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Exam 8: Internal Control and Cash

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Question 1

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Stephanie Jo Company established a petty cash fund of $300 on May 1. At the end of the month, the petty cash fund has $42 in cash; receipts for postage, $39; entertainment, $146; and office supplies, $70.Prepare the needed journal entries, recording any discrepancy in the cash short and over account.? $\begin{array}{l}\text { Journal }\\\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \text { Description } & \begin{array} { c } \text { Post. } \\\text { Ref. }\end{array} & \text { Debit } & \text { Credit } \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline\end{array}\end{array}$

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Question 2

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A special form on which is recorded pertinent data about a liability and the particulars of its payment is called a (n)

A) invoice
B) voucher
C) debit memo
D) remittance advice

E) All of the above
F) A) and C)

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Question 3

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An example of good internal controls over cash payments is the taking of all cash discounts offered.

Aspen, Inc. reported the following data in its annual report:? Cash and cash equivalents $460,000 Cash flow from operations (240,000)?Required (1) What is the company's "cash burn" per month? (2) What is the company's ratio of cash to monthly cash expenses?

On April 2, Granger Sales decides to establish a $125 petty cash fund to relieve the burden on Accounting.? (a) Journalize the establishment of the fund. (b) On April 10, the petty cash fund has receipts for mail and postage of $43.50, contributions and donations of$29.50, meals and entertainment of $38.25, and $13.55 in cash. Journalize the replenishment of the fund. (c) On April 11, Granger Sales decides to increase petty cash to $200. Journalize this event.

You are trying to explain debit and credit memos that appear on bank statements and whether these will increase or decrease your company's bank account balance. Complete the following table to help your new staff understand. $\begin{array} { | l | c | c| } \hline { \text { Item } } & \begin{array} { c } \text { Debit } \\\text { or } \\\text { Credit } \\\text { Memo }\end{array} & \begin{array} { c } \text { Increases or } \\\text { Decreases the } \\\text { Company's Bank } \\\text { Account Balance }\end{array} \\\hline \text { EFT payment } & & \\\hline \begin{array} { l } \text { Bank correction of an error due to posting another } \\\text { customer's check to your account }\end{array} & & \\\hline \text { Service charge } & & \\\hline \text { Note and interest collected for our company } & & \\\hline \text { NSF check } & & \\\hline \begin{array} { l } \text { Bank correction of an error recording a } \$ 250 \text { deposit as } \\\$ 520\end{array} & & \\\hline \text { EFT deposit } & & \\\hline\end{array}$

Cash equivalents include

When a firm uses internal auditors, it is adhering to which of the following internal control elements?

What entry is required in the company's accounts to record outstanding checks?

Jamison Company gathered the following reconciling information in preparing its June bank reconciliation:?? $\begin{array} { | l | r | } \hline \text { Cash balance per bank, June } 30 & \$ 13,000 \\\hline \text { Note receivable collected by bank } & 4,000 \\\hline \text { Outstanding checks } & 7,000 \\\hline \text { Deposits in transit } & 2,500 \\\hline \text { Bank service charge } & 35 \\\hline \text { NSF check } & 1,900 \\\hline\end{array}$ Using the above information, determine the cash balance per books (before adjustments) for Jamison Company.

The bank reconciles its statement to the company's records.

Which of the following would not be included with the cash and cash equivalents on the balance sheet?

During the year, Tempo Inc. has monthly cash expenses of $115,000. On December 31, its cash balance is $1,437,500. The ratio of cash to monthly cash expenses is

A bank reconciliation should be prepared periodically because

List the objectives of internal control and give an example of how each is implemented.

A minimum cash balance required by a bank is called

Which of the following would be subtracted from the balance per books on a bank reconciliation?

Match the following elements of internal control: -Control environment

List the principal advantages of electronic funds transfers.

Match each item to a bank statement adjustment, a company books adjustment, or either. -Charges for some other company's safe deposit box were posted to your account