Question 1

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?

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Question 2

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.

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Question 3

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

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Question 4

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.

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Question 5

Describe the net method of accounting for purchases. Why might companies use the net method?

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Question 6

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.

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The answer of Norman Co. had $5,925 million in sales...

Question 7

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:
 $$\begin{array} { | l | r | } 
\hline \text { Petty cash receipts: } & \
\hline \text { Postage } & \$ 43.50 \
\hline \text { Office supplies } & 11.85 \
\hline \text { Office equipment repair } & 39.00 \
\hline \text { Cash } & 4.25 \
\hline
\end{array}$$ Prepare the general journal entry to record the replenishment of the petty cash fund on August 31.

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Question 8

Describe a bank reconciliation and discuss its purpose.

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Question 9

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.

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Question 10

Describe a petty cash account and its purpose.

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Question 11

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.

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Question 12

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.

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Question 13

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:
  The company uses the perpetual inventory method. Prepare Quibble's general journal entry to
record both the reimbursement and the increase of the petty fund on February 15.

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The answer of Quibble Company established a $300 petty cash...

Question 14

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?

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Question 15

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.

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Question 16

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.

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Question 17

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.

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Question 18

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.

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Question 19

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.

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Question 20

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.
 $$\begin{array} { | l | l | l | l | } 
\hline \text { Bank statement cash balance } & & \text { Book balance of cash } & \
\hline \text { Add: } & 0 & \text { Add: } & 0 \
\hline & 0 & & 0 \
\hline \text { Deduct: } & 0 & & 0 \
\hline & 0 & \text { Deduct: } & 0 \
\hline & 0 & & 0 \
\hline & 0 & & 0 \
\hline \text { Reconciled balance } & &\text { Reconciled balance } & \ 
\hline
\end{array}$$

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Quiz 8: Cash and Internal Controls