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Exam 7: Sarbanes-Oxley, Internal Control, and Cash

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Question 91

Multiple Choice

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Match each item to a bank statement adjustment, a company books adjustment, or either. -Note collected by the bank

A) bank statement adjustment
B) company books adjustment
C) either

D) A) and B)
E) None of the above

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Question 92

True/False

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

A) True
B) False

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Question 93

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The bank statement for Farmer Co. indicates a balance of $7,735.00 on June 30. After the journals for June had been posted, the cash account had a balance of $4,098.00. Prepare a bank reconciliation on the basis of the following reconciling items: a) Cash sales of $742 had been erroneously recorded in the cash receipts journal as $724. b) Deposits in transit not recorded by bank, $425. c) Bank debit memo for service charges, $35. d) Bank credit memo for note collected by bank, $2,475 including $75 interest. e) Bank debit memo for $256 NSF not sufficient funds) check from Janice Smith, a customer. f) Checks outstanding, $1,860.

In preparing a bank reconciliation, the amount indicated by a credit memo for a note receivable collected by the bank is added to the balance per company's records.

Businesses who have several bank accounts, petty cash, and cash on hand, would maintain a separate ledger account for each type of cash.

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

A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. What entry is required in the company's accounts?

A backlog in recording transactions is an example of a warning sign from the accounting system.

Bank customers are considered creditors of the bank so the bank shows their accounts with credit balances on the bank's records.

In preparing a bank reconciliation, the amount indicated by a debit memo for bank service charges is added to the balance per company's records.

Which of the following should not be considered cash by an accountant?

Assign the letter to indicate whether the following items would be added or subtracted from the company's books or the bank statement during the construction of a bank reconciliation. -outstanding checks

Expenditures from a petty cash fund are documented by a petty cash receipt.

Assign the letter to indicate whether the following items would be added or subtracted from the company's books or the bank statement during the construction of a bank reconciliation. -interest revenue earned by the note above

The amount of cash to be reported on the balance sheet at June 30 is the

Consider the following information taken from the cash account. Assume cash payments were 80% of collections. How much was the beginning balance of the cash account?

An element of internal control is

Depositing all cash, checks, etc. in a bank and paying with checks is an internal control procedure over cash.

Journalize the entries to record the following: March 1 Established a petty cash fund of $300. March 31 The amount of cash in the petty cash fund is now $64. The fund is replenished based on the following receipts: office supplies, $137; selling expenses, $112. Record any discrepancy in the cash short and over account. Journal

The Sarbanes-Oxley Act requires that financial statements of all public companies report on management's conclusions about the effectiveness of the company's internal control procedures.