Question 1

If a bank statement included a bank collection and related interest revenue, the journal entry to record this reconciling item should include a:

Accepted Answer

The bank collection increases the company's cash balance, so a debit to Cash is needed to reflect this increase in the company's books.

Question 2

If the bank records a deposit of $1,500 as $150, the error should be shown on a bank reconciliation as an):

Accepted Answer

The answer of If the bank records a deposit of...

Question 3

An imprest petty cash fund of $400 was established for minor disbursements. At the end of the month the fund included petty cash tickets for the purchase of $185 in supplies, $41 for postage, $86 for fuel and a delivery charge of $65. If there is $13 left in the fund, how much cash is required to replenish the fund?

Accepted Answer

The total expenses are $185 + $41 + $86 + $65 = $377. Since there is $13 left in the fund, the cash required to replenish it is $400 - $13 = $387.

Question 4

A fidelity bond is an):

Accepted Answer

A fidelity bond is an insurance policy that protects a company from losses caused by employee theft or dishonesty.

Question 5

Internal control can be broken down in the following items:

Accepted Answer

Internal control consists of monitoring of controls, risk assessment, and control environment.

Question 6

At the time of payment, what journal entry is required to record a petty cash disbursement for postage?

Accepted Answer

The answer of At the time of payment, what journal...

Question 7

An EFT is an:

Accepted Answer

EFT stands for "electronic funds transfer," which refers to the electronic transfer of money from one bank account to another.

Question 8

Gamma Company has an account at First Bank. Gamma writes a check payable to Delta Company. In this transaction, Delta Company is the:

Accepted Answer

Delta Company is the payee, as they are the entity to whom the check is made payable.

Question 9

In a bank reconciliation, items recorded by the bank, but not yet recorded by the company, include:

Accepted Answer

Bank collections are amounts collected by the bank on behalf of the company, such as notes receivable, which the company has not yet recorded in its books.

Question 10

A cash budget is:

Accepted Answer

A cash budget is a financial tool used to estimate future cash receipts and payments, helping businesses manage their cash flow effectively.

Question 11

Where do cash equivalents appear on the balance sheet?

Accepted Answer

Cash equivalents are reported in conjunction with cash on the balance sheet as they are short-term, highly liquid investments that are easily convertible to known amounts of cash.

Question 12

Albert Company's accountant considered the following items: cash in a checking account, $1,400; cash in a time deposit account, $450; cash pledged as collateral, $250. How much should appear as Cash on the balance sheet?

Accepted Answer

The answer of Albert Company's accountant considered the following items:...

Question 13

A bank collected $200 on behalf of its customer. The $200 should appear on the bank reconciliation as:

Accepted Answer

The $200 collected by the bank on behalf of the customer should be added to the book balance in the bank reconciliation, as it represents funds that have been received by the bank but not yet recorded in the company's books.

Question 14

In a bank reconciliation, an EFT cash receipt is:

Accepted Answer

An EFT (Electronic Funds Transfer) cash receipt is added to the book balance because it represents funds that have been received by the bank but not yet recorded in the company's books.

Question 15

Interest paid by the bank to a company's account should appear on the bank reconciliation as:

Accepted Answer

Interest paid by the bank to a company's account is an addition to the company's cash balance per books, so it should be added to the book balance in the bank reconciliation.

Question 16

Which guideline for ethical judgments is correct?

Accepted Answer

The answer of Which guideline for ethical judgments is correct?
...

Question 17

Which of the following is prepared by the accounting department and sent to the vendor who sells the needed merchandise?

Accepted Answer

The answer of Which of the following is prepared by...

Question 18

All of the following are purposes of internal control EXCEPT:

Accepted Answer

Internal control systems are designed to promote operational efficiency, not inefficiency.

Question 19

Which of the following steps should be performed by the accounting department prior to the approval of a disbursement?

Accepted Answer

The answer of Which of the following steps should be...

Question 20

The beginning cash balance is $3,000, estimated cash receipts are $105,000, and estimated cash disbursements are $111,000. How much cash must be borrowed to have a desired ending balance of $5,000?

Accepted Answer

To find out how much cash must be borrowed, calculate the ending cash balance without borrowing: $3,000 (beginning balance) + $105,000 (receipts) - $111,000 (disbursements) = -$3,000. To achieve a desired ending balance of $5,000, $8,000 must be borrowed (-$3,000 + $8,000 = $5,000).

Quiz 4: Internal Control and Cash