Question 1

Why do businesses need to keep some currency on hand?

Accepted Answer

The answer of Why do businesses need to keep some...

Question 2

Under a perpetual inventory system,is it necessary to take a physical inventory at the end of the period? Why or why not?

Accepted Answer

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Question 3

The petty cash fund of Writer Company was established on May 1 and appeared as follows on May 31:

a.Prepare the journal entry on May 1 to establish the fund (omit explanation).
b.Prepare the journal entry on May 31 to replenish the fund (omit explanation).

Accepted Answer

The answer of The petty cash fund of Writer Company...

Question 4

Compute the correct amount for each letter in the following table:

Accepted Answer

The answer of Compute the correct amount for each letter...

Question 5

The Sarbanes-Oxley Act of 2002 does not apply to
A)public companies with assets over $300 million.
B)public companies with assets under $1 million.
C)privately owned companies.
D)companies established after 2002.

Accepted Answer

The Sarbanes-Oxley Act of 2002 applies only to publicly traded companies, not privately owned companies.

Question 6

Why is the separation of duties an important control activity in a good system of internal control?

Accepted Answer

The answer of Why is the separation of duties an...

Question 7

Chaney Company has established a petty cash fund for small expenditures.Prepare journal entries for the following transactions (omit explanations).

Accepted Answer

The answer of Chaney Company has established a petty cash...

Question 8

The Sarbanes-Oxley Act of 2002 requires all of the following to certify a public company's system of internal control,except for the
A)chief financial officer.
B)the independent auditors.
C)the board of directors.
D)chief executive officer.

Accepted Answer

The Sarbanes-Oxley Act of 2002 requires the chief executive officer, chief financial officer, and independent auditors to certify a public company's system of internal control, but it does not require the board of directors to do so.

Question 9

The Sarbanes-Oxley Act of 2002 requires management to acknowledge its responsibility for internal control
A)in the company's annual report.
B)in a public statement posted on social media.
C)in a posted notice at the front of company headquarters.
D)in all of these.

Accepted Answer

The Sarbanes-Oxley Act of 2002 requires management to acknowledge its responsibility for internal control in the company's annual report.

Question 10

On a balance sheet,what items normally are included in Cash?

Accepted Answer

The answer of On a balance sheet,what items normally are...

Question 11

The Report of Management in Brighton Company's annual report states,"Management has established a system of internal controls to provide reasonable assurance that assets are maintained and accounted for in accordance with its policies and that transactions are recorded accurately on the company's books and records." Name five control activities Townsgate could and probably does implement.

Accepted Answer

The answer of The Report of Management in Brighton Company's...

Question 12

Public companies are required to
A)have an independent audit of financial statements.
B)have an audit of the internal control systems.
C)fully document and certify the company's system of internal controls.
D)do all of these.

Accepted Answer

Public companies are required to have an independent audit of financial statements, have an audit of the internal control systems, as well as fully document and certify the company's system of internal controls. These measures are put in place to ensure transparency and accuracy of financial reporting, and to prevent fraud or errors in financial statements.

Question 13

An accountant is responsible for the following activities: 
(1)receiving all cash; (2)maintaining the general ledger; (3)maintaining the accounts receivable subsidiary ledger that includes the individual records of each customer; (4)maintaining the journals for recording sales,purchases,and cash receipts;and (5)preparing monthly statements to be sent to customers.As a service to customers and employees,the company allows the accountant to cash checks of up to $75 with money from the cash receipts.When deposits are made,the checks are included in place of the cash receipts.What weaknesses in internal control exist in this system?

Accepted Answer

The answer of An accountant is responsible for the following...

Question 14

Mandisa Sounds,Inc. ,a specialty retailer of customized audio systems for automobiles,installed a perpetual inventory system in the second quarter of 2011.The new system allowed the firm to adjust its merchandise inventories to sales patterns more effectively and to prepare monthly financial statements.Although the system led to an improvement in sales and income,the gross margin on the monthly income statements was falling below both management's expectations and the industry average.At the end of 2014,a physical inventory revealed that actual merchandise inventory was considerably lower than the perpetual inventory records indicated.The merchandise inventories of some stores were off more than others,but all had deficiencies.What probably caused these losses and what steps could be taken to prevent them in the future?

Accepted Answer

The answer of Mandisa Sounds,Inc. ,a specialty retailer of customized...

Question 15

The following is a quote found in a company's annual report: 
In our opinion,the Company maintained,in all material respects,effective internal control over financial reporting...
This statement would have been made by
A)the company's independent auditors.
B)the chief financial officer.
C)the chief executive officer.
D)the board of directors.

Accepted Answer

The statement is referring to the effectiveness of internal controls over financial reporting, which is the responsibility of the independent auditors to assess and opine on in their audit report. The chief financial officer, chief executive officer, and board of directors may have knowledge of the effectiveness of internal controls, but it is ultimately the independent auditors who provide an opinion on it in the annual report.

Question 16

Explain management's responsibility as it pertains to internal control of a company.

Accepted Answer

The answer of Explain management's responsibility as it pertains to...

Question 17

The management of public companies must establish systems that
A)safeguard the firm's assets.
B)ensure reliability of its accounting records.
C)see that employees comply with legal requirements
D)do all of these.

Accepted Answer

The management of public companies must establish systems that safeguard the firm's assets, ensure the reliability of its accounting records, and see that employees comply with legal requirements. All of these are important for the proper functioning of a public company and to maintain the trust of stakeholders. Therefore, option D is the best choice.

Question 18

A company establishes a $200 petty cash fund.The fund is replenished in the amount of $180,after petty cash vouchers of $80 for postage,$68 for donations,and $54 for meals had accumulated.Was there a cash shortage,overage,or neither? (State amount if overage or shortage. )

Accepted Answer

The answer of A company establishes a $200 petty cash...

Question 19

Privately owned companies
A)are required to have an independent CPA audit their financial statements.
B)are required to have their internal control systems audited.
C)are required to have both the financial statements and internal control systems audited.
D)are not required to do any of these.

Accepted Answer

Privately owned companies are not required by law to have an independent CPA audit their financial statements or internal control systems. However, it is recommended that they do so for the benefit of the company and its stakeholders.

Question 20

Jasmine Company has established a petty cash fund for small expenditures.Prepare journal entries for the following transactions (omit explanations).

Accepted Answer

The answer of Jasmine Company has established a petty cash...

Quiz 7: Cash and Internal Control

Why do businesses need to keep some currency on hand?

Under a perpetual inventory system,is it necessary to take a physical inventory at the end of the period? Why or why not?

The petty cash fund of Writer Company was established on May 1 and appeared as follows on May 31: a.Prepare the journal entry on May 1 to establish the fund (omit explanation). b.Prepare the journal entry on May 31 to replenish the fund (omit explanation).

Compute the correct amount for each letter in the following table:

The Sarbanes-Oxley Act of 2002 does not apply to

Why is the separation of duties an important control activity in a good system of internal control?

Chaney Company has established a petty cash fund for small expenditures.Prepare journal entries for the following transactions (omit explanations).

The Sarbanes-Oxley Act of 2002 requires all of the following to certify a public company's system of internal control,except for the

The Sarbanes-Oxley Act of 2002 requires management to acknowledge its responsibility for internal control

On a balance sheet,what items normally are included in Cash?

Public companies are required to

The following is a quote found in a company's annual report: In our opinion,the Company maintained,in all material respects,effective internal control over financial reporting... This statement would have been made by

Explain management's responsibility as it pertains to internal control of a company.

The management of public companies must establish systems that

A company establishes a $200 petty cash fund.The fund is replenished in the amount of $180,after petty cash vouchers of $80 for postage,$68 for donations,and $54 for meals had accumulated.Was there a cash shortage,overage,or neither? (State amount if overage or shortage. )

Privately owned companies

Jasmine Company has established a petty cash fund for small expenditures.Prepare journal entries for the following transactions (omit explanations).