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Exam 8: Sarbanes-Oxley, Internal Control, and Cash

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Question 51

True/False

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In preparing a bank reconciliation, the amount of an error indicating the recording of a check in the journal for an amount larger than the amount of the check is added to the balance per company's records.

A) True
B) False

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Question 52

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

A) True
B) False

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Question 53

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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.

Meredith Company gathered the following reconciling information in preparing its May bank reconciliation:

A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695. This item would be included in the bank reconciliation as a(n)

The petty cash fund eliminates the need for a bank checking account.

Credit memos from the bank

Money market accounts, commercial paper, and United States Treasury Notes are examples of cash equivalents.

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.

You are trying to explain debit and credit memos that appear on bank statements and whether these will increase or decrease your company's bank account balance. Complete the following table to help your new staff understand.

Sarbanes-Oxley requires companies to maintain strong and effective internal controls and thus prevent fraud and misleading financial statements.

(a) Where are cash equivalents disclosed in the financial statements? (b) List fhree examples of cash equivalents.

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

A firm's internal control environment is not influenced by

Farm Store, Inc. reported the following data in its December 31, 2011 annual report. Required: (1) What is the company's "cash burn" per month? (2) What is the company's ratio of cash to monthly cash expenses? (3) Interpret the ratio you computed in part 2. What are the implications for Farm Store, Inc.

The actual cash received during the week ended January 16 for cash sales was $7,427 and the amount indicated by the cash register total was $7,413. Journalize the entry to record the cash receipts and cash sales. Journal

After a bank reconciliation is completed, adjusting entries are prepared for items in the balance per company's records as well as items in the balance per bank statement.

The type of account and normal balance of Petty Cash is a(n)

Journalize the entries to record the following: Sept 1 Established a petty cash fund of $350 Sept 30 The amount of cash in the petty cash fund is now $130. The fund is replenished based on the following receipts: office supplies, $116; postage $100. Record any discrepancy in the cash short and over account. Journal

Which of the following items that appeared on the bank reconciliation did not require an adjusting entry?