Complete Test Bank Chapter 6 Banking And Budgeting

Chapter 6

Banking and Budgeting

True/False Questions
 

1. ATM's have completely replaced the need for tellers. 
True    False

2. The payee is the person to whom the check is payable. 
True    False

3. All checks are required to have a preprinted check number. 
True    False

4. A check stub is completed after the check is written so records will be up to date. 
True    False

5. Mobile banking is increasing today. 
True    False

6. Crediting an account by the bank means a decrease to that account. 
True    False

7. A blank endorsement is the safest type of endorsement. 
True    False

8. An endorsement may be in writing or by the use of a company stamp. 
True    False

9. A full endorsement is as safe as the restrictive endorsement. 
True    False

10. The use of smartphones in banking is decreasing.
True    False

11. Timing plays no role in differences between reconciling checkbook balances and bank balances. 
True    False

12. Outstanding checks have not reached the bank for processing by the time the bank statement has been prepared. 
True    False

13. Deposits in transit are the result of outstanding checks. 
True    False

14. Overdraft protection could be a positive factor if a deposit in transit occurs. 
True    False

15. All checking accounts earn interest. 
True    False

16. A reconciled balance is found on the front side of a bank statement. 
True    False

17. Online banking is always safe. 
True    False

18. NSF results in a bank crediting one's account. 
True    False

19. Electronic funds transfer does not use paper checks. 
True    False

20. Photocopies of the front and back of canceled checks are acceptable evidence of payment for courts as well as IRS audits. 
True    False

 21. A profit occurs when expenses exceed revenue.

 True    False

22. Budgets are used to plan monthly cash flow.

True    False

23. Because money can be spent for multiple purposes, it is said to have an opportunity cost.

True    False

Multiple Choice Questions
 

24. In the reconciliation process the unrecorded bank service charge is: 
A. Added to checkbook balance
B. Deducted from checkbook balance
C. Added to bank statement balance
D. Deducted from bank statement balance
E. None of these

25. The process of analyzing the differences between the bank statement balance and the checkbook balance is: 
A. Checks outstanding
B. Bank audit
C. Deposits in transit
D. Bank reconciliation
E. None of these

26. Outstanding checks: 
A. Have been paid by the bank
B. Are checks returned to the payor
C. Are bank checks
D. Have not been received by the bank for processing
E. None of these

27. An unrecorded credit memo for collection of a note should be: 
A. Ignored
B. Subtracted from checkbook balance
C. Added to checkbook balance
D. Added to bank balance
E. None of these

28. Online banking: 
A. Is never accepted by all banks
B.  Still holds checks for 10 days
C. Is usually safe
D. Is very unsafe
E. None of these

29. Electronic funds transfer: 
A. Uses paper checks
B. Uses some paper checks
C. Does not use paper checks
D. Is a manual transfer system
E. None of these

30. Which of the following results in crediting the checkbook balance? 
A. NSF
B. Service charge
C. Interest earned
D. Overdraft protection charge
E. None of these

31. Mia Wong's checking account had a balance of $3,100.55 on July 1. After looking at her bank statement, she noticed an NSF for $60.50, a service charge of $12.55, and a note collected for $600. There was one deposit in transit for $400 and no checks outstanding. What is the reconciled checkbook balance? 
A. $3,527
B. $5,327.50
C. $3,627.50
D. $3,267.50
E. None of these

32. Citizen Bank sent a bank statement to Bane Co. showing an ending balance of $1,480. On the bank statement there was a service charge of $20. The bookkeeper of Bane Co. noticed in the reconciliation process a deposit in transit of $200 along with checks outstanding of $300. Complete the reconciliation for Bane assuming a beginning balance of $1,400. 
A. $1,830.00
B. $1,138.00
C. $1,380.00
D. $1,803.00
E. None of these

33. The bank statement for Mat Co. revealed a balance of $900, and the checkbook balance showed $1,420. Checks outstanding totaled $35. A check printing charge for $5 was on the bank statement. There was a $50 NSF shown on the bank statement. There was a $500 deposit in transit. What is the reconciled balance? 
A. $1,045
B. $1,095
C. $1,040
D. $1,545
E. None of these

34. From the following the reconciled balance is:
   
A. $74,959.10
B. $47,959.10
C. $74,459.10
D. $74,359.10
E. None of these

35. Jim Lee received his bank statement from Bayne Bank indicating a balance of $7,980. Lee's checkbook showed a balance of $6,800. Jim noticed that checks outstanding were $1,330. The bank statement also revealed an NSF check for $120 and a service charge of $30. The reconciled balance is: 
A. $6,560
B. $6,530
C. $6,950
D. $6,650
E. None of these

36. The checkbook balance of Lester Co. was $922.55. The bank statement revealed a balance of $3,881.14. The bank statement showed interest earned of $77 and a service charge of $38.22, along with a deposit in transit of $9,555.88. Outstanding checks totaled $6,142.88. The bookkeeper in further analyzing the bank statement noticed a collection of a note by the bank for $6,815.00. Lester Co. forgot to deduct a check for $482.19 during the month. The reconciled balance is: 
A. $7,924.14
B. $7,429.18
C. $7,294.14
D. $7,429.14
E. None of these

37. The beginning checkbook balance of Shelley Co. was $5,559.10. The bank statement showed a bank balance of $7,888.44. The bookkeeper of Shelley Co. noticed a $111.10 deposit in transit along with check numbers 90 and 97 for $499.88 and $1,256.45, respectively, as outstanding. The bank statement credited Shelley's account for $750.99 for a note collected. The bank statement revealed a check printing charge of $66.88. The reconciled balance is: 
A. $6,423.12
B. $6,243.21
C. $6,423.21
D. $4,623.21
E. None of these

38. The bank statement of Ali Co. indicated a current balance of $32,900.10. The current checkbook balance indicated a balance of $34,509.11. In the reconciliation process a deposit in transit for $6,821.11 was discovered. Check number 600 for $3,988.33 was outstanding. The statement also revealed an NSF of $110.11 along with interest earned by Ali of $1,333.88. The reconciled balance is: 
A. $35,237.88
B. $34,237.88
C. $35,723.88
D. $35,732.88
E. None of these

39. Jill Gracie's current checkbook balance is $8,900.15. She opened up the bank statement and saw the bank's balance at $7,000.10. After reviewing her records with the bank statement, she discovered a deposit on July 1 not recorded on the statement for $9,821.55. A check written for $7,986.05 had not been returned by the bank. This month the company earned interest of $33.10. The bank charged the company $48.10 for printing new checks. Jill also discovered that a check written for $49.55 was not recorded in the check stubs. The reconciled balance is: 
A. $8,835.60
B. $8,358.60
C. $8,735.60
D. $8,835.06
E. None of these

40. The bank statement of July 31 for Savon Co. showed a balance of $6,008.10, and the checkbook showed a balance of $1,900.40. The bookkeeper of Savon Co. noticed from the bank statement that the bank had collected a note for $666.66. There was a deposit in transit made on July 1 for $1,100.10 along with the outstanding checks of $4,580.54. Check charges were $39.40. The reconciled balance is: 
A. $5,227.66
B. $2,572.66
C. $2,527.66
D. $5,272.66
E. None of these

41. On December 31 the checkbook balance of Ray Co. was $5,420.95. The bank statement balance showed $5,102.88. Checks outstanding totaled $813.53. The statement did not show a deposit in transit of $1,102.95. Check charges were $15.88. The company earned interest income of $29.32 that was shown on the report. The bookkeeper forgot to record a check for $42.09. The reconciled balance is: 
A. $5,392.30
B. $5,923.03
C. $5,932.03
D. $5,392.03
E. None of these

42. Jane Co.’s checkbook currently has a balance of $295.10. The bank statement shows a balance of $205.10. The statement revealed interest income of $10.03 along with check charges of $2.95. Jane recorded a $200 check as $150. Deposits in transit were $402.80. Check numbers 85, 88, and 92 for $90.80, $108.10, and $156.82 were not returned with the statement. The reconciled balance is: 
A. $302.18
B. $242.18
C. $242.51
D. $252.18
E. None of these

43. The checkbook balance of Roger Co. is $982.50. The bank statement reveals a balance of $1,051.82. The bank statement showed interest earned of $3.82 and a service charge of $15, along with a deposit in transit of $210. Outstanding checks totaled $270.50. The bookkeeper in further analyzing the bank statement noticed a collection of a note by the bank for $200. Roger Co. forgot to deduct a check for $180 during the month. The reconciled balance is: 
A. $831.32
B. $991.32
C. $831.23
D. $991.23
E. None of these

44. Checks written that do not appear on your bank statement are:

A. Paid from the previous month

B. Not written correctly

C. Appear as a deposit

D. Credited to savings

E. None of the above

45. Which of the following are debited from a checking account?

A. ATM withdrawal

B. Returned check fee

C. Monthly service charge

D. Monthly electronic payment of utilities

E. All are debits

46. Sandi’s checking account had a balance of $4627.36; her bank statement’s balance was $10,275.46. A service fee of $37.00 also appeared on her statement. What was the total of all outstanding checks?

A. $10,238.48

B. 4,664.36

C. 5,611.11

D. 6,115.10

E. None of these

47. When you are reconciling a bank statement, it’s recommended that you do the following:

A. List your balance

B. List your bank statement’s balance

C. Record checks outstanding

D. Record deposits outstanding

E. All of these

48. Concord Pizza’s checkbook balance is $782.50. The bank statement has a balance of $2,314.22. Interest earned on the statement was $35.50; with checks outstanding of $504.13 and a monthly service charge of $25.00, the reconciled balance is:

A. $793

B. 1,027.59

C. 2,046.35

D. 2,071.35

E. None of these

49. To create a budget, all of the following are needed except:

1. Revenue
2. Fixed cash costs
3. Variable cash costs
4. Depreciation
5. Net cash flow

50. Which of the following is considered a fixed cash cost for a personal budget?

A. Mortgage

B. Groceries

C. Cable TV

D. Cell Phone

E. Clothing

Short Answer Questions
51. 1. Bank reconciliation
2. Bank statement
3. Blank endorsement
4. Net deposit
5. Check register
6. Credit memo
7. Debit memo
8. Deposits in transit
9. Deposit tickets
10. Electronic funds transfer
11. Endorsements
12. Full endorsements
13. Drawer
14. Nonsufficient funds
15. Outstanding checks
16. Payee
17. ATM
18. Restrictive endorsement
19. Safekeeping
A. Check must be deposited to payee's account
B. Total credit card sales minus credit accounts
C. Signing back of checks
D. Automatic teller machines
E. Checks not returned
F. Identifies to whom check is to be transferred
G. Bounced check
H. Comparing bank balance to checkbook balance
I. Record keeping device
J. Document that records deposit
K. One to receive amount of check
L. No restrictions
M. Added to bank balance
N. Bank adds to your account
O. Not processed by bank yet
P. A report sent by bank
Q. Eliminates the use of paper checks
R. Bank is charging your account
S. One who writes a check 

52. Calculate the balance carried forward:
   

53. Calculate the balance carried forward:
   

54. Calculate the balance carried forward:
   

55. Calculate the statement balance:
   

56. Calculate the statement balance:
   

57. Calculate the statement balance:
   

58. Compute the reconciled balance:
   

59. Moore Company has a checkbook balance of $1,999.10. The bank statement indicated a balance of $1,981.54. Moore noticed on his bank statement a bounced check for $52.88 along with a service charge of $12.10. Interest earned on the checking account amounted to $33.81. Moore noticed that a deposit of $350 had not been recorded on the bank statement. Checks written for $363.61 had not yet been processed by the bank. What is the adjusted reconciled balance? 

60. Roger Ran's checkbook balance on April 30 was $1,498, and his bank statement balance for same period was $1,210.88. He discovered from his canceled checks that a check for $30 had been recorded in the check register for $20. The bank deducted a service charge of $12.55 from Roger's account. A deposit mailed on April 29 for $310.99 did not appear on the statement. Roger noticed that checks number 110 and number 118 for $16.88 and $29.54 were not returned with the canceled checks. What is the adjusted reconciled balance? 

61. Valdez Company opened a special checking account. The charge for each check written was $.55 or a $6 a month minimum service charge (whichever is greater). At the beginning of the month, the company checkbook balance was $695.18. Valdez Company wrote 14 checks totaling $312.88. Deposits of $188.10 and $195.10 were made during the month. What is Valdez's checkbook balance to start the next month (include cost of check writing)? 

62. The checkbook of Vance Company had a balance of $2,210.55. The bank statement showed a balance of $4,918.18. The bank collected a $2,000 note minus a $5 service charge. There was a deposit in transit of $610.88. Several checks outstanding totaled $1,196.17. Vance collected $42.33 in interest on the checking account. Vance recorded a $300 check for $400. The bank service charge is $14.99. What is the adjusted reconciled balance? 

63. From the following calculate the final balance that was to be carried forward in your check stubs as of the end of October:
   

64. On November 1, 201x, Broom Company received a bank statement that showed a $2,950 balance. Broom showed a $4,010 checking account balance. The bank did not return check number 124 for $1,080 and check number 138 for $720. A $3,200 deposit made on October 30 was in transit. The bank charged Broom $12 for check printing and $18 for an NSF check. Broom forgot to record a $30 withdrawal at the ATM. The bank also collected a $400 note for Broom. Prepare a bank reconciliation. 

65. On December 31, 201x, Brown Company's checkbook showed a $8,195.32 balance. Brown's bank statement showed a balance of $8,400.50. Check number 311 for $395.10 and check number 418 for $115.46 were outstanding. A $310.30 deposit was in transit. The bank charged a $10 service charge. The statement showed $14.92 in earned interest income. Complete Brown's bank reconciliation. 

66. On May 31, 201x, Kane Company's bank statement showed a $9,900.50 bank balance. The bank statement also showed that it collected a $1,200 note for Kane Company. A $1,315.80 deposit made on May 31 was in transit. Check number 314 for $48.50 and check number 485 for $465.12 were outstanding. Kane's bank charges $.15 per processed check. This month Kane wrote 68 checks. Kane has a $9,512.88 checkbook balance. Prepare a reconciled balance. 

67. The Swell Co. had a beginning checkbook balance of $1,792.15. Record the following in the check stubs provided:
201x
A. Oct. 17 check number 162 payable to Ray Co. for $282.88 for supplies
B. $700.50 deposit Oct. 19 (Record deposit on second check stub)
C. Oct. 25 check number 163 payable to Flynn Co. for $382.41 for insurance
   

68. The Losponato Co. had a beginning checkbook balance of $1,982.15. Record the following in the check stubs provided:
201x
A. Oct. 19 check number 155 payable to Bill Co. for $185.66 for supplies
B. $1,200.85 deposit Oct. 21 (record deposit on second check stub)
C. Oct. 24 check number 156 payable to Fudge Co. for $421.88 for entertainment expenses
   

69. From the following, prepare a bank reconciliation for the J. Company:
Service charge $10
Checks outstanding $730
NSF $100
Deposits in transit $1,040
Checkbook balance $2,000
Bank balance $1,580 

70. From the following, prepare a bank reconciliation for Blue Co.
Service charge $20
Checks outstanding $1,460
NSF $200
Deposits in transit $2,080
Checkbook balance $4,000
Bank balance $3,160 

71. On Dec. 31 the checkbook balance of Rose Co. was $755.09. The bank statement balance was $602.05. Checks outstanding were $249.54. The statement revealed a deposit in transit of $401.95 as well as a bank service charge of $13.05. The company earned interest income of $12.42. Complete a bank reconciliation for Rose Co. 

72. On Dec. 31 the checkbook balance of Aster Co. was $1,241.05. The bank statement balance was $1,510. Checks outstanding were $3,052.03. The statement revealed a deposit in transit of $2,800.10 as well as a bank service charge of $12.03. The company earned interest income of $29.05. Complete a bank reconciliation for Aster Co. 

73. John Murray has a beginning checkbook balance of $110. The beginning bank balance is $135, and deposits in transit amounted to $50. Checks outstanding were $80. John also noticed a bank service charge of $5. What should the reconciled balance be? 

74. Andy Finn received a bank statement from Jon Bank indicating a balance of $3,000. Based on Finn's check stubs, the ending checkbook balance was $3,600. Checks outstanding were number 110 for $150, number 115 for $90, and number 118 for $75. Andy noticed a deposit in transit for $900 as well as a bank service charge for $15. Complete the reconciliation for Andy. 

75. Abe Frill received a bank statement from the Cloudy Bank indicating a balance of $12,000. Abe's checkbook showed a balance of $11,200. Deposits in transit were $2,000, and checks outstanding totaled $2,900. The bank service charge was $100. Complete the reconciliation. 

76. John Small was looking over his bank statement and jotted down the following information:
  
Could you calculate the ending checkbook balance for John? 

77. On the bank statement, Bill notices a beginning bank balance of $500.25. Bill knew he had written his nephew a check for $25 that had not been returned to him by the bank. What effect does this $25 have on the bank reconciliation process? 

78. The beginning balance of the check register was $492.88. During the month, deposits were made for $210 and $499.88. Checks were written for $18.25, $19.82, and $309.82. Could you calculate the ending balance of the check register? 

79. John Mills has asked you to compute his checkbook balance from the following:
   

80. Bill Morse had a balance of $422.88 in his check register. The bank notified him that Alice Wrong had insufficient funds to cover her check that Bill deposited. The bank indicated that Bill's bank balance was being reduced. Bill felt that this was unfair since he never "bounces" his own checks. Is he justified? Please explain. 

81. As the bookkeeper of Moorse Co., you are asked to complete a bank reconciliation from the following:
   

82. Balance last statement: $3,371.12

Checks processed: 1,214.44

Deposits received: 60.00

Service charge: 10.20

Statement balance: _______

83. Norm’s concrete company had the following activity on its bank statement last month:

Beginning balance: $12,133.14

Deposits of: 600.00; 613.13; and $1,176.25

Total checks written: 10,233.76

Service fee: 40.00

Ending balance: ________

84. Debbie’s checkbook balance was $2,715.50. She wrote checks totaling $5,298.13 during the month of May. Deposits made during the month were $250.16 on May 1. On May 15, her payroll check was electronically processed for $2980.66; on May 22, a check from the IRS was electronically processed for $2,550. On May 27, she recorded $534.10 for payments debited to her account for auto insurance and utilities. What is her checkbook balance?

85. Jodie has a checkbook balance of $733.17; she wrote a check payable to Finney’s Gym for $24.99 on June 1 and another check for $382.77 payable to Ford Credit on June 10. On June 28, her payroll check from Maryville College for $2,210.54 was deposited electronically. What was her balance on June 28?

86. David had the following activity with his checking account during the month of July:

• Checkbook starting balance $701.13
• July 15 electronic payroll deposit of $1,807.44
• Online payment of $109.17 to Ameren Utilities
• Online payment of $104.00 to Gas Company
• Checks written on July 15 totaling $984.15
• On July 27 he received an electronic payroll deposit of $1,807.43

What was David’s checkbook balance as of July 31?

 87. What is the expected cash profit or loss given the following information:

Expected merchandise sales (in cash) $125,000

Expected service sales (in cash) $80,000

Expected fixed cash expenses $75,000

Expected variable cash expenses $120,000

 88. Your monthly income is $1,950. You have developed the following list of anticipated cash costs for the month.

Mortgage $750, Car Payment $250, Car Insurance $75, Groceries $250, Cell Phone $120, Cable TV $35, Entertainment $65, 401k Contribution $300, Charitable Contribution $35, Miscellaneous unexpected costs $115.

What would you have to do about your anticipated spending