Question 1

Accompanying the bank statement was a debit memorandum for an NSF check received from a customer.This item would require an adjusting entry including a:
A) debit to Accounts Receivable.
B) debit to Cash.
C) debit to Accounts Payable.
D) credit to Accounts Payable.

Accepted Answer

An NSF check means that the customer's payment bounced due to insufficient funds in their account. As a result, the amount of the check needs to be added back to the Accounts Receivable (since it was previously recorded as a sale) and deducted from Cash. Therefore, the adjusting entry should include a debit to Accounts Receivable and a credit to Cash.

Question 2

The ratio of cash to monthly cash expenses can be used to _____.
A) assess how long a company with positive cash flows from investing activities can continue to operate
B) assess how long a company with negative cash flows from operations can continue to operate
C) assess how long a company with negative cash flows from investing activities can continue to operate
D) assess how long a company with positive cash flows from financing activities can continue to operate

Accepted Answer

The ratio of cash to monthly cash expenses is a measure of a company's liquidity. By comparing how much cash a company has on hand to how much it spends each month, we can determine how long the company can continue to operate without generating additional cash. If the ratio is low, it indicates that the company may be at risk of running out of cash and may need to take steps to improve its cash flow. Therefore, choice B is the best choice as it accurately reflects the purpose of the ratio of cash to monthly cash expenses.

Question 3

When a company reports negative net cash flows from operations _____.
A) ratio of equity to annual cash expenses helps in assessing the survival of the company
B) ratio of equity to monthly cash expenses helps in assessing the survival of the company
C) ratio of cash to monthly cash expenses helps in assessing the survival of the company
D) ratio of accounts payable to annual financing expenses helps in assessing the survival of the company

Accepted Answer

When a company reports negative net cash flows from operations, it means that the company is spending more cash than it is generating from its operations. In this situation, it is important to assess the company's ability to survive and continue operating. One useful ratio for this purpose is the ratio of cash to monthly cash expenses, which measures how many months the company can continue to operate with its current cash on hand. This ratio gives a clearer picture of the company's short-term liquidity and its ability to meet its obligations.

Question 4

A canceled check for $1,900 was erroneously recorded by the bank as $9,100.How is the error adjusted in a bank reconciliation?
A) The amount is deducted from the cash balance in the bank section of the reconciliation.
B) The amount is deducted from the cash balance in the company section of the reconciliation.
C) The amount is added to the cash balance in the bank section of the reconciliation.
D) The amount is added to the cash balance in the company section of the reconciliation.

Accepted Answer

The bank recorded the check as $9,100 instead of $1,900, overstating the deduction by $7,200. To correct this, $7,200 should be added back to the bank's cash balance in the reconciliation.

Question 5

XYZ Co.'s petty cash receipts indicate the following expenditures for the end of October: $$\begin{array} { l r } 
\text { Office supplies } & \$ 490 \
\text { Miscellaneous selling expense } & \$ 300 \
\text { Miscellaneous administrative expense } & \$ 120
\end{array}$$ These transactions would result in a:
A) $910 increase in total assets.
B) $490 decrease in stockholders' equity.
C) $420 decrease in total assets.
D) $910 increase in stockholders' equity.

Accepted Answer

These transactions represent expenditures from petty cash, which is a current asset. Thus, they would decrease total assets by the sum of the expenditures ($490 + $300 + $120 = $910), not increase or affect stockholders' equity directly.

Question 6

WFC Co.'s petty cash receipts indicate the following expenditures for the end of October: Office supplies
$500
Miscellaneous selling expense
$350
Miscellaneous administrative expense
$160
As a result of these transactions, WFC Co.'s stockholders' equity:
A) remains unchanged.
B) increases by $500.
C) decreases by $1,010.
D) decreases by $510.

Accepted Answer

The petty cash expenditures of $500, $350, and $160 are all expenses, which decrease stockholders' equity. Therefore, the total decrease in stockholders' equity is $500 + $350 + $160 = $1,010.

Question 7

Denominator in the ratio of cash to monthly cash expense is calculated as _____.
A) total revenues divided by 12
B) net cash flows from investing activities divided by 12
C) earnings before taxes divided by 12
D) net cash flows from operations divided by 12

Accepted Answer

The denominator in the ratio of cash to monthly cash expense represents the monthly cash expense, which is typically derived from the net cash flows from operations divided by 12. This is because net cash flows from operations represent the cash generated from the company's core operations, which includes expenses such as salaries, rent, and utilities. Therefore, dividing this amount by 12 gives us the monthly cash expense of the company.

Question 8

Identify each of the following as related to (a) the control environment, (b) risk assessment, or (c) control procedures.
(1) Mandatory vacations
(2) Personnel policies
(3) Report of outside consultants on future market changes

Accepted Answer

The answer of Identify each of the following as related...

Question 9

A special cash fund used to make small payments that occur frequently is called a(n):
A) operating expenses fund.
B) change fund.
C) market fund.
D) petty cash fund.

Accepted Answer

A petty cash fund is specifically used for making small payments that occur frequently, such as for office supplies or minor expenses. An operating expenses fund is a broader category that would include all expenses related to running the business. A change fund is typically used in a retail setting to make change for customers. A market fund may refer to an investment fund or a fund used for purchasing goods in a specific market.

Question 10

The amount of deposits in transit is included on the bank statement as a(n):
A) deduction from the cash balance per books.
B) deduction from the cash balance per bank.
C) addition to the cash balance per bank.
D) addition to the cash balance per books.

Accepted Answer

Deposits in transit are deposits made by the company that have not yet been processed by the bank. Therefore, they will not yet be reflected in the bank's cash balance. As a result, deposits in transit will be added to the cash balance per bank, increasing the overall cash balance.

Question 11

List and define each of the five elements of internal control set forth by the Integrated Framework.

Accepted Answer

The answer of List and define each of the five...

Question 12

The following data is given for DGR Company: Net cash flows from operating activities $ \quad \$ 6,000,000 $
Cash and cash equivalents at end of year $ \quad \$ 2,700,000 $ DGR Company's ratio of cash to monthly cash expenses is:
A) 4.5 months.
B) 5.4 months.
C) 8.1 months.
D) 3.2 months.

Accepted Answer

The ratio of cash to monthly cash expenses is calculated by dividing cash and cash equivalents at the end of the year by the average monthly cash expenses. The average monthly cash expenses can be found by dividing the net cash flows from operating activities by 12 months. Thus, the ratio is $ \frac{2,700,000}{6,000,000/12} = 5.4 $ months.

Question 13

The ratio of cash to monthly cash expenses is computed as _____.
A) monthly cash expenses divided by cash
B) current assets divided by monthly cash expenses
C) cash divided by cash equivalents
D) cash and cash equivalents divided by monthly cash expenses

Accepted Answer

This ratio compares the amount of cash and cash equivalents on hand to the amount of cash needed for monthly expenses. It is calculated by dividing the sum of cash and cash equivalents by the monthly cash expenses.

Question 14

For each of the following procedures, indicate whether it is an internal control strength or a weakness.Also, for each weakness, explain why it is a weakness and how it can be corrected.
(a)Only the best accounting graduates are hired to eliminate the need for training.
(b)The person responsible for order supplies also records the receipt of the supplies.
(c)Company policy mandates that all employees take vacation time.
(d)Internal auditors constantly monitor the internal control system.
(e)The accountant deposits cash at least once each day.

Accepted Answer

The answer of For each of the following procedures, indicate...

Question 15

Which of the following would be deducted from the cash balance per books on a bank reconciliation?
A) Service charges
B) Outstanding checks
C) Deposits in transit
D) Notes collected by the bank

Accepted Answer

Service charges would be deducted from the cash balance per books on a bank reconciliation as they represent a fee charged by the bank for services rendered. Outstanding checks and deposits in transit would be added to the cash balance per books as they represent transactions that have not yet cleared the bank. Notes collected by the bank would not be included in the bank reconciliation process as they have already been recorded as an increase in cash on the company's books.

Question 16

ABC Co.'s petty cash receipts indicate the following expenditures for the end of October:? Office supplies.....................$490
Miscellaneous selling expense.................$300
Miscellaneous administrative expense....$120
What is the cumulative effect of these transactions on the statement of cash flows?
A) $420 decrease in financing activities
B) $490 increase in operating activities
C) $910 decrease in operating activities
D) No effect on the statement of cash flows

Accepted Answer

The cumulative effect of these transactions on the statement of cash flows is a $910 decrease in operating activities, as they all relate to expenses paid out in cash, reducing the cash flow from operating activities.

Question 17

List the objectives of internal control and give an example of how each is implemented.

Accepted Answer

The answer of List the objectives of internal control and...

Question 18

The highly liquid investments that a company may invest in when they temporarily have excess cash are called _____.
A) cash equivalents
B) bank overdrafts
C) cash short and over
D) vouchers

Accepted Answer

Cash equivalents are highly liquid investments that can easily be converted into cash, and are typically used by companies to invest short-term excess cash. Bank overdrafts, cash short and over, and vouchers are not investments and do not represent a company's excess cash.

Question 19

If a company's net cash flows from operating activities is $1,500,000 for a year and its end of the year cash and cash equivalents balance is $750,000, determine the company's ratio of cash to monthly cash expenses.
A) 6 months
B) 2 months
C) 5 months
D) 9 months

Accepted Answer

The ratio of cash to monthly cash expenses is calculated by dividing the end of the year cash and cash equivalents balance by the average monthly cash expenses. Given the net cash flows from operating activities is $1,500,000 for the year, this implies monthly cash flows from operations of $1,500,000 / 12 = $125,000. With an end of the year cash and cash equivalents balance of $750,000, the ratio is $750,000 / $125,000 = 6 months.

Question 20

Terri Co.established a petty cash fund of $2,300.What is the effect of this transaction?
A) Accounts payable increases
B) Retained earnings decreases
C) Cash decreases
D) Expenses increases

Accepted Answer

Establishing a petty cash fund means that cash is taken out of the company's primary cash account in order to create the new fund. Therefore, Cash decreases.

Quiz 5: Internal Control and Cash

Accompanying the bank statement was a debit memorandum for an NSF check received from a customer.This item would require an adjusting entry including a:

The ratio of cash to monthly cash expenses can be used to _____.

When a company reports negative net cash flows from operations _____.

A canceled check for $1,900 was erroneously recorded by the bank as $9,100.How is the error adjusted in a bank reconciliation?

WFC Co.'s petty cash receipts indicate the following expenditures for the end of October: Office supplies $500 Miscellaneous selling expense $350 Miscellaneous administrative expense $160 As a result of these transactions, WFC Co.'s stockholders' equity:

Denominator in the ratio of cash to monthly cash expense is calculated as _____.

Identify each of the following as related to (a) the control environment, (b) risk assessment, or (c) control procedures. (1) Mandatory vacations (2) Personnel policies (3) Report of outside consultants on future market changes

A special cash fund used to make small payments that occur frequently is called a(n) :

The amount of deposits in transit is included on the bank statement as a(n) :

List and define each of the five elements of internal control set forth by the Integrated Framework.

The following data is given for DGR Company: Net cash flows from operating activities $\quad \$ 6,000,000$ Cash and cash equivalents at end of year $\quad \$ 2,700,000$ DGR Company's ratio of cash to monthly cash expenses is:

The ratio of cash to monthly cash expenses is computed as _____.

Which of the following would be deducted from the cash balance per books on a bank reconciliation?

List the objectives of internal control and give an example of how each is implemented.

The highly liquid investments that a company may invest in when they temporarily have excess cash are called _____.

If a company's net cash flows from operating activities is $1,500,000 for a year and its end of the year cash and cash equivalents balance is $750,000, determine the company's ratio of cash to monthly cash expenses.

Terri Co.established a petty cash fund of $2,300.What is the effect of this transaction?

Quiz 5: Internal Control and Cash

Accompanying the bank statement was a debit memorandum for an NSF check received from a customer.This item would require an adjusting entry including a:

The ratio of cash to monthly cash expenses can be used to _____.

When a company reports negative net cash flows from operations _____.

A canceled check for $1,900 was erroneously recorded by the bank as $9,100.How is the error adjusted in a bank reconciliation?

WFC Co.'s petty cash receipts indicate the following expenditures for the end of October: Office supplies $500 Miscellaneous selling expense $350 Miscellaneous administrative expense $160 As a result of these transactions, WFC Co.'s stockholders' equity:

Denominator in the ratio of cash to monthly cash expense is calculated as _____.

Identify each of the following as related to (a) the control environment, (b) risk assessment, or (c) control procedures. (1) Mandatory vacations (2) Personnel policies (3) Report of outside consultants on future market changes

A special cash fund used to make small payments that occur frequently is called a(n) :

The amount of deposits in transit is included on the bank statement as a(n) :

List and define each of the five elements of internal control set forth by the Integrated Framework.

The following data is given for DGR Company: Net cash flows from operating activities $6,000,000 \quad \$ 6,000,000 $6,000,000 Cash and cash equivalents at end of year $2,700,000 \quad \$ 2,700,000 $2,700,000 DGR Company's ratio of cash to monthly cash expenses is:

The ratio of cash to monthly cash expenses is computed as _____.

Which of the following would be deducted from the cash balance per books on a bank reconciliation?

List the objectives of internal control and give an example of how each is implemented.

The highly liquid investments that a company may invest in when they temporarily have excess cash are called _____.

If a company's net cash flows from operating activities is $1,500,000 for a year and its end of the year cash and cash equivalents balance is $750,000, determine the company's ratio of cash to monthly cash expenses.

Terri Co.established a petty cash fund of $2,300.What is the effect of this transaction?

The following data is given for DGR Company: Net cash flows from operating activities $\quad \$ 6,000,000$ Cash and cash equivalents at end of year $\quad \$ 2,700,000$ DGR Company's ratio of cash to monthly cash expenses is: