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Exam 8: Internal Control and Cash

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Question 91

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Match the following elements of internal control: -Control procedures

A) Provides reasonable assurance that business goals will be achieved
B) Used by management for guiding operations and ensuring compliance with requirements
C) Overall attitude of management and employees
D) Used to locate weaknesses and improve controls
E) Identify, analyze, and assess likeliness of vulnerabilities

F) B) and E)
G) B) and D)

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Question 92

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You began your new job as the accountant at Bolivar Industries during the month of December. During your first month, you found several interesting issues.? 1) While looking through the invoices, you found Invoices 213-242, 245-271, and 275-290. It appears that invoices243, 244, 272, 273, and 274 are missing.? 2) During the month, Clerk # 3 issued $250 in refunds as compared to Clerks #1, #2, and #4 who issued less than$50 each.? 3) The daily cash receipts and bank deposits reconcile, except on Tuesdays during the month.? 4) Business is generally brisk during the holiday season, but two weeks before Christmas there was a suddenincrease in slow payments. ?Required (a) What kind of warning signs could be associated with these issues? (b) What control could you put in place regarding cash refunds mentioned in (a)(2)?

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(a)1) Missing invoices or gaps in transa...

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Question 93

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After a bank reconciliation is completed, journal entries are prepared for items in the balance per company's records as well as items in the balance per bank statement.

In preparing a bank reconciliation, the amount of an error indicating the recording of a check in the journal for an amount larger than the amount of the check is added to the balance per company's records.

Roper Electronics received its bank statement for the month of August with an ending balance of $11,740. Roper determined that Check No. 613 for $155 and Check No. 601 for $420 were both outstanding. Also, a $6,900 deposit for August 30 was in transit as of the end of the month. Northern Regional Bank also collected a $5,000 notes receivable on August 1 that was issued March 1. Accrued interest is $250. Northern Regional Bank charged a $35 fee for the collection service. The bank statement reveals a bank service charge of $20. A customer check for $68 was returned with the bank statement marked "NSF." The ending balance of the Roper cash account is $12,938.?Prepare a bank/account reconciliation and any necessary journal entries for the reconciliation.

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.

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

If an adjustment for an NSF check is made in a company's bank reconciliation, then the company must have written a bad check during the month.

Garden Gate, Inc. reported the following data in its August 31 annual report. Cash and cash equivalents$ 485,625 Cash flow from operations (630,000)Required (a) What is the company's "cash burn" per month? (b) What is the company's ratio of cash to monthly cash expenses? (c) Interpret the ratio you computed in part b. What are the implications for Garden Gate, Inc.?

For efficiency of operations and better control over cash, a company should maintain only one bank account.

(a)Where are cash equivalents disclosed in the financial statements? (b)List three examples of cash equivalents.

The type of account and normal balance of Petty Cash is a (n)

On April 3, Snappy Sales decides to establish a $135 petty cash fund to relieve the burden on Accounting. (a) Journalize the establishment of the fund. (b) On April 11, the petty cash fund has receipts for mail and postage of $32.75, contributions and donations of$25.25, meals and entertainment of $68.00, and $9.75 in cash. Journalize the replenishment of the fund. (c) On April 12, Snappy Sales decides to increase petty cash to $175. Journalize this transaction.

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

The amount of deposits in transit is included on the bank reconciliation as a (n)

Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the item is a (n)

An element of internal control is

Identify each of the following as relating 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

You began your new job as the accountant for Morton Company. You were surprised to find that the company had a $2,000 petty cash fund, which sits in the break room. The president of the company told you: "Our petty cash system here works quite smoothly. Since everyone is honest here, everyone has access to the fund for incidentals that might pop up in the course of the business day. Most of these situations don't have any receipts tied to them, so I just put the money back in the fund when my secretary tells me that we have run out of petty cash and we debit the amount to Miscellaneous Expense."​Required (a) Should you implement some controls on petty cash? Why? (b) If so, what controls could be used for petty cash?

The following information is from Madison Corporation's accounting records for May. Check No. 3269 was returned as a double payment and voided. Checks that have not cleared the bank include No. 3252, No. 3260, and series No. 3275-3278.? $\begin{array}{|c|r|r|r|}\hline \underline{Check No.} &\underline{ Amount } & \underline{Check No.} & \underline{ Amount } \\\hline 3247 & \$ 32.64 & 3263 & \$ 24.87 \\\hline 3248 & 400.00 & 3264 & 45.00 \\\hline 3249 & 309.22 & 3265 & 33.78 \\\hline 3250 & 256.00 & 3266 & 756.77 \\\hline 3251 & 3,212.17 & 3267 & 84.34 \\\hline 3252 & 56.89 & 3268 & 789.00 \\\hline 3253 & 98.02 & 3269 & 48.90 \\\hline 3254 & 47.55 & 3270 & 34.41 \\\hline 3255 & 1,124.77 & 3271 & 872.00 \\\hline 3256 & 250.00 & 3272 & 22.00 \\\hline 3257 & 68.00 & 3273 & 562.38 \\\hline 3258 & 215.56 & 3274 & 512.00 \\\hline 3259 & 38.55 & 3275 & 603.50 \\\hline 3260 & 92.65 & 3276 & 67.00 \\\hline 3261 & 44.61 & 3277 & 301.61 \\\hline 3262 & 72.96 & 3278 & 47.88 \\\hline\end{array}$ In addition to the above list of checks, Madison had Check No. 2264 for $32.98 and Check No. 2655 for $45.99 outstanding previously that have not cleared.1. Create an outstanding checks list for Madison at the end of May.2. What is the total amount of checks that cleared the bank (written in May)?