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Exam 6: Internal Control and Accounting for Cash

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Question 1

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Towle Company established a petty cash fund for $500 on January 1,2016.At the end of the month,the petty cash fund contained cash of $238.60 and vouchers for the following cash payments: freight on goods shipped to customers,$67.00;postage,$75.00;miscellaneous expense,$79.22;entertainment expense,$36.00. Three distinct events affected the petty cash fund during January: 1.establishment of the fund; 2.making payments for various items from the fund;and 3.recognizing expenses and replenishing the fund at the end of the month Required: a)Record each of the events in the horizontal statements model below.Indicate with the dollar amount of the increase or decrease,or NA if the element is not affected. b)Prepare journal entries for these events.

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Question 2

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

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Is the establishment of a petty cash fund an asset source,asset use,asset exchange,or claims exchange transaction?

The owner of the Barnes Company established a petty cash fund amounting to $400.What is the effect on the financial statements of the entry to record this transaction?

While performing its monthly bank reconciliation,the bookkeeper for the Grace Corporation noted that a deposit of $990 (received from a customer on account)was recorded in the company books as $900.Which of the following shows the effect of the correcting entry on the financial statements?

On January 1,2016,Whitecastle Company established a petty cash fund for $250.On January 31,2016,when the petty cash fund was replenished,it contained $70.40 in cash and petty cash receipts for: postage expense,$49.60;office supplies,$62;entertainment expense,$64.21 Required: a)Prepare the journal entry to establish the petty cash fund. b)Assuming that Warren treats all disbursements from petty cash as miscellaneous expenses,prepare the journal entry to replenish the fund on January 31.

Which document issued by a bank reflects a transaction that decreases a company's checking account balance?

Owen Company's unadjusted book balance at June 30,2016 is $9,700.The company's bank statement reveals bank service charges of $45.Two credit memos are included in the bank statement: one for $900,which represents a collection that the bank made for Owen,and one for $50,which represents the amount of interest that Owen had earned on its interest-bearing account in June.Based on this information,Owen's true cash balance is:

Rexrode Company's bank statement at January 31,2016 showed an ending balance of $24,712.80.The unadjusted cash account balance for Rexrode is $21,245.75.The following data were gathered by Rexrode's accountant: Outstanding checks as of January 31: $4,895.44 NSF check from customer: $183.62 Debit memo related to the returned deposit: $20.00 Credit memo for interest earned: $12.00 Deposits in transit: $1,236.77 Required: 1)Prepare a bank reconciliation for Rexrode Company at January 31,2016. 2)Prepare the required journal entries for Cash at January 31,2016.

Which of the following is not considered an accounting control?

Which of the following is not a motive for the embezzlement of cash by employees?

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

At the time petty cash funds are disbursed,a journal entry should be made,debiting the appropriate asset or expense account.

As of May 31,2016,the bank statement of Xi Company showed an ending balance of $8,632.52.The following information was available: Required: Compute Xi's true cash balance at May 31,2016.

The May 31,2016,balance per bank statement was $12,400.The cash balance per books was $17,000.Outstanding checks amounted to $1,700,and deposits in transit were $4,800.The bank statement contained an NSF check for $1,100,a service charge for $50,and a debit memo for direct payment of the telephone bill of $350. Required: a)Prepare a bank reconciliation to determine the true cash balance at May 31,2016. b)Prepare any necessary journal entries.

Duke Company's unadjusted bank balance at March 31,2016 is $2,300.The bank reconciliation revealed outstanding checks amounting to $500 and deposits in transit of $400.Based on this information,Duke's true cash balance is:

On November 30,2016,Hernandez Company's bank statement showed an ending balance of $37,341.The following information is available about Hernandez's account: 1.Debit memo in bank statement for bank service charge,$39 2.Deposit in transit,$2,988 3.Outstanding checks,$3,156 4.Customer's NSF check for $723 was returned with the bank statement Required: a)Determine the true cash balance as of November 30,2016. b)Determine the unadjusted balance of the company's Cash account as of November 30,2016.

Which of the following is an internal control procedure used to safeguard a company's assets?

Jasper Company accepted a check from Harp Company as payment for services rendered.Jasper's bank statement revealed that the Harp check was an NSF check.What effect will the entry to record the NSF check have on the accounting equation of Jasper Company?

A well-designed system of internal controls will eliminate employee theft and fraud in a company.