Test Bank Docx Ch6 Reporting And Analyzing Cash, Fraud, And

Financial Accounting, 9e (Wild)

Chapter 6 Reporting and Analyzing Cash, Fraud, and Internal Control

1) A properly designed internal control system is a key part of systems design, analysis, and performance.

2) The use of internal controls provides a guarantee against losses due to operating activities.

3) Maintaining adequate records is an important internal control principle.

4) Clearly establishing responsibilities and assigning all accounting activities to one person is an important principle of internal control.

5) Cash registers, time clocks and personal identification scanners are examples of technologies that can improve internal control.

6) An internal control system consists of the policies and procedures companies use to protect assets, ensure reliable accounting, promote efficient operations, and uphold company policies.

7) Insuring assets and requiring all accounting personnel to have CPA licenses are two important principles of internal control.

8) Because employees know that bonding is an insurance policy against loss from theft, bonding does not generally discourage loss from theft.

9) According to good internal control policies, a person who controls an asset also maintains that asset's accounting records.

10) Technologically advanced accounting systems rarely need monitoring for errors because computers always process transactions correctly.

11) Internal control in technologically advanced accounting systems depends less on the design and operation of the information system and more on the analysis of its resulting documents.

12) Internal control systems are subject to limitations that usually arise from either (1) human error or human fraud, or (2) the cost-benefit principle.

13) Collusion is a form of fraud where individuals collaborate to thwart separation of duties.

14) Separation of duties involves dividing responsibility for a transaction or a series of related transactions between two or more individuals or departments.

15) The Sarbanes-Oxley Act (SOX) requires managers and auditors of companies whose stock is traded on an exchange to document and verify the system of internal controls.

16) Harsh penalties exist for violators of the Sarbanes-Oxley Act (SOX) – sentences up to 25 years in prison with severe fines.

17) Human fraud is driven by the triple-threat of fraud: Opportunity, collusion, and rationalization.

18) Cash equivalents are short-term highly liquid investment assets that are readily converted to a known cash amount, and have maturities of one year.

19) Cash equivalents are short-term highly liquid investment assets that are readily converted to a known cash amount, and are close enough to their due date so that their market value will not greatly change.

20) Liquidity refers to a company's ability to pay its long-term obligations.

21) Money orders, cashier's checks, and certified checks are all examples of cash.

22) Basic bank services such as bank accounts, bank deposits, and checking contribute to the control of cash.

23) The payee is the person who signs a check, authorizing its payment.

24) Electronic funds transfers (EFTs) are decreasingly used by companies due to the inconvenience and high cost.

25) Canceled checks are checks the bank has paid and deducted from the customer's account during the period.

26) A check involves 3 parties: a maker who signs the check, a payee who is the recipient, and a bank on which the check is drawn.

27) Signature cards, deposit tickets, checks, and bank statements are all examples of internal control devices for banking activities.

28) On a bank statement, deposits are listed as credits because the bank increases its liability to the depositor when the deposit is made.

29) The days' sales uncollected ratio measures a company's ability to manage its debt.

30) The days' sales uncollected ratio measures the liquidity of accounts receivable.

31) When evaluating the days' sales uncollected ratio, generally the higher the receivables balance, the better the ratio.

32) Internal control of cash receipts aims to ensure that all cash received is properly recorded and deposited.

33) A voucher system is a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.

34) Most large thefts occur from payment of fictitious invoices, which makes control of cash disbursements especially important for companies.

35) If the Cash Over and Short account has a credit balance at the end of the period, the amount is commonly reported as miscellaneous revenue.

36) The clerk who has access to the cash in the cash register should also have access to the cash register tape or file.

37) A voucher system's control over cash disbursements begins when a company incurs an obligation that will result in eventual payment of cash.

38) A voucher system establishes procedures for verifying, approving, and recording obligations for eventual cash disbursement.

39) Assigning purchasing, receiving, and paying for merchandise to one department or individual is a way to streamline a voucher system.

40) A voucher is an external document used to accumulate information to control cash disbursements and to ensure that a transaction is properly recorded.

41) Vouchers should be used for purchases of inventory and all other expenditures made within a company.

42) A debit balance in the Cash Over and Short account reflects an expense and is reported on the income statement as part of selling, general and administrative expenses.

43) The Petty Cash account is a separate bank account used for small amounts.

44) Since petty cash is concerned with such small amounts of cash, it is not necessary to document all transactions with a petty cash receipt.

45) Petty cash reimbursement requires a journal entry that involves a debit to the appropriate expenses and a credit to Cash.

46) The petty cash fund should be reimbursed when it is nearing zero and at the end of the accounting period when financial statements are prepared.

47) The entry to increase the balance in petty cash from $50 to $75 would include a credit to Petty Cash of $25.

48) The Petty Cash account is only debited when it is established, or the amount of the fund is increased.

49) A bank reconciliation explains any differences between the balance of a checking account on the depositor's records and the balance reported on the bank statement.

50) Outstanding checks are checks the bank has paid and deducted from the customer's account during the month.

51) Deposits in transit are deposits made and recorded by the depositor but not yet recorded on the bank statement.

52) It is generally not necessary for businesses to reconcile their checking accounts since banks keep accurate records and provide internal control support for cash.

53) After preparing a bank reconciliation, adjustments must be made for items reconciling the book balance.

54) After preparing a bank reconciliation, adjustments must be made for items reconciling the bank balance.

55) Outstanding checks, deposits in transit, deductions for bank fees, additions for interest, and errors are all factors that can cause the bank statement balance for a checking account to be different from the company's checking account balance.

56) Outstanding checks, deposits in transit, and bank service charges are added to the beginning balance of the bank statement to determine the adjusted bank balance.

57) Proper internal control would require that a department manager inform the purchasing department of its needs for additional merchandise by preparing and signing a purchase requisition which lists the merchandise needed and requests that it be purchased.

58) An invoice is an itemized statement of goods prepared by the customer listing the customer's name, items sold, sales prices, and terms of sale.

59) An invoice is an itemized statement of goods prepared by the vendor listing the customer's name, items sold, sales prices, and terms of sale.

60) Approved vouchers are recorded in a journal called the voucher register.

61) A receiving report is a document used within a company to notify the appropriate persons that ordered goods have been received and to describe the quantities and condition of the goods.

62) When a voucher system is used, an invoice approval is not needed as long as the purchase is evidenced by an invoice and purchase order.

63) In order to streamline the purchasing process, department managers should place orders directly with suppliers.

64) A purchase order is a document the purchasing department sends to the vendor to place an order.

65) Which of the following is not one of the policies and procedures that make up an internal control system?

A) Protect assets.

B) Ensure reliable accounting.

C) Guarantee a return to investors.

D) Urge adherence to company policies.

E) Promote efficient operations.

66) Managers place a high priority on internal control systems because the systems assist managers in all of the following except:

A) Promoting efficient operations.

B) Protecting assets.

C) Upholding company policies.

D) Ensuring reliable accounting.

E) Assuring that no loss will occur.

67) The principles of internal control include:

A) Separate recordkeeping from custody of assets.

B) Maintain minimal records.

C) Use only computerized systems.

D) Bond all employees.

E) Require automated sales systems.

68) Principles of internal control include all of the following except:

A) Apply technological controls.

B) Maintaining security by having one person track and record assets.

C) Perform regular and independent reviews.

D) Separate recordkeeping from custody of assets.

E) Divide responsibilities for related transactions.

69) A properly designed internal control system:

A) Lowers the company's risk of loss.

B) Insures profitable operations.

C) Eliminates the need for an audit.

D) Requires the use of non-computerized systems.

E) Is not necessary if the company uses a computerized system.

70) A company's internal control system:

A) Eliminates the company's risk of loss.

B) Monitors company and employee performance.

C) Eliminates human error.

D) Eliminates the need for audits.

E) Eliminates the need for managers' certification of controls.

71) Two clerks sharing the same cash register is a violation of which internal control principle?

A) Establish responsibilities.

B) Maintain adequate records.

C) Insure assets.

D) Bond key employees.

E) Apply technological controls.

72) Which internal control principle prescribes the use of pre-numbered printed checks?

A) Technological controls.

B) Maintain adequate records.

C) Perform regular and independent reviews.

D) Establish responsibilities.

E) Divide responsibility for related transactions.

73) The impact of technology on internal controls includes:

A) Reduced processing errors.

B) Elimination of the need for regular audits.

C) Elimination of the need to bond employees.

D) Elimination of separation of duties.

E) Elimination of fraud.

74) Internal control policies and procedures have limitations not including:

A) Human error.

B) Human fraud.

C) Cost-benefit principle.

D) Collusion.

E) Establishing responsibilities.

75) Internal control systems are:

A) Developed by the Securities and Exchange Commission for public companies.

B) Developed by the Small Business Administration for non-public companies.

C) Developed by the Internal Revenue Service for all U.S. companies.

D) Required by Sarbanes-Oxley (SOX) to be documented and certified if the company's stock is traded on an exchange (a public company).

E) Required only if a company plans to engage in interstate commerce.

76) Cash, not including cash equivalents, includes:

A) Postage stamps.

B) Customer checks, cashier checks, and money orders.

C) IOUs.

D) Two-year certificates of deposit.

E) Money market funds.

77) Cash equivalents:

A) Are short-term, highly liquid investment assets.

B) Include 6-month certificates of deposit.

C) Include checking accounts.

D) Are recorded in petty cash.

E) Include money orders.

78) Cash equivalents:

A) Include savings accounts.

B) Include checking accounts.

C) Are readily converted to a known cash amount.

D) Include time deposits.

E) Have no immediate value.

79) Cash equivalents meet all of the following criteria except:

A) Readily convertible to a known cash amount.

B) Short-term investments purchased within 3 months of their maturity dates.

C) Have a market value that is not sensitive to interest rate changes.

D) Short-term U.S. treasury bills.

E) More liquid than cash.

80) The following information is available for Birch Company at December 31:

Based on this information, Birch Company should report Cash and Cash Equivalents on December 31 of:

A) $29,420

B) $41,345

C) $31,345

D) $39,420

E) $38,770

81) The following information is available for Fenton Manufacturing Company at June 30:

Based on this information, Fenton Manufacturing Company should report Cash and Cash Equivalents on June 30 of:

A) $28,495

B) $29,286

C) $23,286

D) $12,095

E) $22,495

82) The following information is available for Montrose Company at December 31:

Based on this information, the amounts considered Cash and Cash Equivalents, respectively on December 31 are:

A) Cash $10,430; Cash equivalents $20,400

B) Cash $8,540; Cash equivalents $22,290

C) Cash $8,790; Cash equivalents $26,400

D) Cash $19,190; Cash equivalents $16,000

E) Cash $11,235; Cash equivalents $26,400

83) Basic bank services do not include:

A) Bank accounts.

B) Bank deposits.

C) Checking.

D) Electronic funds transfer.

E) Petty cash management.

84) The three parties involved with a check are:

A) The writer, the cashier, and the bank.

B) The maker, the payee, and the bank.

C) The maker, the manager, and the payee.

D) The bookkeeper, the payee, and the bank.

E) The signer, the cashier, and the company.

85) A remittance advice is a(n):

A) Explanation for a payment by check.

B) Bank statement.

C) Internal voucher.

D) Electronic funds transfer.

E) Cancelled check.

86) A bank statement provided by the bank includes:

A) A list of outstanding checks.

B) A list of petty cash amounts.

C) The beginning and the ending balance of the depositor's account.

D) A listing of deposits in transit.

E) A reconciliation to the depositor cash account.

87) A bank does not issue a debit memorandum to notify the depositor of which of the following?

A) All withdrawals through an ATM.

B) A fee assessed to the depositor's account.

C) An uncollectible check.

D) Periodic payments arranged in advance, by a depositor.

E) A deposit to their account.

88) Preparing a bank reconciliation on a monthly basis is an example of:

A) Establishing responsibility.

B) Separation of duties.

C) Protecting assets by proving the accuracy of cash records.

D) A technological control.

E) Poor internal control.

89) The number of days' sales uncollected:

A) Is used to evaluate the liquidity of receivables.

B) Is calculated by dividing accounts receivable by sales.

C) Measures a company's ability to pay its bills on time.

D) Measures a company's debt to income.

E) Is calculated by dividing sales by accounts receivable.

90) The number of days' sales uncollected is used to:

A) Measure how many days of sales remain until the end of the year.

B) Determine the number of days that have passed without collecting on accounts receivable.

C) Identify the likelihood of collecting sales on account.

D) Estimate how much time is likely to pass before the current amount of accounts receivable is received in cash.

E) Measure the amount of cash sales during a period.

91) The number of days' sales uncollected is calculated by:

A) Dividing accounts receivable by net sales.

B) Dividing accounts receivable by net sales and multiplying by 365.

C) Dividing net sales by accounts receivable.

D) Dividing net sales by accounts receivable and multiplying by 365.

E) Multiplying net sales by accounts receivable and dividing by 365.

92) All of the following are true of the number of days' sales uncollected ratio except:

A) Is most effective in evaluating the cash sales of a company.

B) Can be used for comparisons to other companies in the same industry.

C) Can be used for comparisons between current and prior periods.

D) Reflects the liquidity of receivables.

E) Measures how much time is likely to pass before the current amount of accounts receivable is received in cash.

93) A company had net sales of $21,500 and ending accounts receivable of $2,700 for the current period. Its days' sales uncollected equals: (Use 365 days a year.)

A) 8.0 days.

B) 58.9 days.

C) 45.8 days.

D) 7.4 days.

E) 45.2 days.

94) Freeman Co. had net sales of $4.2 million and ending accounts receivable of $0.8 million. Its days' sales uncollected equals: (Use 365 days a year.)

A) 5.3 days.

B) 69.5 days.

C) 19.2 days.

D) 11.5 days.

E) 292 days.

95) The following information is taken from Reagan Company's December 31 balance sheet:

If net credit sales for the current year were $612,000, the firm's days' sales uncollected for the year is: (Use 365 days a year.)

A) 60 days

B) 85 days

C) 42 days

D) 154 days

E) 70 days

96) An income statement account that is used to record cash overages and cash shortages arising from petty cash transactions or from errors in making change is titled:

A) Cash Lost.

B) Bank Reconciliation.

C) Petty Cash.

D) Cash Over and Short.

E) Cash Receivable.

97) A set of procedures and approvals for verifying, approving, and recording obligations for eventual cash disbursement, and for issuing checks for payment only of verified, approved, and recorded obligations is referred to as a(n):

A) Internal cash system.

B) Petty cash system.

C) Cash disbursement system.

D) Voucher system.

E) Cash control system.

98) Internal control procedures for cash receipts do not require that:

A) Custody over cash is kept separate from its recordkeeping.

B) All collections for sales are received immediately upon making the sales.

C) Clerks having access to cash in a cash register should not have access to the register tape or file.

D) An employee with no access to cash receipts should compare the total cash recorded by the register with the record of cash receipts reported by the cashier.

E) Cash sales should be recorded on a cash register at the time of each sale.

99) The Cash Over and Short account:

A) Is used when the cash account reports a credit balance.

B) Is used to record the income effects of errors in making change and/or processing petty cash transactions.

C) Is not necessary in a computerized accounting system.

D) Can never have a debit balance.

E) Can never have a credit balance.

100) The voucher system of control:

A) Is a set of procedures and approvals designed to control cash receipts and the acceptance of obligations.

B) Establishes procedures for verifying, approving, and recording obligations for eventual cash disbursement.

C) Establishes procedures for receiving checks for the sale of verified, approved, and recorded activities.

D) Applies only when multiple purchases are made from the same supplier.

E) Is required in large companies but not beneficial for small to mid-sized companies.

101) A voucher is an internal document or file:

A) Prepared after an invoice is received.

B) Used as a substitute for an invoice if the supplier fails to send one.

C) Used to accumulate information needed to control cash disbursements and to ensure that transactions are properly recorded.

D) Takes the place of a bank check.

E) Prepared before the company orders goods to make sure that all goods are being ordered from an approved vendor list.

102) Which of the following procedures would weaken control over cash receipts that arrive through the mail?

A) After the mail is opened, a list (in triplicate) of the money received is prepared with a record of the sender's name, the amount, and an explanation of why the money is sent.

B) The bank reconciliation is prepared by a person who does not handle cash or record cash receipts.

C) For safety, only one person should open the mail, and that person should immediately deposit the cash received in the bank.

D) The cashier deposits the money in the bank and the recordkeeper records the amounts received in the accounting records.

E) The employees handling the cash receipts are bonded.

103) At the end of the day, the cash register's record shows $2,050, but the count of cash in the cash register is $2,058. The correct entry to record the cash sales is:

A) Debit Cash $2,058; credit Sales $2,058.

B) Debit Cash $2,058; credit Cash Over and Short $8; credit Sales $2,050.

C) Debit Cash $2,050; credit Sales $2,050.

D) Debit Cash $2,050; debit Cash Over and Short $8; credit Sales $2,058.

E) Debit Cash Over and Short $8, credit Sales $8.

104) At the end of the day, the cash register tape shows $1,000 in cash sales but the count of cash in the register is $1,010. The proper entry to record the cash sales is:

A) Debit Cash $1,000; credit Sales $1,000.

B) Debit Cash $1,010; credit Sales $1,010.

C) Debit Cash $1,010; credit Sales $1,000; credit Cash Over and Short $10.

D) Debit Cash $1,000; debit Cash Over and Short for $10; credit Sales $1,010.

E) Debit Cash Over and Short $10; credit Cash $10.

105) A key factor in a voucher system includes all of the following except:

A) Only approved departments and individuals are authorized to incur an obligation that will result in the payment of cash.

B) Procedures for purchasing, receiving, and paying for merchandise are divided among several departments.

C) The system limits the individuals that can incur cash payment obligations for a company.

D) It is applied to purchases of merchandise inventory and all other expenses.

E) It is not necessary if the supplier provides both receiving report and invoice with the merchandise shipped.

106) The entry to establish a petty cash fund includes:

A) A debit to Cash and a credit to Petty Cash.

B) A debit to Cash and a credit to Cash Over and Short.

C) A debit to Petty Cash and a credit to Cash.

D) A debit to Petty Cash and a credit to Accounts Receivable.

E) A debit to Cash and a credit to Petty Cash Over and Short.

107) Spencer Co. decides to establish a petty cash fund with a beginning balance of $200. The company decides that any purchase under $25 can be processed through petty cash instead of the voucher system. The journal entry to record establishing the account is:

A) Debit Cash $200 and credit Petty Cash $200.

B) Debit Cash $200 and credit Cash Over and Short $200.

C) Debit Petty Cash $200 and credit Cash $200.

D) Debit Petty Cash $200; credit Cash $175; and credit Cash Over and Short $25.

E) Debit Cash $200 and credit Petty Cash Over and Short $200.

108) The entry to record reimbursement of the petty cash fund for postage expense should include:

A) A debit to Postage Expense.

B) A debit to Petty Cash.

C) A debit to Cash.

D) A debit to Cash Short and Over.

E) A debit to Supplies.

109) Silver Co. has a $200 petty cash fund. At the end of the first month the accumulated receipts represent $43 for delivery expenses, $127 for merchandise inventory, and $12 for miscellaneous expenses. The fund has a balance of $18. The journal entry to record the reimbursement of the account includes a:

A) Debit to Petty Cash for $200.

B) Debit to Cash Over and Short for $18.

C) Credit to Cash for $182.

D) Credit to Inventory for $127.

E) Credit to Cash Over and Short for $18.

110) Albany Co., which uses a perpetual inventory system, has a $400 petty cash fund. At the end of the first month, the accumulated receipts represent $60 for delivery expenses, $140 for incoming freight charges, $90 for entertainment expense, and $20 for miscellaneous expenses. The fund has a balance of $105. The journal entry to record the reimbursement of the account is:

A) Debit Petty Cash, $295; Credit Cash, $295.

B) Debit Merchandise Inventory, $200; Debit Entertainment Expense, $90; Debit Miscellaneous Expenses, $20; Credit Cash, $295; Credit Cash Over and Short, $15.

C) Debit Merchandise Inventory, $140; Debit Delivery Expense, $60; Debit Entertainment Expense, $90; Debit Miscellaneous Expenses, $20; Credit Cash, $295; Credit Cash Over and Short, $15.

D) Debit Merchandise Inventory, $140; Debit Delivery Expense, $60; Debit Entertainment Expense, $90; Debit Miscellaneous Expenses, $20; Credit Cash, $310.

E) Debit Delivery Expense, $200; Debit Entertainment Expense, $90; Debit Miscellaneous Expenses, $20; Credit Cash, $295; Credit Cash Over and Short, $15.

111) When a petty cash fund is in use:

A) Expenses paid with petty cash are recorded when the fund is replenished.

B) Petty Cash is debited when funds are replenished.

C) Petty Cash is credited when funds are replenished.

D) Expenses are not recorded.

E) Cash is debited when funds are replenished.

112) When reimbursing the petty cash fund:

A) Cash is debited.

B) Petty Cash is credited.

C) Petty Cash is debited.

D) Appropriate expense accounts are debited.

E) No expenses are recorded.

113) Assume that the custodian of a $450 petty cash fund has $65 in coins and currency plus $382 in receipts at the end of the month. The entry to replenish the petty cash fund will include:

A) A debit to Cash for $382.

B) A credit to Cash Over and Short for $3.

C) A debit to Petty Cash for $385.

D) A credit to Cash for $385.

E) A debit to Cash for $450.

114) Assume that the custodian of a $450 petty cash fund has $62 in coins and currency plus $383 in receipts at the end of the month. The entry to replenish the petty cash fund will include:

A) A debit to Cash for $378.

B) A debit to Cash Over and Short for $5.

C) A debit to Petty Cash for $383.

D) A credit to Cash for $383.

E) A credit to Cash Over and Short for $5.

115) A company wants to decrease its $200 petty cash fund to $175. The entry to reduce the fund is:

A) Debit Cash Over and Short for $25; credit Petty Cash $25.

B) Debit Cash $25; credit Petty Cash $25.

C) Debit Miscellaneous Expenses $25; credit Cash $25.

D) Debit Petty Cash for $175; debit Cash Over and Short $25; credit Cash $200.

E) Debit Petty Cash $25; credit Cash $25.

116) A company had $43 missing from petty cash that was not accounted for by petty cash receipts. The correct procedure is to:

A) Debit Cash Over and Short for $43.

B) Credit Cash Over and Short for $43.

C) Debit Petty Cash for $43.

D) Credit Petty Cash for $43.

E) Debit Cash for $43.

117) On a bank reconciliation, an unrecorded debit memorandum for printing checks is:

A) Noted as a memorandum only.

B) Added to the book balance of cash.

C) Deducted from the book balance of cash.

D) Added to the bank balance of cash.

E) Deducted from the bank balance of cash.

118) A debit memorandum on a bank statement indicates:

A) An increase in the bank's asset account.

B) A decrease in the bank's asset account.

C) A decrease in the bank's liability account.

D) An increase in the bank's liability account.

E) An increase in the bank's expense account.

119) A credit memorandum on a bank statement indicates:

A) An increase in the bank's asset account.

B) A decrease in the bank's asset account.

C) A decrease in the bank's liability account.

D) An increase in the bank's liability account.

E) An increase in the bank's expense account.

120) Childers Company, which uses a perpetual inventory system, has an established petty cash fund in the amount of $400. The fund was last reimbursed on November 30. At the end of December, the fund contained the following petty cash receipts:

If, in addition to these receipts, the petty cash fund contains $201 of cash, the journal entry to reimburse the fund on December 31 will include:

A) A debit to Transportation-In of $62.

B) A debit to Petty Cash of $189.

C) A credit to Office Supplies of $30.

D) A credit to Cash Over and Short of $10.

E) A credit to Cash of $199.

121) An analysis that explains differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a(n):

A) Internal audit.

B) Bank reconciliation.

C) Bank audit.

D) Trial reconciliation.

E) Analysis of debits and credits.

122) Outstanding checks refer to checks that have been:

A) Written, recorded, sent to payees, and received and paid by the bank.

B) Written and not yet recorded in the company books.

C) Held as blank checks.

D) Written, recorded on the company books, sent to the payee, but not yet paid by the bank.

E) Issued by the bank.

123) On a bank reconciliation, the amount of an unrecorded bank service charge should be:

A) Added to the book balance of cash.

B) Deducted from the book balance of cash.

C) Added to the bank balance of cash.

D) Deducted from the bank balance of cash.

E) Noted in memorandum form only.

124) If a check that was outstanding on last period's bank reconciliation was not among the cancelled checks returned by the bank this period, in preparing this period's reconciliation, the amount of this check should be:

A) Added to the book balance of cash as an outstanding check.

B) Deducted from the book balance of cash as an outstanding check.

C) Added to the bank balance of cash as an outstanding check.

D) Deducted from the bank balance of cash as an outstanding check.

E) Ignored in preparing the period's bank reconciliation as an outstanding check.

125) If a company made a bank deposit on September 30 that did not appear on the bank statement dated September 30, in preparing the September 30 bank reconciliation, the company should:

A) Deduct the deposit from the bank statement balance.

B) Send the bank a debit memorandum.

C) Deduct the deposit from the September 30 book balance and add it to the October 1 book balance.

D) Add the deposit to the book balance of cash.

E) Add the deposit to the bank statement balance.

126) If a check correctly written and paid by the bank for $749 is incorrectly recorded in the company's books for $794, how should this error be treated on the bank reconciliation?

A) Subtract $45 from the bank's balance.

B) Add $45 to the bank's balance.

C) Subtract $45 from the book balance.

D) Add $45 to the book balance.

E) Subtract $45 from the bank's balance and add $45 to the book's balance.

127) If a check correctly written and paid by the bank for $272 is incorrectly recorded in the company's books for $227, how should this error be treated on the bank reconciliation?

A) Subtract $45 from the bank's balance.

B) Add $45 to the bank's balance.

C) Subtract $45 from the book balance.

D) Add $45 to the book balance.

E) Subtract $45 from the bank's balance and add $45 to the book's balance.

128) During the month of July, Clanton Industries issued a check in the amount of $845 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:

A) Deduct the check amount from the book balance of cash.

B) Add the check amount to the book balance of cash.

C) Deduct the check amount from the bank balance.

D) Add the check amount to the bank balance.

E) Make a journal entry in the company records for an error.

129) In the process of reconciling its bank statement for April, Donahue Enterprises' accountant compiles the following information:

The adjusted cash balance per the books on April 30 is:

A) $6,900

B) $8,160

C) $4,600

D) $6,520

E) $5,840

130) In the process of reconciling its bank statement for January, Maxi's Clothing's accountant compiles the following information:

The adjusted cash balance per the books on January 31 is:

A) $5,855

B) $5,335

C) $4,055

D) $4,815

E) $4,585

131) Which of the following events would cause a bank to debit a depositor's account?

A) The depositor orders new checks through the bank at a cost of $50.

B) The bank collects a note receivable and related interest on the depositor's behalf.

C) There are outstanding checks drawn on the account at month-end.

D) There are deposits in transit on the account at month-end.

E) The bank corrects an error from previous month by adding $75 to the depositor account.

132) A seller (or provider) of goods or services to a business organization is known as a:

A) Vendor.

B) Payee.

C) Vendee.

D) Creditor.

E) Debtor.

133) The internal document prepared by a department manager that informs the purchasing department of its merchandise needs and requests that the merchandise be purchased is the:

A) Purchase requisition.

B) Purchase order.

C) Invoice.

D) Receiving report.

E) Invoice approval.

134) The document that the purchasing department prepares and sends to the vendor to place an order is called the:

A) Purchase requisition.

B) Purchase order.

C) Invoice.

D) Receiving report.

E) Invoice approval.

135) The itemized statement of goods prepared by a vendor listing the customer's name, items sold, sales prices, and terms of the sale is called the:

A) Purchase requisition.

B) Purchase order.

C) Invoice.

D) Receiving report.

E) Invoice approval.

136) The internal document prepared to notify the appropriate persons that goods ordered have been received, describing the quantities and condition of the goods is the:

A) Purchase requisition.

B) Purchase order.

C) Invoice.

D) Receiving report.

E) Invoice approval.

137) The checklist of steps necessary for approving an invoice for recording and payment, also known as the check authorization, is the:

A) Purchase requisition.

B) Purchase order.

C) Invoice.

D) Receiving report.

E) Invoice approval.

138) A voucher system is a set of procedures and approvals:

A) Designed to eliminate the need for subsidiary ledgers.

B) Designed to determine if the company is operating profitably.

C) Used almost exclusively by small companies.

D) Used to ensure that the company sells on credit only to creditworthy customers.

E) Designed to control cash disbursements and the acceptance of obligations.

139) Internal controls are crucial to companies that convert from U.S. GAAP to IFRS because of all of the following risks except:

A) Possible misstatement of financial information.

B) Possible fraud.

C) Controls are significantly different across the globe.

D) Ineffective communication of the change to investors, creditors, and others.

E) Management's inability to certify the effectiveness of the controls.

140) All of the following are considered effective cash management principles except:

A) Encouraging collection of receivables by offering discounts for early payments.

B) Keeping only necessary levels of assets.

C) Planning expenditures.

D) Retaining excess cash for unexpected expenditures.

E) Delaying payment of liabilities until the last possible day.

141) Ryan Company deposits all cash receipts on the day they are received and makes all cash payments by check. Ryan's June bank statement shows $18,361 on deposit in the bank. Ryan's comparison of the bank statement to its cash account revealed the following:

Additionally, a $29 check correctly written and recorded by the company was recorded by the bank as a $92 deduction.

The adjusted cash balance per the bank records should be:

A) $18,974

B) $18,911

C) $20,711

D) $19,037

E) $16,137

142) Clayborn Company deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on May 31, its Cash account shows a debit balance of $17,025. Clayborn's May bank statement shows $15,800 on deposit in the bank. Determine the adjusted cash balance using the following information:

The adjusted cash balance should be:

A) $16,400

B) $11,200

C) $21,000

D) $16,425

E) $17,000

143) Franklin Company deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on August 31, its Cash account shows a debit balance of $13,162. Franklin's August bank statement shows $14,237 on deposit in the bank. Determine the adjusted cash balance using the following information:

The adjusted cash balance should be:

A) $18,737

B) $10,337

C) $14,887

D) $13,112

E) $14,837

144) Clayborn Company' bank reconciliation as of May 31 is shown below.

One of the adjusting journal entries that Clayborn must record as a result of the bank reconciliation includes:

A) A debit to Cash of $625

B) A debit to Cash of $5,200

C) A credit to Cash of $4,600

D) A credit to Cash of $600

E) A debit to cash of $25

145) Franklin Company's bank reconciliation as of August 31 is shown below.

The adjusting journal entries that Clayborn must record as a result of the bank reconciliation include:

A) Debit Cash $4,500; credit Sales $4,500.

B) Debit Cash $1,725; credit Notes Receivable $1,725.

C) Debit Cash $50; credit Bank Service Fee Expense $50.

D) Debit Misc. Expense $3,900; credit Cash $3,900.

E) Debit Notes Receivable $1,725; credit Cash $1,725.

146) Easton Co. deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on June 30, its Cash account shows a debit balance of $60,209. Easton's June bank statement shows $58,349 on deposit in the bank. Determine the adjusted cash balance using the following information:

The adjusted cash balance should be:

A) $60,194

B) $60,239

C) $62,149

D) $56,424

E) $60,224

147) Great Falls Co.'s bank reconciliation as of February 28 is shown below.

One of the adjusting journal entries that Great Falls must record as a result of the bank reconciliation includes:

A) Debit Note Payable $745; credit Cash $745.

B) Debit Cash $745; credit Note Receivable $745.

C) Debit Cash $2,950; credit Sales $2,950.

D) Debit Cash $2,950; credit Accounts Receivable $2,950.

E) Debit Miscellaneous Expense $35; credit Accounts Payable $35.

148) Havermill Co. establishes a $250 petty cash fund on September 1. On September 30, the fund is replenished. The accumulated receipts on that date represent $73 for Office Supplies, $137 for merchandise inventory, and $22 for miscellaneous expenses. The fund has a balance of $18. On October 1, the accountant determines that the fund should be increased by $50. The journal entry to record the establishment of the fund on September 1 is:

A) Debit Cash $250; credit Petty Cash $250.

B) Debit Petty Cash $250; credit Accounts Payable $250.

C) Debit Miscellaneous Expense $250; credit Cash $250.

D) Debit Petty Cash $250; credit Cash $250.

E) Debit Cash $250; credit Accounts Payable $250.

149) Havermill Co. establishes a $250 petty cash fund on September 1. On September 30, the fund is replenished. The accumulated receipts on that date represent $73 for Office Supplies, $137 for merchandise inventory, and $22 for miscellaneous expenses. The fund has a balance of $18. On October 1, the accountant determines that the fund should be increased by $50. The journal entry to record the reimbursement of the fund on September 30 includes a:

A) Debit to Office Supplies for $73.

B) Credit to Merchandise Inventory for $137.

C) Credit to Cash for $250.

D) Debit Petty Cash for $232.

E) Credit to Cash for $18.

150) Havermill Co. establishes a $250 petty cash fund on September 1. On September 30, the fund is replenished. The accumulated receipts on that date represent $73 for Office Supplies, $137 for merchandise inventory, and $22 for miscellaneous expenses. The fund has a balance of $18. On October 1, the accountant determines that the fund should be increased by $50. The journal entry to record the increase in the fund balance on October 1 is:

A) Debit Petty Cash $300; credit Cash $300.

B) Debit Cash $50; credit Petty Cash $50.

C) Debit Miscellaneous Expense $50; credit Cash $50.

D) Debit Petty Cash $50; credit Accounts Payable $50.

E) Debit Petty Cash $50; credit Cash $50.

151) Meng Co. maintains a $300 petty cash fund. On January 31, the fund is replenished. The accumulated receipts on that date represent $80 for office supplies, $160 for merchandise inventory, and $20 for miscellaneous expenses. There is a cash shortage of $8. Based on this information, the amount of cash in the fund before the replenishment is:

A) $300.

B) $260.

C) $40.

D) $48.

E) $32.

152) Meng Co. maintains a $300 petty cash fund. On January 31, the fund is replenished. The accumulated receipts on that date represent $80 for office supplies, $160 for merchandise inventory, and $20 for miscellaneous expenses. There is a cash shortage of $8. The journal entry to replenish the fund on January 31 is:

A) Dr. Office Supplies, $80; Dr. Merchandise inventory, $160; Dr. Miscellaneous expenses, $20; Dr. Cash over and short, $8; Cr. Petty cash, $268.

B) Dr. Office Supplies, $80; Dr. Merchandise inventory, $160; Dr. Miscellaneous expenses, $20; Cr. Cash over and short, $8; Cr. Petty cash, $252.

C) Dr. Office Supplies, $80; Dr. Merchandise inventory, $160; Dr. Miscellaneous expenses, $20; Cr. Cash over and short, $8; Cr. Cash, $252.

D) Dr. Office Supplies, $80; Dr. Merchandise inventory, $160; Dr. Miscellaneous expenses, $20; Dr. Cash over and short, $8; Cr. Cash, $268.

E) Dr. Office Supplies, $80; Dr. Merchandise inventory, $160; Dr. Miscellaneous expenses, $20; Cr. Cash over and short, $8; Cr. Petty cash, $400.

153) Pelcher Co. maintains a $400 petty cash fund. On January 31, the fund is replenished. The accumulated receipts on that date represent $110 for office supplies, $140 for merchandise inventory, and $70 for miscellaneous expenses. There is a cash overage of $4. Based on this information, the amount of cash in the fund before the replenishment is:

A) $400.

B) $320.

C) $80.

D) $76.

E) $84.

154) Pelcher Co. maintains a $400 petty cash fund. On January 31, the fund is replenished. The accumulated receipts on that date represent $110 for office supplies, $140 for merchandise inventory, and $70 for miscellaneous expenses. There is a cash overage of $4. The journal entry to replenish the fund on January 31 is:

A) Dr. Office Supplies, $110; Dr. Merchandise inventory, $140; Dr. Miscellaneous expenses, $70; Dr. Cash over and short, $4; Cr. Petty cash, $324.

B) Dr. Office Supplies, $110; Dr. Merchandise inventory, $140; Dr. Miscellaneous expenses, $70; Dr. Cash over and short, $4; Cr. Cash, $324.

C) Dr. Office Supplies, $110; Dr. Merchandise inventory, $140; Dr. Miscellaneous expenses, $70; Cr. Cash over and short, $4; Cr. Petty cash, $316.

D) Dr. Office Supplies, $110; Dr. Merchandise inventory, $140; Dr. Miscellaneous expenses, $70; Cr. Cash over and short, $4; Cr. Cash, $316.

E) Dr. Office Supplies, $110; Dr. Merchandise inventory, $140; Dr. Miscellaneous expenses, $70; Dr. Cash over and short, $4; Cr. Petty cash, $400.

Match each of the following terms with the appropriate definitions.

A) Days' sales uncollected

B) Cash over or short

C) Purchase order

D) Voucher system

E) Bank reconciliation

F) Gross method

G) Receiving report

H) Principles of internal control

I) Liquidity

155) Fundamental guidelines applicable to all companies established to minimize the risk of fraud and theft and to increase the reliability and accuracy of the accounting records.

156) A method of initially recording purchases at the full invoice price ignoring any cash discount.

157) A document used within the company to notify the approporiate persons that ordered goods have been received and to describe the quantity and condition of the goods.

158) An income statement account used to record the income effects of cash overages and cash shortages arising from missing petty cash receipts or errors in making change.

159) A measure of how quickly a company can convert its accounts receivable into cash.

160) A document the purchasing department uses to place an order with a supplier.

161) A set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.

162) A report explaining any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement.

163) The ability of a company to pay for its near-term obligations.

Match the following terms with the appropriate definition.

A) Cash equivalent

B) Vendor

C) Internal control system

D) Invoice

E) Purchase requisition

F) Cash

G) Liquid assets

H) Sarbanes-Oxley Act

I) Check protector

164) The set of policies and procedures managers use to monitor and control business activities.

165) The supplier (seller) of goods or services.

166) Currency, coins, and amounts on deposit in bank accounts.

167) An asset such as cash that can be readily used to settle near-term obligations.

168) Regulation requiring public companies to document and certify their system of internal controls.

169) An internal document listing the goods needed by a department and requesting that the goods be purchased.

170) Short-term, highly liquid investments that are readily convertible to a known cash amount and are sufficiently close to their maturity date so that the market value is not sensitive to interest rate changes.

171) A bill sent from the supplier to the buyer.

172) A device that perforates the amount of a check into its face, making it difficult to alter.

173) Match each of the following transactions with the applicable internal control principle that is being violated listed.

A. Establish responsibility

B. Maintain adequate records

C. Insure assets and bond employees

D. Separate recordkeeping from custody of assets

E. Divide responsibility for related transactions

F. Apply technological controls

G. Perform regular and independent reviews

_____ 1. Cashiers have access to the cash register recorded tape or file.

_____ 2. A company uses a voucher system, but the cash disbursement clerk pays directly from invoices received.

_____ 3. Only sales clerks use the cash registered, but they all share the same cash drawer.

_____ 4. The bookkeeper prepares and signs checks and completes the bank reconciliation.

_____ 5. A restaurant allows servers to keep cash collected in their aprons and ring in all sales at the end of the night.

_____ 6. A company fails to hire a CPA to perform an annual audit.

_____ 7. A company does not bond its key cash-handling employees.

_____ 8. A company has a single department that handles purchasing, receiving, and inventory management.

_____ 9. A large company has no internal auditor on staff.

_____ 10. A company manager keeps pre-signed checks in his desk drawer for employees to hand write when the accountant is out of the office.

174) Identify each of the following items 1 through 10 as either (A) cash or (B) cash equivalent.

_____ 1. Coins

_____ 2. Petty cash

_____ 3. Three-month certificate of deposit

_____ 4. Commercial paper

_____ 5. Currency

_____ 6. Certified check

_____ 7. Cashier's check

_____ 8. Money market accounts

_____ 9. Money orders

_____ 10. U.S. treasury bills

175) Identify whether each of the following items 1 through 10 would on appear on the bank side or the book side of a bank reconciliation.

____ 1. Bank service charges

____ 2. Outstanding checks

____ 3. Deposits in transit

____ 4. NSF check

____ 5. Interest on a checking account

____ 6. The company properly wrote a check for $95.80 that the bank incorrectly paid as $9.58.

____ 7. The bank printed checks for the depositor for a fee.

____ 8. Bank debit memorandum

____ 9. Bank credit memorandum

____10. The bank collected a $1,000 note for the depositor.

176) Define an internal control system and describe its purpose.

177) List the principles of internal control.

178) Explain the difference between cash and cash equivalents.

179) Describe the basic bank services that contribute to the control of cash and identify at least two internal control objectives served by the banking activities.

180) What is the purpose of the days' sales uncollected ratio?

181) What is a voucher system and what are the two areas for which it establishes control procedures?

182) Discuss how the principles of internal control apply to cash receipts over-the-counter by giving several examples of good control measures that should be implemented.

183) Discuss how the principles of internal control apply to cash receipts through the mail by giving several examples of good control measures that should be implemented.

184) Describe a petty cash account and its purpose.

185) Describe a bank reconciliation and discuss its purpose.

186) When using a voucher system, what are the steps on the invoice approval checklist that must be completed before an invoice approval is complete and a voucher prepared?

187) The Sarbanes-Oxley Act (SOX) requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls. What are the specific requirements for auditors set forth by SOX?

188) The treasurer of a company is responsible for cash management. List five cash management principles that are essential for effective cash management.

189) For each of the independent cases below, identify the principle of internal control that is violated, and recommend what should be done to remedy the violation.

1. In order to save money, Indigo Company has decided to drop its property insurance on assets; and stop bonding the cashiers who handle upwards of $5,000 in cash each day.

2. Jobs Company records each sale on a preprinted invoice. Because invoices are sometimes damaged in the process of preparation, the invoices are not prenumbered. Instead, the sales clerk writes the next number on each invoice as it is prepared.

3. Keegan Company is a very small business. Dylan Epps, one of the two office clerks, opens the mail each day and removes the cash receipts that come in the mail. Dylan also records the receipts in the cash records and the customer's account and deposits the cash in the bank.

4. Ludwig Company prides itself on hiring only the most competent employees. The owner, Jeremy Ludwig, believes that since the employees are highly competent he can show he trusts them completely by not checking up on their performance.

5. Maple Industries is a small business with three accounting employees. Each employee is well-trained and able to perform any of the accounting tasks, including handling cash receipts and cash disbursements, and preparing the bank reconciliation. Because of this cross-training, the employees share responsibilities for all of the tasks.

190) At the end of the current period, a company reported $725,000 in net credit sales and $100,000 in ending accounts receivable. Calculate this company's days' sales uncollected at the end of the current period.

191) Norman Co. had $5,925 million in sales and $1,155 million in ending accounts receivable for the current period. For the same period, Opal Co. reported $5,885 million in sales and $790 million in ending accounts receivable. Calculate the days' sales uncollected for both companies as of the end of the current period and indicate which company is doing a better job in managing the collection of its receivables.

192) A company reported net sales for 2014 of $265,000 and $545,000 for 2015. The year-end balances of accounts receivable were $39,000 for 2014 and $92,000 for 2015. Calculate the days' sales uncollected at the end of each year for this company and describe any changes in the apparent liquidity of the company's receivables.

193) At the end of the day on March 15, the cash register's record shows $1,957, but the count of cash in the register is $1,965. Prepare the general journal entry to record the day's cash sales.

194) Plenty Co. established a petty cash fund of $150 on October 1. On October 10, the petty cash fund was replenished when there was $49 remaining and there were petty cash receipts for: office supplies, $47; transportation-in on inventory purchased, $32; and postage, $22. On October 15, the petty cash fund was decreased to $125 in total. Plenty Co. uses the perpetual inventory system. Record the above transactions in general journal form.

195) A petty cash fund was originally established with a check for $100. On August 31, which is the period end, the petty cash fund included the following:

Prepare the general journal entry to record the replenishment of the petty cash fund on August 31.

196) Quibble Company established a $300 petty cash fund by issuing a check to the custodian on February 1. On February 15, the petty cash fund was replenished and increased to $800 in total. The contents of the petty cash fund at the time of the February 15 replenishment were:

197) On March 1, a company established a $75 petty cash fund. On March 12, the petty cash fund contains $3 in cash and the following paid petty cash receipts: transportation-in on merchandise inventory $14.25; postage, $19.50; and office supplies, $36. Give the general journal entry to reimburse the fund and to increase its amount to $150 on March 12.

198) On June 1, a company established a $75 petty cash fund. On June 27, the petty cash fund contains $5.25 in cash and the following paid petty cash receipts: postage, $19.50; office supplies, $36.25; and miscellaneous expense $14.00. Give the general journal entry to reimburse the fund on June 27.

199) A company established a petty cash fund in November of the current year and experienced the following transactions affecting the fund during November:

200) Following are seven items a through g that would cause Rembrandt Company's book balance of cash to differ from its bank statement balance of cash.

a. A service charge imposed by the bank.

b. A check listed as outstanding on the previous period's reconciliation and still outstanding at the end of this month.

c. A customer's check returned by the bank is marked "Not Sufficient Funds (NSF)".

d. A deposit mailed to the bank on the last day of the current month and not recorded on this month's bank statement.

e. A check paid by the bank at its correct $190 amount recorded in error in the company's check register at $109.

f. An unrecorded credit memorandum indicating that bank collected a note receivable for Rembrandt Company and deposited the proceeds in the company's account.

g. A check written in the current period that is not yet paid or returned by the bank.

Indicate where each item, letters a-g, would appear on Rembrandt Company's bank reconciliation by placing its identifying letter in the parentheses in the proper section of the form below.

201) The following information is available for the Savvy Company for the month of June.

a. On June 30, after all transactions have been recorded, the balance in the company's Cash account has a balance of $17,202.

b. The company's bank statement shows a balance on June 30 of $19,279.

c. Outstanding checks at June 30 total $2,984.

d. A credit memo included with the bank statement indicates that the bank collected $770 on a noninterest-bearing note receivable for Savvy.

e. A debit memo included with the bank statement shows a $67 NSF check from a customer, J. Maroon.

f. A deposit placed in the bank's night depository on June 30 totaling $1,675 did not appear on the bank statement.

g. Comparing the checks on the bank statement with the entries in the accounting records reveals that check #3445 for the payment of an account payable was correctly written for $2,450, but was recorded in the accounting records as $2,540.

h. Included with the bank statement was a debit memorandum in the amount of $25 for bank service charges. It has not been recorded on the company's books.

1. Prepare the June bank reconciliation for the Savvy Company.

2. Prepare the general journal entries to bring the company's book balance of cash into conformity with the reconciled balance as of June 30.

202) The following information is available for the Topper Company for the month of July.

a. On July 31, after all transactions have been recorded, the balance in the company's Cash account has a balance of $15,244.

b. The company's bank statement shows a balance on July of $16,450.

c. Outstanding checks at July total $2,063.

d. A credit memo included with the bank statement indicates that the bank collected $570 on a note receivable for Topper. The $570 includes $550 principle and $20 interest.

e. A debit memo included with the bank statement shows a $107 NSF check from a customer, P. Flank.

f. A deposit placed in the bank's night depository on July 31 totaling $1,275 did not appear on the bank statement.

h. Included with the bank statement was a debit memorandum in the amount of $45 for check printing charges that have not been recorded on the company's books.

Prepare the July bank reconciliation for the Topper Company.

203) Umber Company's bank reconciliation for September is presented below. Prepare the necessary adjusting journal entries based on the reconciliation report.

204) The following information is available for the Victor Company for its March 31 bank reconciliation:

From the March 31 bank statement:

NSF: A check from a customer, Booker Co. in payment of their account.

IN: Interest earned on the account.

From the Victor Company's accounting records:

1. Based on the above information, prepare a bank reconciliation for the Victor Company.

2. Prepare the necessary general journal entries to adjust cash to the reconciled balance.

205) The following information is available to reconcile Dibble Co.'s book balance of cash with its bank statement cash balance as of April 30. The April 30 cash balance according to the accounting records is $68,356, and the bank statement cash balance for that date is $73,525.

a. The bank erroneously cleared a $480 check against the account in April that was not issued by Dibble. The check documentation included with the bank statement indicates the check was actually issued by Flushing Co.

b. On April 30, the bank issued a credit memorandum for $53 interest earned on Dibble's account.

c. When the April checks are compared with entries in the accounting records, it is found that Check No. 1828 had been correctly drawn for $1,530 to pay for advertising but was erroneously entered in the accounting records as $1,350.

d. A credit memorandum indicates that the bank collected $10,000 cash on a note receivable for Dibble, deducted a $30 collection fee, and credited the balance to the company's Cash account. Dibble did not record this transaction before receiving the statement.

e. A debit memorandum of $895 is enclosed with the bank statement for an NSF check for $870 received from a customer. The bank assessed a $25 fee for processing it.

f. Dibble's April 30 daily cash receipts of $5,102 were placed in the bank's night depository on that date, but do not appear on the April 30 bank statement.

g. Dibble's April 30 cash disbursements journal indicates that Check No. 1837 for $584 and Check No. 1840 for $1,219 were both written and entered in the accounting records, but are not among the canceled checks.

1. Prepare the bank reconciliation for this company as of April 30.

2. Prepare the journal entries necessary to bring the company's book balance of cash into conformity with the reconciled cash balance as of April 30.

206) The following account balances are taken from Everest Events at December 31.

Calculate the number of days' sales uncollected for both years. According to this analysis, is the company's collection of receivables improving? Explain.

207) The following account balances are taken from Ferguson Sports at December 31.

Calculate the number of days' sales uncollected for both years. According to this analysis, is the company's collection of receivables improving? Explain.

208) A company established a petty cash fund in April of the current year and experienced the following transactions affecting the fund during April. Prepare journal entries to establish the fund on April 1, to replenish it on April 25, and to record the increase in the fund on April 25.

209) The following information is available to reconcile Hinckley Company's book balance of cash with its bank statement cash balance as of June 30. The June 30 cash balance according to the accounting records is $57,542, and the bank statement cash balance for that date is $67,047.

a. The bank erroneously cleared a $295 check against the account in June that was not issued by Hinckley. The check documentation included with the bank statement indicates the check was actually issued by Dancer Co.

b. On June 30, the bank issued a credit memorandum for $35 interest earned on Hinckley's account.

c. When the June checks are compared with entries in the accounting records, it is found that Check No. 1727 had been correctly drawn for $1,450 to pay for advertising but was erroneously entered in the accounting records as $1,540.

d. A credit memorandum indicates that the bank collected $9,000 cash on a note receivable for Hinckley, deducted a $30 collection fee, and credited the balance to the company's Cash account. Hinckley did not record this transaction before receiving the statement.

e. A debit memorandum of $865 is enclosed with the bank statement for an NSF check for $840 received from a customer. The bank assessed a $25 fee for processing it.

f. Hinckley's June 30 daily cash receipts of $6,425 were placed in the bank's night depository on that date, but do not appear on the June 30 bank statement.

g. Hinckley's June 30 cash disbursements journal indicates that Check No. 1737 for $4,830 and Check No. 1740 for $3,280 were both written and entered in the accounting records, but are not among the canceled checks.

h. A debit memorandum for $115.00 indicates the bank deducted the annual lock box fee for the company.

1. Prepare the bank reconciliation for this company as of June 30.

2. Prepare the journal entries necessary to bring the company's book balance of cash into conformity with the reconciled cash balance as of June 30.

210) An ________ refers to the policies and procedures managers use to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.

211) When a company purchases an insurance policy against losses from theft by an employee, that employee is ________.

212) Two sales clerks not being permitted to share the same cash register is an example of the internal control principle of ________.

213) A sales system with pre-numbered, controlled sales slips is an example of the internal control principle of ________.

214) A person who controls or has access to an asset must not keep that asset's accounting records. This describes the internal control principle of ________.

215) Having external auditors test the company's financial records and evaluate the effectiveness of the internal control system is part of the internal control principle of ________.

216) Two limitations of internal control systems are ________ and ________.

217) ________ are short-term, highly liquid investment assets that are readily convertible to a known amount of cash.

218) ________ includes currency, coins, and amounts on deposit in checking accounts and savings accounts.

219) The use of electronic communication to transfer cash from one party to another is called ________.

220) A ________ is a document explaining the payment of a check.

221) On a bank statement, deposits are shown as ________, because the depositor's account is a liability on the bank's records.

222) ________ reflects the liquidity of a company's accounts receivable.

223) The ________ account is used to record the effects of cash overages and shortages from errors in making change or managing a petty cash fund.

224) A ________ is an internal document (or file) that is used to accumulate information to control cash disbursements.

225) A ________ fund is used to make cash disbursements of small amounts to avoid the time and cost of writing checks.

226) ________ are checks written by the depositor, deducted on the depositor's records, and sent to the payee, but not yet recorded by the bank at the bank statement date.

227) Deposits made and recorded by the depositor but not yet recorded on the bank statement are called ________.

228) A ________ is a report explaining any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement.

229) The document the purchasing department sends to the vendor that is used to place an order is the ________.

230) The document prepared by the vendor that is an itemized statement of goods listing the customer's name, items sold, sales prices, and terms of the sale is the ________.

231) The internal document that is used to notify the appropriate person that ordered goods have been received and to describe the quantities and condition of the goods is the ________.

232) The ________ requires the managers and auditors of companies whose stock is traded on an exchange (called public companies) to document and certify the system of internal controls.