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

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Question 81

Multiple Choice

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A $135 petty cash fund has cash of $18 and receipts of $120.The journal entry to replenish the account would include a

A) credit to Petty Cash for $120
B) debit to Cash for $120
C) credit to Cash Over and Short for $3
D) credit to Cash for $102

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

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Question 82

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) A) and D)
F) B) and D)

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Question 83

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In preparing a bank reconciliation,the amount indicated by a credit memo for a note receivable collected by the bank is added to the balance per company's records.

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. $\begin{array}{|l|c|c|}\hline&\text { Debit }&\text { Increases or }\\&\text { or }&\text { Decreasesthe }\\&\text { Credit }&\text { Company's Bank }\\\text { ITEM }& \text { Memo }&\text { Account Balance } \\\hline \text { EFT payment } & \\\hline \begin{array}{l}\text { Bank correction of an error due to } \\\text { posting another customer's check to } \\\text { your account }\end{array} & & \\\hline \text { Service Charge } & \\\hline \begin{array}{l}\text { Note and interest collected for our } \\\text { company }\end{array} &\\\hline \text { NSF check } & \\\hline \text { Bank correction of an error recording } &\\ \text { a } \$ 250 \text { deposit as } \$ 520 & \\\hline \text { EFT deposit } & \\\hline\end{array}$

The Sarbanes-Oxley Act requires that financial statements of all public companies report on management's conclusions about the effectiveness of the company's internal control procedures.

The following data were gathered to use in reconciling the bank account of Savannah Company: $\begin{array}{|l|r|}\hline \text { Balance per bank } & \$ 16,750 \\\hline \text { Balance per company records } & 16,125 \\\hline \text { Bank service charges } & 80 \\\hline \text { Deposit in transit } & 2,195 \\\hline \text { NSF check } & 950 \\\hline \text { Outstanding checks } & 3,850\\\hline\end{array}$ What is the adjusted balance on the bank reconciliation?

Aspen,Inc.reported the following data in its annual report: 1 What is the company's "cash burn" per month? 2 What is the company's ratio of cash to monthly cash expenses?

In preparing a bank reconciliation,the amount of a canceled check omitted from the journal is added to the balance per company's records.

Which one of the following below is not an element of internal control?

The portion of an invoice that is returned with payment is a

The following data is from the Autumn Company for the past four years. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $\text { Year Ending December } 31$ $\begin{array}{|l|c|c|c|c|}\hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\hline \text { Cash \& cash equivalents } & \$ 23,788 & \$ 45,776 & \$ 52,899 & \$ 82,744 \\\hline \text { Cash flow from operations } & 32,556 & 47,880 & 32,357 & 16,450 \\\hline\end{array}$ Calculate the following: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Year Ending December } 31$ $\begin{array}{|l|c|c|c|c|}\hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\hline \text { Cash \& cash equivalents } & \\\hline \text { Cash flow from operations } & \\\hline\end{array}$

The amount of the outstanding checks is included on the bank reconciliation as an

Bank reconciliation information for Kaden Co.for May 31 is as follows: 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. Record the appropriate journal entry for Kaden Co.

Sarbanes­Oxley's purpose is to maintain public confidence and trust in the financial reporting of companies.

The Garden Gate,Inc.reported the following data in its August 31 annual report. a. What is the company's "cash burn" per month? b. What is the company's ratio of cash to monthly cash expenses? c. Interpret the ratio you computed in part 2.What are the implications for The Garden Gate,Inc.?

Depositing all cash,checks,etc.in a bank and paying with checks is an internal control procedure over cash.

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

The debit balance in Cash Short and Over at the end of an accounting period is reported as

In establishing a petty cash fund,a check is written for the amount of the fund and is recorded as a debit to Accounts Payable and a credit to Petty Cash.

If the balance in Cash Short and Over at the end of a period is a credit,it should be reported as an "other income" item on the income statement.