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Exam 6: Internal Control and Accounting for Cash

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Question 41

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[The following information applies to the questions displayed below.] A review of the bank statement and accounting records of Blake Company revealed the following items: $\begin{array}{|c|l|}\hline \text { Item No. } & \text { Description } \\\hline \text { 1) } & \text { Three outstanding checks } \\\hline \text { 2) } & \text { A debit memo showing a bank service charge } \\\hline \text { 3) } & \text { A deposit in transit } \\\hline \text { 4) } & \text { An NSF check written by one of Blake's customers } \\\hline \text { 5) } & \text { A certified check written by Blake that remains outstanding } \\\hline \text { 6) } & \text { A credit memo reflecting interest revenue earned by Blake } \\\hline\end{array}$ -Which of the item(s) would be added to the unadjusted bank balance to determine the true cash balance?

A) Item numbers 2 and 3
B) Item number 2
C) Item numbers 3, 4, and 6
D) Item number 3

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

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Question 42

Multiple Choice

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Rainey Company's true cash balance at October 31 is $5,710.The following information is available for the bank reconciliation: (1) Outstanding checks,$600 (2) Deposits in transit,$450 (3) Bank service charges,$90 (4) The bank had collected an account receivable for Rainey Company,$1,000 (5) The bank statement included an NSF check written by one of Ramsey's customers for $600. What was the unadjusted book balance at October 31?

A) $5,870
B) $5,400
C) $6,400
D) $5,490

E) All of the above
F) B) and C)

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Question 43

Multiple Choice

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Which of the following is an administrative control?

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

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

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?

The accountant for Ye Olde Bookstore balanced out the cash register for the day.The company began the day with $125 and ended the day with $1,150.25 in the cash drawer.That day's cash register tape shows $1,031.50 in cash sales.What is the effect on the financial statements of recording the day's sales and any related overage or shortage?

Which of the following statements accurately describes a fidelity bond?

How are cash overages reported on the financial statements?

A cash shortage is treated as an expense.

Which of the following is not a common feature of an internal control system?

The purpose of a petty cash fund is to eliminate the need for control over a business's small cash disbursements.

While preparing its bank reconciliation,Maynard Company determined that its bank had collected a $650 account receivable for the company and deducted a $25 collection fee.Which of the following shows the effect of this transaction on the financial statements?

A bank statement debit memo describes a transaction that increases a customer's account balance.

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

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