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Question 1 A $100 petty cash fund contains $89 in petty cash receipts, and $7.50 in currency and coins. The journal entry to record the replenishment of the fund would include a Answer credit to Petty Cash for $96.50. credit to Cash for $89. debit to Cash Short and Over for $3.50. credit to Cash Short and Over for $3.50. 2 points Question 2 A bank reconciliation should be prepared Answer whenever the bank refuses to lend the company money. to explain any difference between the company’s balance per books with the balance per bank. when an employee is suspected of fraud. by the person who is authorized to sign checks. 2 points Question 3 A bank reconciliation should be prepared periodically because Answer the company’s records and the bank’s records are in agreement the bank has not recorded all of its transactions any differences between the company’s records and the bank’s records should be determined, and any errors made by either party should be discovered and corrected the bank must make sure that its records are correct 2 points Question 4 A check drawn by a company for $270 in payment of a liability was recorded in the journal as $720. This item would be included on the bank reconciliation as a(n) Answer addition to the balance per the company’s records addition to the balance per the bank statement deduction from the balance per the bank statement deduction from the balance per the company’s records 2 points Question 5 A check drawn by a company for $270 in payment of a liability was recorded in the journal as $720. What entry is required in the company’s accounts? Answer debit Accounts Payable; credit Cash debit Cash; credit Accounts Receivable debit Cash; credit Accounts Payable debit Accounts Receivable; credit Cash 2 points Question 6 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 Answer deposited checks returned for insufficient funds a promissory note left for collection a service charge notification that a customer’s check for $375 was recorded by the company as $735 on the deposit ticket 2 points Question 7 A firm’s internal control environment is not influenced by Answer management’s operating style organizational structure personnel policies monitoring policies 2 points Question 8 A minimum cash balance required by a bank is called Answer cash in bank cash equivalent compensating balance EFT 2 points Question 9 A necessary element of internal control is Answer database systems design systems analysis information and communication 2 points Question 10 A voucher is usually supported by Answer a supplier’s invoice a purchase order a receiving report all of the above 2 points Question 11 Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the company. This item is a(n) Answer deduction from the balance per company’s records addition to the balance per bank statement deduction from the balance per bank statement addition to the balance per company’s records 2 points Question 12 Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the item is Answer a deduction from the balance per company’s records an addition to the balance per bank statement a deduction from the balance per bank statement an addition to the balance per company’s records 2 points Question 13 Accompanying the bank statement was a debit memo for an NSF check received from a customer. What entry is required in the company’s accounts? Answer debit Other Income; credit Cash debit Cash; credit Other Income debit Cash; credit Accounts Receivable debit Accounts Receivable; credit Cash 2 points Question 14 Accompanying the bank statement was a debit memo for bank service charges. What entry is required in the company’s accounts? Answer debit Miscellaneous Administrative Expense; credit Cash debit Cash; credit Other Income debit Cash; credit Accounts Payable debit Accounts Payable; credit Cash 2 points Question 15 Cash equivalents Answer are illegal in some states will be converted to cash within two years will be converted to cash within 90 days will be converted to cash within 120 days 2 points Question 16 During 2010, Tempo Inc has monthly cash expenses of $120,000. On December 31, 2010, their cash balance is $1,860,000. The ratio of cash to monthly cash expenses is Answer 6.5 15.5 77.4 12.0 2 points Question 17 During a bank reconciliation process, Answer Outstanding checks and deposits in transit are added to the bank statement balance. Outstanding checks are subtracted and deposits in transit are added to the bank statement balance. Outstanding checks and deposits in transit are subtracted from the bank statement balance. Outstanding checks are added and deposits in transit are subtracted from the bank statement balance. 2 points Question 18 Internal control does not consist of policies and procedures that Answer protect assets from misuse aid management in directing operations toward achieving business goals guarantee the company will not go bankrupt ensure that business information is accurate 2 points Question 19 The objectives of internal control are to Answer control the internal organization of the accounting department personnel and equipment provide reasonable assurance that operations are managed to achieve goals, financial reports are accurate, and laws and regulations are complied with prevent fraud, and promote the social interest of the company provide control over “internal-use only” reports and employee internal conduct 2 points Question 20 The type of account and normal balance of Petty Cash is a(n) Answer revenue, credit asset, debit liability, credit expense, debit 2 points Question 21 Which of the following is not an internal control activity for cash? Answer The number of persons who have access to cash should be limited. All cash receipts should be recorded promptly. The functions of record keeping and maintaining custody of cash should be combined. Surprise audits of cash on hand should be made occasionally. 2 points Question 22 Which one of the following below reflects a weak internal control system? Answer all employees are well supervised a single employee is responsible for comparing a receiving report to an invoice all employees must take their vacations a single employee is responsible for collecting and recording of cash 2 points Question 23 Journal entries based on the bank reconciliation are required in the company’s accounts for Answer outstanding checks deposits in transit bank errors book errors 2 points Question 24 The amount of the outstanding checks is included on the bank reconciliation as a(n) Answer deduction from the balance per company’s records addition to the balance per bank statement deduction from the balance per bank statement addition to the balance per company’s records 2 points Question 25 The debit balance in Cash Short and Over at the end of an accounting period is reported as Answer an expense on the income statement income on the income statement an asset on the balance sheet a liability on the balance sheet

Question 1

A $100 petty cash fund contains $89 in petty cash receipts, and $7.50 in currency and coins. The journal entry to record the replenishment of the fund would include a
Answer

credit to Petty Cash for $96.50.

credit to Cash for $89.

debit to Cash Short and Over for $3.50.

credit to Cash Short and Over for $3.50.
2 points
Question 2

A bank reconciliation should be prepared
Answer

whenever the bank refuses to lend the company money.

to explain any difference between the company’s balance per books with the balance per bank.

when an employee is suspected of fraud.

by the person who is authorized to sign checks.
2 points
Question 3

A bank reconciliation should be prepared periodically because
Answer

the company’s records and the bank’s records are in agreement

the bank has not recorded all of its transactions

any differences between the company’s records and the bank’s records should be determined, and any errors made by either party should be discovered and corrected

the bank must make sure that its records are correct
2 points
Question 4

A check drawn by a company for $270 in payment of a liability was recorded in the journal as $720. This item would be included on the bank reconciliation as a(n)
Answer

addition to the balance per the company’s records

addition to the balance per the bank statement

deduction from the balance per the bank statement

deduction from the balance per the company’s records
2 points
Question 5

A check drawn by a company for $270 in payment of a liability was recorded in the journal as $720. What entry is required in the company’s accounts?
Answer

debit Accounts Payable; credit Cash

debit Cash; credit Accounts Receivable

debit Cash; credit Accounts Payable

debit Accounts Receivable; credit Cash
2 points
Question 6

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
Answer

deposited checks returned for insufficient funds

a promissory note left for collection

a service charge

notification that a customer’s check for $375 was recorded by the company as $735 on the deposit ticket
2 points
Question 7

A firm’s internal control environment is not influenced by
Answer

management’s operating style

organizational structure

personnel policies

monitoring policies
2 points
Question 8

A minimum cash balance required by a bank is called
Answer

cash in bank

cash equivalent

compensating balance

EFT
2 points
Question 9

A necessary element of internal control is
Answer

database

systems design

systems analysis

information and communication
2 points
Question 10

A voucher is usually supported by
Answer

a supplier’s invoice

a purchase order

a receiving report

all of the above
2 points
Question 11

Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the company. This item is a(n)
Answer

deduction from the balance per company’s records

addition to the balance per bank statement

deduction from the balance per bank statement

addition to the balance per company’s records
2 points
Question 12

Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the item is
Answer

a deduction from the balance per company’s records

an addition to the balance per bank statement

a deduction from the balance per bank statement

an addition to the balance per company’s records
2 points
Question 13

Accompanying the bank statement was a debit memo for an NSF check received from a customer. What entry is required in the company’s accounts?
Answer

debit Other Income; credit Cash

debit Cash; credit Other Income

debit Cash; credit Accounts Receivable

debit Accounts Receivable; credit Cash
2 points
Question 14

Accompanying the bank statement was a debit memo for bank service charges. What entry is required in the company’s accounts?
Answer

debit Miscellaneous Administrative Expense; credit Cash

debit Cash; credit Other Income

debit Cash; credit Accounts Payable

debit Accounts Payable; credit Cash
2 points
Question 15

Cash equivalents
Answer

are illegal in some states

will be converted to cash within two years

will be converted to cash within 90 days

will be converted to cash within 120 days
2 points
Question 16

During 2010, Tempo Inc has monthly cash expenses of $120,000. On December 31, 2010, their cash balance is $1,860,000. The ratio of cash to monthly cash expenses is
Answer

6.5

15.5

77.4

12.0
2 points
Question 17

During a bank reconciliation process,
Answer

Outstanding checks and deposits in transit are added to the bank statement balance.

Outstanding checks are subtracted and deposits in transit are added to the bank statement balance.

Outstanding checks and deposits in transit are subtracted from the bank statement balance.

Outstanding checks are added and deposits in transit are subtracted from the bank statement balance.
2 points
Question 18

Internal control does not consist of policies and procedures that
Answer

protect assets from misuse

aid management in directing operations toward achieving business goals

guarantee the company will not go bankrupt

ensure that business information is accurate
2 points
Question 19

The objectives of internal control are to
Answer

control the internal organization of the accounting department personnel and equipment

provide reasonable assurance that operations are managed to achieve goals, financial reports are accurate, and laws and regulations are complied with

prevent fraud, and promote the social interest of the company

provide control over “internal-use only” reports and employee internal conduct
2 points
Question 20

The type of account and normal balance of Petty Cash is a(n)
Answer

revenue, credit

asset, debit

liability, credit

expense, debit
2 points
Question 21

Which of the following is not an internal control activity for cash?
Answer

The number of persons who have access to cash should be limited.

All cash receipts should be recorded promptly.

The functions of record keeping and maintaining custody of cash should be combined.

Surprise audits of cash on hand should be made occasionally.
2 points
Question 22

Which one of the following below reflects a weak internal control system?
Answer

all employees are well supervised

a single employee is responsible for comparing a receiving report to an invoice

all employees must take their vacations

a single employee is responsible for collecting and recording of cash
2 points
Question 23

Journal entries based on the bank reconciliation are required in the company’s accounts for
Answer

outstanding checks

deposits in transit

bank errors

book errors
2 points
Question 24

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

deduction from the balance per company’s records

addition to the balance per bank statement

deduction from the balance per bank statement

addition to the balance per company’s records
2 points
Question 25

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

an expense on the income statement

income on the income statement

an asset on the balance sheet

a liability on the balance sheet

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