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Exam 8: Sarbanes-Oxley, Internal Control, and Cash

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Question 31

True/False

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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.

A) True
B) False

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Question 32

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Cash equivalents include

A) checks
B) coins and currency
C) money market accounts and commercial paper
D) stocks and short-term bonds

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

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Question 33

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

A remittance advice is the notification accompanying the check issued to a creditor that states the specific invoice being paid.

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

Bank reconciliation information for Cole Co. for May 31, 2011 is as follows: Record the appropriate journal entry for Cole Co.

The amount of the outstanding checks is included on the bank reconciliation as a(n)

The following data were gathered to use in reconciling the bank account of Savannah Company: What is the adjusted balance on the bank reconcilition?

Select each of the following as relating to (a) the control environment, (b) risk assessment, or (c) control procedures.

The debit balance in Cash Short and Over at the end of an accounting period is reported as

If the balance in Cash Short and Over at the end of a period is a credit, it should be reported as an "other income" item on the income statement.

Sarbanes-Oxley's purpose is to improve financial reporting.

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 invoices 243, 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 sudden increase in slow payments. REQUIRED: Part A: What kind of warning signs could be associated with these issues? Part B: What control could you put in place regarding cash refunds mentioned in Part A (2)?

Roper Electronics received its bank statement for the month of August with an ending balance of $11,740.00. Roper determined that check #613 for $155.00 and check #601 for $420.00 were both outstanding. Also, a $6,900.00 deposit for August 30th was in transit as of the end of the month. Northern Regional Bank also collected a $5,000.00 notes receivable on August 1st that was issued March 1st at 12% annual interest. No interest revenue has been accrued on this note and Northern Regional Bank charged a $35.00 fee for the collection service.The bank statement reveals a bank service charge of $20.00. A customer check for $68.00 was returned with the bank statement marked "NSF". The ending balance of the Roper cash account is $12,938.00. Complete a bank/account reconciliation and prepare any necessary journal entries for the reconciliation.

A $135 petty cash fund has cash of $28 and receipts of $110. The journal entry to replenish the account would include a

An element of internal control is

There are three parties to a check. The drawer is

The term cash includes

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

A debit or credit memo describing entries in the company's bank account may be enclosed with the bank statement. An example of a credit memo is