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Exam 6: Cash, fraud, and Internal Controls

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Question 51

Multiple Choice

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A company had net sales of $21,500 and ending accounts receivable of $2,700 for the current period.Its days' sales uncollected equals: (Use 365 days a year.)

A) 8.0 days.
B) 58.9 days.
C) 45.8 days.
D) 7.4 days.
E) 45.2 days.

F) B) and D)
G) A) and D)

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Question 52

Multiple Choice

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A company had $43 missing from petty cash that was not accounted for by petty cash receipts.The correct procedure is to:

A) Debit Cash Over and Short for $43.
B) Credit Cash Over and Short for $43.
C) Debit Petty Cash for $43.
D) Credit Petty Cash for $43.
E) Credit Cash for $43.

F) None of the above
G) A) and D)

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Question 53

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It is generally not necessary for businesses to reconcile their checking accounts since banks keep accurate records and provide internal control support for cash.

Outstanding checks,deposits in transit,and bank service charges are added to the beginning balance of the bank statement to determine the adjusted bank balance.

A voucher system is a set of procedures and approvals:

Havermill Co.establishes a $250 petty cash fund on September 1.On September 30,the fund is replenished.The accumulated receipts on that date represent $73 for Office Supplies,$137 for merchandise inventory,and $22 for miscellaneous expenses.The fund has a balance of $18.On October 1,the accountant determines that the fund should be increased by $50. -The journal entry to record the establishment of the fund on September 1 is:

________ reflects the liquidity of a company's accounts receivable.

________ includes currency,coins,and amounts on deposit in checking accounts and savings accounts.

The document prepared by the vendor that is an itemized statement of goods listing the customer's name,items sold,sales prices,and terms of the sale is the ________.

A person who controls or has access to an asset must not keep that asset's accounting records.This describes the internal control principle of ________.

In the process of reconciling its bank statement for January,Maxi's Clothing's accountant compiles the following information: $\begin{array} { | l | r | } \hline \text { Cash balance per company books on January 30 } & \$ 4,725 \\\hline \text { Deposits in transit at month-end } & \$ 1,800 \\\hline \text { Outstanding checks at month-end } & \$ 520 \\\hline \text { Bank service charges } & \$ 25 \\\hline \text { EFT automatically deducted monthly, not yet recorded by Maxi } & \$ 380 \\\hline \text { An NSF check returned on a customer account } & \$ 265 \\\hline\end{array}$ The adjusted cash balance per the books on January 31 is:

A voucher system's control over cash disbursements begins when a company incurs an obligation that will result in eventual payment of cash.

The voucher system of control:

A ________ fund is used to make cash disbursements of small amounts to avoid the time and cost of writing checks.

During the month of July,Clanton Industries issued a check in the amount of $845 to a supplier on account.The check did not clear the bank during July.In preparing the July 31 bank reconciliation,the company should:

Having external auditors test the company's financial records and evaluate the effectiveness of the internal control system is part of the internal control principle of ________.

Internal control procedures for cash receipts do not require that:

When a company purchases an insurance policy against losses from theft by an employee,that employee is ________.

A voucher system is a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.

The entry to record reimbursement of the petty cash fund for postage expense should include: