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Exam 6: Internal Control and Accounting for Cash

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Question 31

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Which of the following statements regarding the Securities and Exchange Commission (SEC) is not true?

A) SEC rules frequently require disclosures in addition to those required by GAAP.
B) The SEC has the authority to establish and enforce accounting rules for public companies.
C) The SEC is a private professional organization.
D) Public companies must register with the SEC.

E) B) and C)
F) C) and D)

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Question 32

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[The following information applies to the questions displayed below.] The bank statement for Tetra Company contained the following items: a bank service charge of $10; a credit memo for interest earned, $15; and a $50 NSF check from a customer. The company had outstanding checks of $100 and a deposit in transit of $300. -Assuming that the unadjusted bank balance was $500,what is the unadjusted book balance?

A) $745
B) $455
C) $700
D) $800

E) None of the above
F) A) and C)

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Question 33

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At March 31,Cummins Co.had an unadjusted balance in its cash account of $10,400.At the end of March,the company determined that it had outstanding checks of $900,deposits in transit of $600,a bank service charge of $20,and an NSF check from a customer for $200.What is the true cash balance at March 31?

Which of the following statements is true with regards to financial statement audits?

Which of the following will be caused by the entry to record the customer's NSF check?

Typical adjustments to the unadjusted book balance on a bank reconciliation include bank service charges,customer NSF checks,and certified checks.

Which of the following statements concerning internal controls is true?

A business learns about customers' NSF checks through debit memos that are included with the bank statement.

Chester Company has established internal control policies and procedures in order to achieve the following objectives: 1) Effective evaluation of management performance. 2) Assure that the accounting records contain reliable information. 3) Safeguard the company's assets. Which of these objectives are achieved by accounting controls?

Which of the following is not a primary role of an independent auditor?

Which of the following is an administrative control?

Establishment of a petty cash fund is an asset exchange transaction.

Jasper Company accepted a check from Harp Company as payment for services rendered.Jasper's bank statement revealed that the Harp check was an NSF check.What effect will the entry to record the NSF check have on the accounting equation of Jasper Company?

Internal controls designed to evaluate performance and the degree of compliance with company policies and public laws are classified as administrative controls.

For a petty cash fund to be most useful to a business,one of the employees of the business should be designated as responsible for the fund.

Gross Company established a $250 petty cash fund on January 1.On March 1,the fund contained $160 in receipts for miscellaneous expenses and $85 in cash.If the entries to record the disbursements and to replenish the fund are combined,what effect will the resulting entry have on the elements of the financial statements?

A credit balance in the Cash Short and Over account represents a shortage of cash and would be treated as an expense.

While performing its monthly bank reconciliation,the bookkeeper for Grace Corporation noted that a deposit of $990 (received from a customer on account) was recorded in the company books as $900.Which of the following shows the effect of the correcting entry on the financial statements?

The Securities and Exchange Commission is authorized to establish and enforce the accounting rules for public companies.

Which of the following is not one of the nine features of an internal control system?