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Exam 5: Internal Control and Cash

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Question 21

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The bank statement for Exible Co.indicates a balance of $10,252.50 on June 30, 2016.The cash account for the company had a balance of $4,787.10.Prepare a bank reconciliation on the basis of the following reconciling items: (a)Cash sales of $351 had been erroneously recorded as $315. (b)Deposits in transit not recorded by bank, $500. (c)Bank debit memorandum for service charges, $45. (d)Bank credit memorandum for note collected by bank, $2,782, including $63 interest. (e)Bank debit memorandum for $223.40 NSF (not sufficient funds) check from Alice Martin, a customer. (f)Checks outstanding, $3,415.80.

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Question 22

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The highly liquid investments that a company may invest in when they temporarily have excess cash are called _____.

A) cash equivalents
B) bank overdrafts
C) cash short and over
D) vouchers

E) A) and B)
F) A) and C)

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Question 23

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Using the following information, list the items that will require adjustments to the accounts of Salem Co.Also, indicate which accounts will increase or decrease due to the adjustment. (a)The bank statement balance is $2,597. (b)The cash account balance is $2,680. (c)Outstanding checks amounted to $703. (d)Deposits in transit are $732. (e)The bank service charge is $25. (f)Interest added to the checking account by the bank is $7. (g)A check drawn for $59 was incorrectly charged by the bank as $95.

A voucher is a written authorization to make a cash payment.

A voucher is a form where pertinent data about a liability and the particulars of its payment are recorded.

A voucher system is an example of an internal control procedure over cash payments.

For a strong internal control system over cash, it is important to have the duties related to cash receipts and cash payments divided among different employees.

In preparing a bank reconciliation, the amount indicated by a credit memorandum for a note receivable collected by the bank is added to the cash balance per books.

When there are major changes in strategy, senior management, business structure, or operations, evaluations of controls is usually performed by _____.

Terri Co.established a petty cash fund of $2,300.What is the effect of this transaction?

Accompanying the bank statement was a debit memorandum for bank service charges.What adjustment is required in the depositor's accounts?

The ratio of cash to monthly cash expenses is computed as _____.

Day Time Company records the receipts from cash sales of $41,200 as $12,400.What adjustment is required in the bank's accounts?

Why would a bank require a company to maintain a compensating balance?

A customer's check received in settlement of an account receivable is considered cash.

Identify each of the following as related to (a) the control environment, (b) risk assessment, or (c) control procedures. (1) Mandatory vacations (2) Personnel policies (3) Report of outside consultants on future market changes

If a company's net cash flows from operating activities is $1,500,000 for a year and its end of the year cash and cash equivalents balance is $750,000, determine the company's ratio of cash to monthly cash expenses.

The ratio of cash to monthly cash expenses can be used to _____.

In a computerized system, paid vouchers are transferred to a paid voucher file.

ABC Co.'s petty cash receipts indicate the following expenditures for the end of October:? Office supplies.....................$490 Miscellaneous selling expense.................$300 Miscellaneous administrative expense....$120 What is the cumulative effect of these transactions on the statement of cash flows?