Accounting 2001 Final Chapter 7
For which of the following will an adjusting entry be required as the result of a bank reconciliation? NSF checks Outstanding checks Deposits in transit Bank errors
a
Which of the following will not require an adjusting entry? Deposits in transit Bank service charges NSF checks Book errors
a
As used in a bank reconciliation, how are deposits in transit handled? Deducted from the book balance Added to the bank balance Deducted from the bank balance Added to the book balance
b
For which of the following might a bank issue a debit memorandum to a depositor's account? Deposits in transit Monthly service charges Interest earned Collection of a note receivable
b
Internal auditors cannot evaluate the system of internal controls of the company that employs them because they are not independent. evaluate the system of internal controls for the companies that employ them. are hired by CPA firms to audit business firms. are employees of the IRS who evaluate the internal controls of companies filing tax returns.
b
Of which of the following is obtaining insurance protection against dishonest employees an example? Establishing responsibility Bonding Segregation of duties Documentation procedures
b
Under which of the following do computer programs that limit unauthorized access to certain files fall? Independent internal verification Physical controls Documentation procedures Human resource controls
b
Which is the adjusting entry Max Company would prepare when the bank collects a $200 note receivable from one of Max's customers? Cash 200 Customer funds 200 Cash 200 Notes Receivable 200 Account Payable 200 Cash 200 Cash 200 Sales Revenues 200
b
Which of the following is not an element of the fraud triangle? Opportunity Segregation of duties Rationalization Financial pressure
b
Which of the following statements is correct? Control is most effective when two or three people are given responsibility for the same task. The person who has custody of assets should not perform the record keeping for the assets. It is often a waste of company resources to have an employee perform independent internal verification. The person who has custody of assets should also perform the record keeping for the assets.
b
Which one of the following is not a primary component of an internal control system? Monitoring Rationalization Risk assessment Information and communication
b
Which one of the following statements is correct? The public accountants conducting annual audits are responsible for continuous evaluations of a company's system of internal control. Internal auditors are company employees who evaluate the effectiveness of the company's system of internal control on a continuous basis. External auditors are company employees who evaluate the effectiveness of the company's system of internal control on a continuous basis. Only large companies employ internal auditors and utilize a system of internal controls.
b
Why should a bank reconciliation be prepared? To make sure employees have not committed fraud. To explain any difference between the depositor's balance per books and the balance per bank. To explain any difference between the bank deposits and the checks written. To make sure the actual cash balance is the same as the cash received from customers.
b
A company's monthly bank statement shows a collection of a note receivable by the bank in the amount of $500. Which of the following is one part of the journal entry needed to record the note collection by the company? Credit to Cash for $500 Credit to Note Expense for $500 Credit to Notes Receivable for $500 Debit to Notes Receivable for $500
c
Barker Company collected the following information to prepare its November bank reconciliation: Cash balance per bank, November 30 $21,000 Note receivable plus interest collected 9,000 Outstanding checks 6,000 Deposits in transit 5,400 Bank service charges 85 NSF check 2,100 How much is the cash balance per books prior to preparing the reconciliation? $27,815 $20,400 $13,585 $6,815
c
For which item below might a bank issue a credit memorandum to a depositor's account? Monthly service charges An NSF check Interest earned Outstanding checks
c
Jones Company collected the following information to prepare its May bank reconciliation: Cash balance per books, May 31 $5,300 Deposits in transit 510 Notes receivable with interest collected by bank 580 Bank service charges 30 Outstanding checks 180 NSF check 150 How much is the adjusted cash balance per books on May 31? $6,210 $5,660 $5,700 $5,810
c
Reasonable assurance rests on the premise that employees are basically honest people. bonding will prevent employees from stealing. the costs of establishing controls should not exceed their expected benefit. a system of internal controls will prevent errors.
c
Which of the following is not a principle of internal control? Bonding of employees Documentation procedures Collusion between employees Segregation of duties
c
Which of the following is the correct adjusting entry for the account holder when the bank submits a debit memorandum for a monthly service charge of $30? Cash 30 Account Revenues 30 Cash 30 Bank Service Fee 30 Miscellaneous Expense 30 Cash 30 Loss on Bank Transactions 30 Cash 30
c
Which of the following was not a result of the Sarbanes-Oxley Act? The Public Company Accounting Oversight Board was created to establish auditing standards and regulate auditor activity. Corporate executives and board of directors must ensure that controls are reliable and effective, and they can be fined or imprisoned for failure to do so. Companies must file financial statements with the Internal Revenue Service. All publicly traded companies must maintain adequate internal controls.
c
Which one of the following is not a physical control? Safes and vaults to store cash Bank safety deposit boxes for important papers Independent bank reconciliations Locked warehouses for inventories
c
Which one of the following is not one of the principles of internal control? Documentation procedures Establishment of responsibility Financial performance measures Independent internal verification
c
Which one of the statements below is true? Deposits in transit are deducted from the balance per the bank statement, and outstanding checks are added to the balance per the bank statement during the bank reconciliation process. Both deposits in transit and outstanding checks are added to the balance per the bank statement during the bank reconciliation process. The deposits in transit are added to the balance per the bank statement, and outstanding checks are deducted from the balance per the bank statement during the bank reconciliation process. Both deposits in transit and outstanding checks are deducted from the balance per the bank statement during the bank reconciliation process.
c
For what purpose are physical controls used in a business? To prevent fraud. To produce accurate financial statements. To deter employee dishonesty. To enhance the accuracy and reliability of its accounting records and to safeguard its assets.
d
Springer Company listed outstanding checks totaling $4,500 on its September bank reconciliation. In October, the company issued checks totaling $45,700. The October bank statement shows that checks totaling $39,800 cleared the bank. In addition, a check from one of Springer's customers in the amount of $500 was returned as NSF. The outstanding checks on the October bank reconciliation should total $1,400. $5,900. $9,900. $10,400.
d
Which of the following is a reason why an organization establishes a system for internal control? To safeguard its assets. To increase efficiency of operations. To ensure compliance with laws and regulations. All of these answer choices are correct.
d
Which one of the following control activities is relevant when a company uses a computerized (rather than manual) accounting system? Establishment of responsibility. Segregation of duties. Independent internal verification. All of these answer choices are correct.
d
Deposits in transit are added to the cash balance per books on the bank reconciliation. True False
f