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Exam 7: Internal Control and Cash

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Question 21

Multiple Choice

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Which of the following items that appeared on the bank reconciliation did not require a journal entry?

A) bank service charges
B) deposits in transit
C) NSF checks
D) a check for $630, recorded in the check register for $360

E) A) and D)
F) None of the above

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Question 22

Multiple Choice

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

A) outstanding checks
B) deposits in transit
C) bank errors
D) book errors

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

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Question 23

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When the voucher system is used, the amount due on each voucher represents the credit balance of an account payable if the voucher is in full payment to a creditor.

Gamma Company and Delta Company have compiled the following data as of the end of the current fiscal year: ​ ​ Depreciation (one of the operating expenses) for Gamma was $35,000, and for Delta was $65,000. ​ (1) Calculate days' cash on hand for Gamma Company and for Delta Company. (Round your answer to one decimal place.) ​ (2) Which company has the better liquidity position based on your calculation?

A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. What entry is required in the company's accounts?

Selected financial statement data for two years ended December 31 for Carey Co. follow. Assets are reported at their year-end value. $\begin{array} { l r c } & \text { Year 2 } & \text { Year 1 } \\\text { Cash } & \$ 32,500 & \$ 30,100 \\\text { Short-term investments } & 9,400 & 10,200 \\\text { Operating expenses } & 72,800 & 70,400 \\\text { Depreciation expense } & 12,000 & 11,200\end{array}$ What is the days' cash on hand for each year?

A voucher system is an example of an internal control procedure over cash payments.

Thompson Corporation gathered the following reconciling information in preparing its October bank reconciliation: $\begin{array} { | l | r | } \hline\text { Cash balance per bank, } 10 / 31 & \$ 17,000 \\\hline \text { Note receivable collected by bank } & 4,800 \\\hline \text { Outstanding checks } & 6,500 \\\hline \text { Deposits in transit } & 3,000 \\\hline \text { Bank service charge } & 50 \\\hline \text { NSF check } & 2,300 \\\hline\end{array}$ Using the above information, determine the cash balance per books (before adjustments) for Thompson Corporation.

Gunnar Company gathered the following reconciling information in preparing its September bank reconciliation. Calculate the adjusted cash balance per books on September 30. $\begin{array} { | l | r | } \hline \text { Cash balance per books, } 9 / 30 & \$ 2,750 \\\hline \text { Deposits in transit } & 200 \\\hline \text { Notes receivable and interest collected by bank } & 630 \\\hline \text { Bank charge for check printing } & 50 \\\hline \text { Outstanding checks } & 1,250 \\\hline \text { NSF check } & 290 \\\hline\end{array}$

A check outstanding for two consecutive months will appear only on the first month's bank reconciliation.

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

The objectives of internal control are to

What entry is required in the company's accounts to record outstanding checks?

List and define each of the five elements of internal control.

EFT

Using the following information, prepare a bank reconciliation for Candace Co. for May 31: (a) The bank statement balance is $\$ 2,936$ . (b) The cash account balance is $\$ 3,194$ . (c) Outstanding checks amounted to $\$ 465$ . (d) Deposits in transit are $\$ 655$ . (e) The bank service charge is $\$ 50$ . (f) A check for $\$ 97$ for supplies was recorded as $\$ 79$ in the ledger.

The effect of a credit memo on the company's books and the bank records is as follows:

Match each item to a bank statement adjustment, a company books adjustment, or either. -Outstanding checks

Roper Electronics received its bank statement for the month of August with an ending balance of $11,740. Roper determined that check #613 for $155 and check #601 for $420 were both outstanding. Also, a $6,900 deposit for August 30 was in transit as of the end of the month. Northern Regional Bank also collected a $5,000 note receivable on August 1 that was issued March 1. Accrued interest is $250. Northern Regional Bank charged a $35 fee for the collection service. The bank statement reveals a bank service charge of $20. A customer check for $68 was returned with the bank statement marked "NSF." The ending balance of the Roper cash account is $12,938. ​ (a) Prepare a bank/account reconciliation. (b) Prepare any necessary journal entries for the reconciliation. (b) If a balance sheet were prepared for Roper Electronics on August 31, what amount should be reported for cash?

Separating the responsibilities for purchasing, receiving, and paying for equipment is an example of the control procedure: separating operations, custody of assets, and accounting.