Question 1

Jack's Jungle Fun, Inc. is a manufacturer of children's outdoor play equipment. The factory foreman determines when orders for materials are necessary. The orders are sent to the purchasing department that places orders with the vendors recommended by the factory foreman. When the materials are received, they are delivered directly to a central storeroom without counting what has been received. When invoices are received for the materials purchased, they are sent to the accounting department for payment. The accounting department compares the invoices with purchase orders. If the two documents are in agreement, the invoice is approved for payment. The accounting department prepares the checks that are signed by the company treasurer.
Recommend improvements in the company's procedures for purchasing and paying for purchases of materials that will provide better internal control over purchases and payment for those purchases.

Accepted Answer

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Question 2

Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation.
-Customer's NSF check is returned with the bank statement

Accepted Answer

The customer's NSF check being returned means that the bank deducted the amount from Latahmer Corporation's account, but the corporation had previously recorded the customer's payment in their records. Therefore, the NSF check should be subtracted from the book balance to match the bank balance.

Question 3

Match the term with the statement that best defines it.
-Procedures concerned with safeguarding the assets or the reliability of financial statements.

Accepted Answer

Accounting controls are specifically designed to protect company assets and ensure the accuracy and reliability of financial statements. Administrative controls focus on the efficiency and effectiveness of operations, while an audit committee and board of directors provide oversight and guidance for the organization as a whole. An accounting system encompasses all of these elements, but specifically refers to the software and processes used to record financial transactions.

Question 4

Match the term with the statement that best defines it.
-Controls that are focused more on efficient operation than with correct reporting of information.

Accepted Answer

Administrative controls are focused on the efficient operation of an organization, while accounting controls are focused on the correct reporting of information. The accounting system refers to the software and procedures used to track financial transactions. The audit committee is a group that oversees the financial reporting and auditing process, while the board of directors is responsible for making strategic decisions for the organization.

Question 5

Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation.
-Interest earned on the checking account for May

Accepted Answer

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Question 6

What are some of the limitations on a company's effective system of internal control?

Accepted Answer

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Question 7

Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation.
-Customer's check which was deposited on May 31 is not listed on the bank statement

Accepted Answer

This item represents a deposit in transit, which means it was recorded by the company but not yet by the bank. Therefore, it should be added to the bank balance on the reconciliation to reflect the amount that will be credited by the bank.

Question 8

McDonald's Corporation is the largest food service organization in the world. The proper handling of cash and food is important to the profitability of McDonald's. Based on your personal knowledge of McDonald's and the internal control concepts and procedures described in the textbook, answer the following questions.
REQUIRED:
Describe procedures that you believe McDonald's may use to control cash receipts.

Accepted Answer

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Question 9

Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation.
-Service charge on the May bank statement for new checks

Accepted Answer

Service charges on a bank statement, such as for new checks, are expenses recognized by the company. Therefore, they are subtracted from the company's book balance to reconcile with the bank's records.

Question 10

What are at least four important internal control procedures?

Accepted Answer

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Question 11

Match the term with the statement that best defines it.
-Consists of all methods and records used to accurately report an entity's transactions.

Accepted Answer

An accounting system consists of all methods and records used to accurately report an entity's transactions.

Answer: A 
 Accounting controls refer to the policies, procedures, and techniques implemented by an organization to ensure the accuracy and reliability of its financial information.

Answer: C 
 Administrative controls are the measures taken by an organization to safeguard its assets, ensure the accuracy of financial information, and promote operational efficiency.

Answer: D 
 An audit committee is a group of independent directors responsible for overseeing the financial reporting and audit process of an organization.

Answer: E 
 The board of directors is a group of individuals responsible for overseeing the overall management and direction of an organization. They typically approve major corporate decisions and set policies and strategies for the organization.

Question 12

Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation.
-Check written on the company's account and paid by the bank is returned with the bank statement

Accepted Answer

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Question 13

The garden club is planning a raffle. The president overheard you talking about internal controls to another member and asked you to set up some guidelines to "make sure" that all money collected for the upcoming raffle is accounted for by the club.
REQUIRED:
1. In general, describe some guidelines that the club should follow to achieve an acceptable level of internal control.
2. Regarding the president's request, is it really possible to make sure that all money is collected and recorded?

Accepted Answer

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Question 14

What is the typical composition of a board of directors of a publicly held corporation?

Accepted Answer

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Question 15

Match the term with the statement that best defines it.
-Provides direct contact between the shareholders and the independent auditing firm.

Accepted Answer

The statement describes the audit committee, which is established by the board of directors to provide direct contact between the shareholders and the independent auditing firm. Accounting controls are procedures designed to ensure that financial information is accurate and reliable, while an accounting system is a set of procedures used to record and report financial information. Administrative controls refers to the policies and procedures put in place to manage a business, while the board of directors is responsible for overseeing the company's management and strategic direction.

Question 16

Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation.
-Check written in May that does not appear on the bank statement

Accepted Answer

A check written in May that does not appear on the bank statement is an outstanding check. It has been recorded in the company's books but has not yet been processed by the bank, so it is subtracted from the bank balance in the reconciliation to match the company's records.

Question 17

Herbert and Evita are planning to open a quick copy center near the local college. They will make both cash and credit sales. They will hire college students to make copies and to operate the cash register. Either Herbert or Evita will act as manager during most hours that the business will be open. One student will be designated as assistant manager when they cannot be present.
Describe procedures that Herbert and Evita might use to provide adequate internal control over cash and credit sales and bank deposits.

Accepted Answer

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Question 18

An effective system of internal control is critical to protecting a company's investment in three of its major assets: cash, accounts receivable, and inventory. For each asset, describe how a company might protect that asset.

Accepted Answer

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Question 19

McDonald's Corporation is the largest food service organization in the world. The proper handling of cash and food is important to the profitability of McDonald's. Based on your personal knowledge of McDonald's and the internal control concepts and procedures described in the textbook, answer the following questions.
REQUIRED:
Describe procedures that you believe McDonald's may use to control the purchase and payment of food products.

Accepted Answer

The answer of McDonald's Corporation is the largest food service...

Question 20

McDonald's Corporation is the largest food service organization in the world. The proper handling of cash and food is important to the profitability of McDonald's. Based on your personal knowledge of McDonald's and the internal control concepts and procedures described in the textbook, answer the following questions.
REQUIRED:
Most corporations, including McDonald's, include a Report of Management in their annual report. Describe, in general, the main elements that should be included in a Report of Management and give the purpose of this report.

Accepted Answer

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Quiz 6: Cash and Internal Control

Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation. -Customer's NSF check is returned with the bank statement

Match the term with the statement that best defines it. -Procedures concerned with safeguarding the assets or the reliability of financial statements.

Match the term with the statement that best defines it. -Controls that are focused more on efficient operation than with correct reporting of information.

Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation. -Interest earned on the checking account for May

What are some of the limitations on a company's effective system of internal control?

Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation. -Customer's check which was deposited on May 31 is not listed on the bank statement

Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation. -Service charge on the May bank statement for new checks

What are at least four important internal control procedures?

Match the term with the statement that best defines it. -Consists of all methods and records used to accurately report an entity's transactions.

Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation. -Check written on the company's account and paid by the bank is returned with the bank statement

What is the typical composition of a board of directors of a publicly held corporation?

Match the term with the statement that best defines it. -Provides direct contact between the shareholders and the independent auditing firm.

Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation. -Check written in May that does not appear on the bank statement

An effective system of internal control is critical to protecting a company's investment in three of its major assets: cash, accounts receivable, and inventory. For each asset, describe how a company might protect that asset.