Question 1

Identify each of the following items 1 through 10 as either (A)cash or (B)cash equivalent.
_____ 1.Coins
_____ 2.Petty cash
_____ 3.Three-month certificate of deposit
_____ 4.Commercial paper
_____ 5.Currency
_____ 6.Certified check
_____ 7.Cashier's check
_____ 8.Money market accounts
_____ 9.Money orders
_____ 10.U.S.treasury bills

Accepted Answer

The answer of Identify each of the following items 1...

Question 2

The gross method of recording purchases refers to the method of recording:
A)Purchases at the invoice price less any cash discounts.
B)Specified amounts and timing of payments that a buyer agrees to make in return for being granted credit.
C)Purchases at the full invoice price, without deducting any cash discounts.
D)Inventory at its selling price.
E)Inventory at the lower of cost or market.

Accepted Answer

The gross method of recording purchases means that purchases are recorded at their full invoice price without deducting any cash discounts. This method is used when the buyer does not take advantage of any cash discounts offered by the seller.

Question 3

A company records purchases using the net method.On February 1,they purchased merchandise inventory on account for $8,300 with terms of 1/10,n/30.The February 1 journal entry to record this transaction would include a:
A)Debit to Merchandise Inventory of $8,300.
B)Debit to Merchandise Inventory of $8,217.
C)Debit to Merchandise Inventory of $83.
D)Credit to Merchandise Inventory of $83.
E)Credit to Accounts Payable of $8,300.

Accepted Answer

$8,300 * 0.99 = $8,217

Question 4

What is a voucher system?

Accepted Answer

The answer of What is a voucher system?...

Question 5

Merchandise with an invoice price of $2,000 was purchased on October 3,terms 1/15,n/60.The company uses the net method to record purchases.The entry to record the cash payment of this purchase obligation on October 17 is:
A)Debit Accounts Payable $1,980; credit Cash $1,980.
B)Debit Accounts Payable $2,000; credit Cash $2,000.
C)Debit Accounts Payable $1,980; credit Discounts Lost $20; credit Cash $2,000.
D)Debit Accounts Payable $2,000; credit Merchandise Inventory $20; credit Cash $1,980.
E)Debit Accounts Payable $2,000; credit Merchandise Inventory $40; credit Cash $1,960.

Accepted Answer

$2,000 * 0.99 = $1,980

Question 6

Define an internal control system and describe its purpose.

Accepted Answer

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Question 7

Explain the difference between cash and cash equivalents.

Accepted Answer

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Question 8

List the principles of internal control.

Accepted Answer

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Question 9

Describe the banking activities that promote the control of cash and identify the internal control objectives served by the banking activities.

Accepted Answer

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Question 10

Reasons that internal controls are crucial to companies that convert from U.S.GAAP to IFRS include all of the following except: 
A)Possible misstatement of financial information.
B)Possible fraud.
C)Controls are significantly different across the globe.
D)Ineffective communication of the change to investors,creditors,and others.
E)Management's inability to certify the effectiveness of the controls.

Accepted Answer

Internal controls are crucial for companies that convert from U.S.GAAP to IFRS for many reasons including the possible misstatement of financial information, possible fraud, ineffective communication of the change to investors, creditors, and others, and management's inability to certify the effectiveness of the controls. However, the fact that controls are significantly different across the globe is not a reason why internal controls are crucial for companies converting to IFRS. Rather, it is a challenge that companies must face in order to ensure that their internal controls are effective under the new reporting standards.

Question 11

Discuss how the principles of internal control apply to cash receipts.

Accepted Answer

The answer of Discuss how the principles of internal control...

Question 12

A company that uses the net method of recording invoices made a purchase of $400 with terms of 2/10,n/30.The entry to record the purchase would include:
A)A debit to Merchandise Inventory for $392.
B)A credit to Discounts Lost for $8.
C)A credit to Cash for $392.
D)A debit to Discounts Lost for $8.
E)A debit to Cash for $392.

Accepted Answer

$400 * 0.98 = $392

Question 13

An expense resulting from failing to take advantage of cash discounts on purchases is called:
A)Sales discounts.
B)Trade discounts.
C)Purchases discounts.
D)Discounts lost.
E)Discounts earned.

Accepted Answer

The correct term for an expense resulting from failing to take advantage of cash discounts on purchases is "discounts lost." This cost occurs when a buyer does not pay their invoice within the discount period offered by the seller, leading to the loss of the discount opportunity.

Question 14

What is the purpose of the days' sales uncollected ratio?

Accepted Answer

The answer of What is the purpose of the days'...

Question 15

A company using the net method of recording purchases failed to take advantage of a discount available.When they pay the full (gross)amount of an invoice at the end of the credit period the journal entry will include a debit to:
A)Merchandise Inventory.
B)Sales Discounts.
C)Discounts Lost.
D)Cash.
E)Accounts Receivable.

Accepted Answer

When a company fails to take advantage of a discount available and pays the full (gross) amount of an invoice at the end of the credit period, they are considered to have lost the discount. This is recorded as a debit to Discounts Lost and a credit to Accounts Payable (or Cash, if payment is made immediately). Therefore, the correct answer is C) Discounts Lost.

Question 16

Identify whether each of the following items 1 through 10 would on appear on the bank side
or the book side of a bank reconciliation.
____ 1.Bank service charges
____ 2.Outstanding checks
____ 3.Deposits in transit
____ 4.NSF check
____ 5.Interest on a checking account
____ 6.The bank incorrectly recorded a check for $9.58.The company properly wrote the check
for $95.80.
____ 7.The bank printed checks for the depositor for a fee.
____ 8.Bank debit memorandum
____ 9.Bank credit memorandum
____10.The bank collected a $1,000 note for the depositor.

Accepted Answer

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Question 17

What is the purpose of the petty cash account?

Accepted Answer

The answer of What is the purpose of the petty...

Question 18

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,Regal Company has decided to drop its property insurance on assets; and stop bonding the cashiers who handle about $10,000 in cash each day.
2.Halton Company records each sale on a preprinted invoice.Since sometimes invoices are damaged in the process of being prepared,the invoices are not prenumbered,but the sales clerk writes the next number onto each invoice.
3.Marion Company is a very small business.Bob Lepley,one of the two office clerks,opens the mail each day and removes the cash receipts that come in the mail.Bob then records the receipts in the cash records and the customer's account and deposits the cash in the bank.
4.Gerald McNichols,the owner of McNichols Company prides himself on hiring only the most competent employees.McNichols believes that since these employees are highly competent and to show that he trusts them completely,he feels there is no need for anyone to check up on the employees' performance.
5.Service Products is a small business with only 3 accounting employees.Each employee is well-trained and so can perform any of the accounting tasks,including handling cash receipts and cash disbursements,and preparing the bank reconciliation.

Accepted Answer

The answer of For each of the independent cases below,identify...

Question 19

The following information is available for the Edwards Company for its March 31 bank reconciliation:
From the March 31 bank statement:
  NSF:
 A check from a customer,Cook Co.in payment of their account.
IN:
 Interest earned on the account.
From the Edwards Company's accounting records:
  1.Based on the above information,prepare a bank reconciliation for the Edwards Company.
2.Prepare the necessary general journal entries to adjust cash to the reconciled balance.

Accepted Answer

The answer of The following information is available for the...

Question 20

Dylan Lauren of Dylan's Candy Bar knew good business practice requires the use of effective internal controls.Identify some of the internal controls that Dylan's Candy Bar should implement and explain how those controls contributed to the firm's success.

Accepted Answer

The answer of Dylan Lauren of Dylan's Candy Bar knew...

Quiz 8: Cash and Internal Controls

Identify each of the following items 1 through 10 as either (A)cash or (B)cash equivalent. ___ 1.Coins _ 2.Petty cash _ 3.Three-month certificate of deposit _ 4.Commercial paper _ 5.Currency _ 6.Certified check _ 7.Cashier's check _ 8.Money market accounts _ 9.Money orders ___ 10.U.S.treasury bills

The gross method of recording purchases refers to the method of recording:

A company records purchases using the net method.On February 1,they purchased merchandise inventory on account for $8,300 with terms of 1/10,n/30.The February 1 journal entry to record this transaction would include a:

What is a voucher system?

Merchandise with an invoice price of $2,000 was purchased on October 3,terms 1/15,n/60.The company uses the net method to record purchases.The entry to record the cash payment of this purchase obligation on October 17 is:

Define an internal control system and describe its purpose.

Explain the difference between cash and cash equivalents.

List the principles of internal control.

Describe the banking activities that promote the control of cash and identify the internal control objectives served by the banking activities.

Reasons that internal controls are crucial to companies that convert from U.S.GAAP to IFRS include all of the following except:

Discuss how the principles of internal control apply to cash receipts.

A company that uses the net method of recording invoices made a purchase of $400 with terms of 2/10,n/30.The entry to record the purchase would include:

An expense resulting from failing to take advantage of cash discounts on purchases is called:

What is the purpose of the days' sales uncollected ratio?

A company using the net method of recording purchases failed to take advantage of a discount available.When they pay the full (gross) amount of an invoice at the end of the credit period the journal entry will include a debit to:

What is the purpose of the petty cash account?

Dylan Lauren of Dylan's Candy Bar knew good business practice requires the use of effective internal controls.Identify some of the internal controls that Dylan's Candy Bar should implement and explain how those controls contributed to the firm's success.