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

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Question 91

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Most companies who have several bank accounts, petty cash, and cash on hand, would list each separately on the balance sheet.

A) True
B) False

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Question 92

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Journalize the entries to record the following: Sept. 1 Established a petty cash fund of $350 Sept. 30 The amount of cash in the petty cash fund is now $130. The fund is replenished based on the following receipts: office supplies, $116; postage $100. Record any discrepancy in the cash short and over account. Journal

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Question 93

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Describe the features of a voucher system and list typical supporting documents for a voucher.

Consider the cash account below. Additional Information: Cash disbursements were 75% of collections. $\begin{array}{|l|l|}\hline \text { Cash } & \\\hline \text { Beg. Balance } & ? ? \\\hline \text { Collections } & 110,257.76 \\\hline \text { Disbursements } & ? ? \\\hline \text { EndBalance } & 112,567.43 \\\hline & \\\hline\end{array}$ How much was the beginning balance of the cash account?

When the petty cash fund is replenished, the petty cash account is credited for the total of all expenditures made since the fund was last replenished.

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

There are three parties to a check. The drawer is

The notification accompanying a check that indicates the specific invoice being paid is called a

Following the completion of the bank reconciliation, an adjusting entry was made that debited cash and credited Interest Revenue. Therefore the bank reconciliation must have included an item that was

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

Using the following information, prepare a bank reconciliation for Cole Co. for May 31, 2011:

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

The following procedures were recently implemented at the Health Station, Inc. For each procedure, indicate whether the internal control over cash represents (1) a strength or (2) a weakness. If it is a weakness, explain why. (a) All mail is opened by the mail clerk, who forwards all cash remittances to the cashier. The cashier prepares a listing of the cash receipts and forwards a copy of the list to the accounts receivable clerk for recording in the accounts. (b) The accounts payable clerk prepares a voucher for each disbursement. The voucher along with the supporting documentation is forwarded to the treasurer's office for approval. (c) At the end of each day, all cash receipts are placed in the bank's night depository. (d) The bank reconciliation is prepared by the cashier, who works under the supervision of the treasurer.

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 23-57, 60-95, and 99-110. It appears that invoices 58, 59, 96, 97, and 98 are missing. 2) During the month, Clerk # 2 issued $300 in refunds as compared to Clerks #1, #3, and #4 who issued less than $30 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)?