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Exam 4: Cash and Internal Controls

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Question 91

True/False

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Internal control is a company's plan to (1) improve the accuracy and reliability of accounting information and (2) safeguard the company's assets.

A) True
B) False

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Question 92

Multiple Choice

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The balance in the Colt Company's Cash account on August 31 was $19,700, before the bank reconciliation was prepared. After examining the August bank statement and items included with it, the company's accountant found: What is the amount of cash that should be reported in the balance sheet as of August 31?

A) $20,700.
B) $17,200.
C) $18,700.
D) $22,200.

E) A) and C)
F) B) and C)

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Question 93

Multiple Choice

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Which of the following would NOT need to be accounted for in a bank reconciliation?

Which of the following is not an example of preventive controls?

Cash is typically reported as a current asset in the balance sheet.

Companies should set maximum purchase limits on debit cards and credit cards as part of internal controls.

The following information was taken from the bank reconciliation for Mooner Sooner Inc. at the end of 2012: Bank balance: $8,000 Checks outstanding: $5,800 Note collected by the bank: $1,500 Service fee: $20 Deposits outstanding: $4,000 NSF check (bad check) returned for $300 What is the correct cash balance that should be reported in Mooner Sooner's balance sheet at the end of 2012?

Listed below are six terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term by placing the letter designating the term in the space provided Terms: -____ Checks written to the company that are returned by the bank as not having adequate funds.

The amount of cash reported in a company's balance sheet includes the balance of accounts receivable if cash collection is highly likely in the near future.

Cash flows from financing activities include:

____ Receive payment from customers.

An example of separation of duties would be not allowing an employee who receives cash to also be responsible for depositing that cash in the bank account.

Which of the following is NOT a design feature of effective internal controls?

Investing activities include cash transactions involving revenue and expense events during the period.

Separation of duties refers to auditors not being allowed to perform both audit and nonaudit services for the same client.

A company's operating cash inflows less operating cash outflows generally equals the reported amount of net income in the income statement.

Issuing common stock for cash is considered a(n) :

Listed below are five terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term by placing the letter designating the term in the space provided. Terms: -____ Short-term investments that have a maturity date no longer than three months from the date of purchase.