Question 1

The April 30 bank statement for Trimble Corporation shows an ending balance of $34,351.The unadjusted cash account balance was $28,250.The accountant for Trimble gathered the following information:
(1)There was a deposit in transit for $4,240.
(2)The bank statement reports a service charge of $39.
(3)A credit memo included in the bank statement shows interest earned of $95.
(4)Outstanding checks totaled $10,935.
(5)The bank statement included a $650 NSF check deposited in April.
What is the true cash balance as of April 30?

Accepted Answer

True cash balance = Unadjusted bank balance of $34,351 + Deposits in transit of $4,240 ? Outstanding checks of $10,935 = $27,656
Alternatively:
True cash balance = Unadjusted book balance of $28,250 ? Service charge of $39 + Interest revenue of $95 ? NSF check of $650 = $27,656

Question 2

Which of the following is an internal control procedure used to safeguard a company's assets?

Accepted Answer

All of these are controls that help safeguard a company's assets, including cash.

Question 3

[The following information applies to the questions displayed below.]
A review of the bank statement and accounting records of Blake Company revealed the following items:
 $\begin{array}{|c|l|}
\hline \text { Item No. } & \text { Description } \
\hline \text { 1) } & \text { Three outstanding checks } \
\hline \text { 2) } & \text { A debit memo showing a bank service charge } \
\hline \text { 3) } & \text { A deposit in transit } \
\hline \text { 4) } & \text { An NSF check written by one of Blake's customers } \
\hline \text { 5) } & \text { A certified check written by Blake that remains outstanding } \
\hline \text { 6) } & \text { A credit memo reflecting interest revenue earned by Blake } \
\hline
\end{array}$
-Which of the item(s)would be added to the unadjusted bank balance to determine the true cash balance?

Accepted Answer

A deposit in transit (Item 3) is added to the unadjusted bank balance to determine the true cash balance because it represents funds that have been received and recorded by the company but not yet reflected in the bank statement.

Question 4

At March 31,Cummins Co.had an unadjusted balance in its cash account of $10,400.At the end of March,the company determined that it had outstanding checks of $900,deposits in transit of $600,a bank service charge of $20,and an NSF check from a customer for $200.What is the true cash balance at March 31?

Accepted Answer

True cash balance = Unadjusted book balance of $10,400 ? Service charge of $20 ? NSF check of $200 = $10,180

Question 5

Which of the following statements accurately describes a fidelity bond?

Accepted Answer

A fidelity bond provides insurance that protects a company from losses caused by employee dishonesty.

Question 6

Which of the following is not a common internal control procedure over cash payments?

Accepted Answer

Providing written copies of receipts to customers is an internal control procedure relating to cash receipts rather than cash payments.

Question 7

Which of the following is not one of the nine features of an internal control system?

Accepted Answer

While customer service comment cards are helpful in monitoring company performance, they are not a generally recognized internal control procedure.

Question 8

Which of the following is not an example of a common control activity?

Accepted Answer

Internal controls can be circumvented by collusion among employees.

Question 9

Chester Company has established internal control policies and procedures in order to achieve the following objectives:
1)Effective evaluation of management performance.
2)Assure that the accounting records contain reliable information.
3)Safeguard the company's assets.
"4)Assure that employees comply with company policy.
Which of these objectives are achieved by accounting controls?"

Accepted Answer

Accounting controls are aimed at achieving the objectives of ensuring that the accounting records contain reliable information and safeguarding the company's assets. Therefore, objectives 2 and 3 are achieved by accounting controls. While employee compliance with company policy may be ensured by policies and procedures outside of accounting controls, such as human resource policies and procedures. As a result, the other objectives (1 and 4) are not exclusively achieved by accounting controls.

Question 10

Which of the following is not a typical document associated with a bank checking account?

Accepted Answer

A cash register tape records the total cash receipts for the day.

Question 11

[The following information applies to the questions displayed below.]
A review of the bank statement and accounting records of Blake Company revealed the following items:
 $\begin{array}{|c|l|}
\hline \text { Item No. } & \text { Description } \
\hline \text { 1) } & \text { Three outstanding checks } \
\hline \text { 2) } & \text { A debit memo showing a bank service charge } \
\hline \text { 3) } & \text { A deposit in transit } \
\hline \text { 4) } & \text { An NSF check written by one of Blake's customers } \
\hline \text { 5) } & \text { A certified check written by Blake that remains outstanding } \
\hline \text { 6) } & \text { A credit memo reflecting interest revenue earned by Blake } \
\hline
\end{array}$
-Which of the item(s)would be subtracted from the company's unadjusted book balance to determine the true cash balance?

Accepted Answer

The answer of [The following information applies to the questions...

Question 12

Which internal control procedure is a deterrent to corruption?

Accepted Answer

The likelihood of fraud or theft is reduced if employees must work together to accomplish it. Clear segregation of duties is frequently used as a deterrent to corruption. When duties are segregated, the work of one employee can act as a check on the work of another employee.

Question 13

[The following information applies to the questions displayed below.]
A review of the bank statement and accounting records of Blake Company revealed the following items:
 $\begin{array}{|c|l|}
\hline \text { Item No. } & \text { Description } \
\hline \text { 1) } & \text { Three outstanding checks } \
\hline \text { 2) } & \text { A debit memo showing a bank service charge } \
\hline \text { 3) } & \text { A deposit in transit } \
\hline \text { 4) } & \text { An NSF check written by one of Blake's customers } \
\hline \text { 5) } & \text { A certified check written by Blake that remains outstanding } \
\hline \text { 6) } & \text { A credit memo reflecting interest revenue earned by Blake } \
\hline
\end{array}$
-Which of the following describes an activity that increases a company's bank account balance?

Accepted Answer

The answer of [The following information applies to the questions...

Question 14

The accountant for Ye Olde Bookstore balanced out the cash register for the day.The company began the day with $125 and ended the day with $1,150.25 in the cash drawer.That day's cash register tape shows $1,031.50 in cash sales.What is the effect on the financial statements of recording the day's sales and any related overage or shortage?

Accepted Answer

Expected change in cash = Cash sales of $1,031.50
Actual change in cash = Ending cash on hand of $1,150.25 ? Beginning cash on hand of $125.00 = $1,025.25
Shortage = Expected change in cash (actual cash sales) of $1,031.50 ? Actual change in cash of $1,025.25 = $6.25
When the company records the day's sales and the shortage, it will increase assets (cash) by $1,025.25 and increase stockholders' equity (retained earnings) by the same amount. It will increase revenue by the cash sales of $1,031.50 and increases expenses by the amount of the shortage of $6.25; resulting in an increase to net income of $1,025.25. A cash inflow for operating activities of $1,025.25 will be reported on the statement of cash flows.

Question 15

Which of the following internal control procedures should be implemented to control cash?

Accepted Answer

All of the procedures relate to controlling cash.

Question 16

Which of the following is an administrative control?

Accepted Answer

Administrative controls are designed to evaluate performance and the degree of compliance with company policies and public laws.

Question 17

Which of the following statements concerning internal controls is true?

Accepted Answer

Strong internal controls provide reasonable, but not absolute, assurance that the objectives of a company will be accomplished.

Question 18

Which of the following is not a motive for the embezzlement of cash by employees?

Accepted Answer

The fact that cash is the common unit of measurement is not a motive for embezzlement.

Question 19

Which of the following is not a common feature of an internal control system?

Accepted Answer

While the mechanics of internal control systems vary from company to company, the more prevalent features include the following: segregation of duties, quality of employees, bonded employees, required absence, a procedures manual, authority and responsibility, prenumbered documents, physical control, and performance evaluations. Internal controls do not relate to effective marketing plans.

Question 20

Which of the following is not a common internal control procedure that would be implemented with regards to cash receipts?

Accepted Answer

This describes an internal control procedure that would be implemented with regards to cash payments rather than cash receipts.

Quiz 6: Internal Control and Accounting for Cash