Amounts owed to suppliers. d. Balances in savings accounts.

d