Question 1

A company establishes a $100 petty cash fund. The fund is replenished in the amount of $90, after petty cash vouchers of $40 for postage, $34 for donations, and $27 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 $100 petty cash...

Question 2

Use the following information regarding Sanders Company to answer the question below.
1) Established a petty cash fund in the amount of $200.
2) Reimbursed the petty cash fund given the following petty cash fund disbursements:
A) Payment for postage, $20.
B) Payment for supplies, $70.
3) Increased the petty cash fund by $100.
4) Cash over at the end of the first period was $5.
The entry to record the cash over in the petty cash fund would include a
A)credit to the Cash account for $5.
B)credit to the Petty Cash account for $5.
C)debit to Cash Short or Over for $5.
D)credit to Cash Short or Over for $5.

Accepted Answer

The answer of Use the following information regarding Sanders Company...

Question 3

Indicate whether each business practice listed below strengthens (S) or weakens (W) a company's system of internal control.
a. Bonding of employees
_____
b. Limiting the number of people who have access to cash
_____
c. Combining the recordkeeping and custodianship functions
_____
d. Making all payments with cash
_____
e. Keeping rotation of key employees to a minimum
_____
_____ f. Using prenumbered sales tickets

Accepted Answer

The answer of Indicate whether each business practice listed below...

Question 4

Indicate whether each business practice listed below strengthens (S) or weakens (W) a company's system of internal control.
_____
a. Discouraging employees from taking paid vacations
_____
b. Using banking facilities as much as possible
_____
c. Having employees bonded
_____
d. Conducting surprise audits of cash on hand
_____
e. Having one person open the mail
_____
_____ f. Having the receiving department compare goods received with goods ordered

Accepted Answer

The answer of Indicate whether each business practice listed below...

Question 5

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

The answer of Under a perpetual inventory system, is it...

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

Indicate the letter of where each of the following documents would be prepared and the letter of where it would be sent.
a. Requesting department
b. Purchasing department
c. Receiving department
d. Accounting department
e. Treasurer
f. Vendor

Accepted Answer

The answer of Indicate the letter of where each of...

Question 8

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 9

Magnolia Company has established a petty cash fund for small expenditures. In the journal provided, prepare the entries for the following transactions. (Omit explanations.)

Accepted Answer

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

Question 10

The Sharon Advocate has established a petty cash fund for small expenditures. In the journal provided, prepare the entries for the following transactions. (Omit explanations.)

Accepted Answer

The answer of The Sharon Advocate has established a petty...

Question 11

A $100 petty cash fund has cash of $14 and valid receipts for $75. The entry to replenish the fund would include a

Accepted Answer

The answer of A $100 petty cash fund has cash...

Question 12

Otto Sounds, Inc., a specialty retailer of customized audio systems for automobiles, installed a perpetual inventory system in the second quarter of 20x3. 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 20x8, 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 Otto Sounds, Inc., a specialty retailer of...

Question 13

For each description below, state which document is being described.
a. Document issued to permit the treasurer to make a payment
b. Bill sent by the vendor to the purchaser
c. Written request prepared by a department asking the purchasing department to make a purchase
d. Document accompanying money put in the bank
e. Document describing items in a shipment of goods delivered
f. Document sent to a vendor requesting shipment of goods

Accepted Answer

The answer of For each description below, state which document...

Question 14

As the controller of a large company, you notice that the Cash Short or Over account is consistently debited for fairly large sums of cash when the petty cash fund is replenished. You probably will want to

Accepted Answer

The consistent debiting of the Cash Short or Over account indicates that there may be some discrepancies in the handling of the petty cash fund. Finding a new custodian for the fund may help solve this issue by introducing new oversight and accountability. Increasing or decreasing the fund amount will not necessarily address the root cause of the problem, and congratulating the custodian without investigating the issue could lead to further financial complications in the future.

Question 15

The Report of Management in Townsgate 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 Townsgate Company's...

Question 16

The entry for establishing a $200 petty cash fund would be

Accepted Answer

The answer of The entry for establishing a $200 petty...

Question 17

A company establishes a $150 petty cash fund. The fund is replenished in the amount of $136, after petty cash vouchers of $66 for transportation, $44 for supplies, and $22 for postage 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 $150 petty cash...

Quiz 7: Internal Control