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Exam 7: Sarbanes-Oxley,internal Control,and Cash

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Question 61

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

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a- This is a weakness.Requiring cash reg...

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Question 62

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During a bank reconciliation process,

A) outstanding checks and deposits in transit are added to the bank statement balance
B) outstanding checks are subtracted and deposits in transit are added to the bank statement balance
C) outstanding checks and deposits in transit are subtracted from the bank statement balance
D) outstanding checks are added and deposits in transit are subtracted from the bank statement balance

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

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Question 63

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List the objectives of internal control and give an example of how each is implemented.

If an adjustment for an NSF check is made in a company's bank reconciliation,then the company must have written a bad check during the month.

Green Valley Bank sent Comstock Industries its end-of-month bank statement for July.The end of month balance by the bank is $11,237.The statement shows that a deposit for $4,250 is in transit at the end of the statement period.The statement also revealed that checks for $87,$105,and $95 are outstanding.Green Valley collected a $4,000 note receivable plus $240 of interest revenue.The bank charges $20 for the collection service.The bank charges a monthly account fee of $35.The end-of-month balance per company books is $11,135. Prepare a bank/account reconciliation and write any necessary journal entries for the reconciliation.

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

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

For each of the following,explain whether the issue would require you to prepare a journal entry for your company,assuming any original entry is correct.If an entry is required,please include it as part of your answer. 1- The bank recorded your deposit as $91 rather than the actual amount of $191. 2- Two outstanding checks amounted to $450. 3- Company check number 538 for postage was recorded incorrectly by the company bookkeeper as $50 instead of $59. 4- The bank paid a check for $500 after the company had issued a stop payment and voided the check. 5- An EFT deposit was made by one of the company's customers,Atlas Design,for merchandise received.The sale had previously been recorded when shipped and was equal to the payment amount of $125.

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

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 an

A voucher is a form on which is recorded pertinent data about a liability and the particulars of its payment.

Cash equivalents include

There are three internal control objectives and they are to safeguard the company's reputation,ensure accurate financial reports,and ensure compliance with applicable laws.

The following data were gathered to use in reconciling the bank statement of Build-A-Lot: $\begin{array}{|l|r|}\hline \text { Balance per bank } & \$ 14,355 \\\hline \text { Balance per company records } & 14,010 \\\hline \text { Bank service charges } & 80 \\\hline \text { Deposits in transit } & 4,100 \\\hline \text { NSF checks } & 775 \\\hline \text { Outstanding checks } & 5,300\\\hline\end{array}$ 1. What is the adjusted balance on the bank reconciliation? 2. Journalize any necessary entries for Build-A-Lot based on the bank reconciliation.

Consider the following journal entry made by Jones Company for one day's sales of a single cashier.Upon investigation,what might you find happened to create this amount of Cash Over/Short account difference? Give three possible reasons for this difference.

For a strong internal control system over cash,it is important to have the duties related to cash receipts and cash payments divided among different employees.

Which of the following would not be included with the cash and cash equivalents on the balance sheet?

The objectives of internal control are to

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

The bank statement for Gatlin Co.indicates a balance of $7,735 on June 30.After the journals for June had been posted,the cash account had a balance of $4,098. a Cash sales of $742 had been erroneously recorded in the cash receipts journal as $724. b Deposits in transit not recorded by bank,$425. c Bank debit memo for service charges,$35. d Bank credit memo for note collected by bank,$2,475 including $75 interest. e Bank debit memo for $256 NSF not sufficient funds check from Janice Smith,a customer. f Checks outstanding,$1,860. Record the appropriate journal entries that would be necessary for Gatlin Co.