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Exam 4: Internal Controls, Accounting for Cash, and Ethics

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Question 61

Multiple Choice

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At March 31, Bandstra Co. had a book balance in its cash account of $5,500. At the end of March the company determined that it had outstanding checks of $900, deposits in transit of $600, a bank service charge of $20, and an NSF check from a customer for $280. The true cash balance at March 31 is:

A) $5,200
B) $5,220
C) $5,500
D) $4,980

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

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Question 62

Multiple Choice

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When a customer's NSF check is returned to a business with its bank statement, the business should make a journal entry increasing

A) Cash.
B) Accounts Receivable.
C) Accounts Payable.
D) Allowance for Doubtful Accounts.

E) B) and C)
F) None of the above

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Question 63

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Indicate whether each of the following statements about a bank statement is true or false. -A bank statement debit memo increases the customer's Cash balance

A business learns about customers' NSF checks through debit memos that are included with the bank statement.

What asset of a business is most susceptible to theft?

Identify and discuss the three basic types of audit opinions.

What documentation issued by a bank decreases the balance in a company's checking account balance at the bank?

In preparing a bank reconciliation, typical adjustments to the bank balance are deposits in transit and bank service charges.

Indicate whether each of the following statements regarding internal controls is true or false. -Under proper internal controls, the person who collects customer payments should also maintain the accounting records of cash receipts

Indicate whether each of the following statements about a bank statement is true or false. -An adverse opinion indicates that the financial statements include a significant departure from GAAP

The bank statement of Stein Company included an NSF check that had been given to the company by a customer in payment of its account with Stein.

Which of the following is not a procedure for the control of cash receipts?

One of your friends is preparing to open a store that will sell clothing and fashionable accessories. When you heard that the business would have three or four employees, you told your friend that she would need to pay careful attention to separation of duties. She has asked you to explain what duties should be separated and why separation of duties is important in a business. Write a note to your friend explaining these issues.

In preparing bank reconciliations, typical adjustments to the book balance include

List three measures that can be taken to achieve strong internal control.

Which of the following situations provides the most likely indication that fraud exists?

Indicate whether each of the following statements regarding internal controls is true or false. -Internal controls can be divided into accounting controls and administrative controls

Indicate whether each of the following statements about a bank statement is true or false. -An unqualified opinion means that the financial statements are in compliance with GAAP without qualification, reservation, or exception

Discuss the types of audit opinions that an independent auditor can express on a company's financial statements.

Preparing a bank reconciliation is an important internal control for a business.