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Exam 8: Internal Control and Cash

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Question 71

Multiple Choice

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The debit recorded in the journal to reimburse the petty cash fund is to

A) Petty Cash
B) Accounts Receivable
C) Cash
D) various accounts for which the petty cash was disbursed

E) A) and B)
F) B) and D)

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Question 72

Multiple Choice

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Sarbanes-Oxley applies to

A) publicly held companies
B) not-for-profit organizations
C) privately held businesses
D) All of these choices

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

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Question 73

Multiple Choice

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Receipts from cash sales of $3,200 were recorded incorrectly in the cash receipts journal as $2,300. This item would be included on the bank reconciliation as a (n)

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)

Minor Company had checks outstanding totaling $19,200 on its April bank reconciliation. In May, Minor Company issued checks totaling $64,900. The May bank statement shows that $47,600 in checks cleared the bank in May. A check of $300 from one of Minor Company's customers was also returned marked "NSF." The amount of outstanding checks on Minor Company's May bank reconciliation should be

The cash account in the company's ledger is a (n)

Pilger Corporation has cash on hand at year-end of $201,000 and a negative cash flow from operations of $144,000. What is the ratio of cash to monthly cash expenses?

A bank statement

The actual cash received during the week ended October 31 for cash sales was $23,447, and the amount indicated by the cash register total was $23,457. Journalize the entry to record the cash receipts and cash sales. $\begin{array}{l}\text { Journal }\\\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \text { Description } & \begin{array} { c } \text { Post. } \\\text { Ref. }\end{array} & \text { Debit } & \text { Credit } \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline\end{array}\end{array}$

Match the following elements of internal control: -Information and communication

Accompanying a bank statement for Marsh Land Properties is a credit memo for payment on a $15,000 one-year note receivable and $900 of interest collected by the bank. Marsh Land Properties had been notified by the bank at the time of collection, but had made no entries. Journalize the entry that should be made by Marsh Land to bring the accounting records up to date.

Match the following elements of internal control: -Risk assessment

The Sarbanes-Oxley Act requires that financial statements of all public companies report on management's conclusions about the effectiveness of the company's internal control procedures.

Cash equivalents include short-term investments that will be converted to cash within 120 days.

In preparing a bank reconciliation, the amount of outstanding checks is added to the balance per bank statement.

The following procedures were recently implemented at 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 alisting of the cash receipts and forwards a copy of the list to the accounts receivable clerk forrecording in the accounts.? (b) The accounts payable clerk prepares a voucher for each disbursement. The voucher along with the supportingdocumentation 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.

Consider the following information from the cash account. Assume cash payments were 84% of collections.How much was the beginning balance of the cash account? $\begin{array} { | c | l | } \hline \text { Cash } & \\\hline ? ? & \text { Beg. balance } \\\hline \$ 245,000 & \text { Collections } \\\hline ? ? & \text { Disbursements } \\\hline \$ 80,275 & \text { End. bal ance } \\\hline\end{array}$

Match each item to a bank statement adjustment, a company books adjustment, or either. -Note collected by the bank

The following procedures were recently implemented at Pampered Pets, 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) At the end of the day, cash register clerks are required to use their own funds to make up any cash shortagesin their registers.​ (b) At the end of the day, an accounting clerk compares the duplicate copy of the daily cash deposit slip with thedeposit receipt obtained from the bank.​ (c) After necessary approvals have been obtained for the payment of a voucher, the treasurer signs and mails thecheck. The treasurer then stamps the voucher and supporting documentation as paid and returns the voucherand supporting documentation to the accounts payable clerk for filing.​ (d) Along with the petty cash receipts for postage, office supplies, etc., several postdated employeechecks are in the petty cash fund.

Farm Store, Inc. reported the following data in its December 31 annual report.​ $\begin{array}{lc}\text { Cash and cash equivalents } & \$ 1,050,000 \\\text { Negative cash flow from operations } & (420,000)\end{array}$ Required (a) What is the company's "cash burn" per month? (b) What is the company's ratio of cash to monthly cash expenses? (c) Interpret the ratio you computed in part b. What are the implications for Farm Store, Inc.?