ACCT 201 Principles of Financial Accounting
Practice Exam - Chapter 6
Reporting & Analyzing Cash and Internal Controls
Dr. Fred Barbee

Part I: Multiple-Choice Questions
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1. An internal control system is the policies and procedures managers use to:
a.  Protect assets
b.  Ensure reliable accounting
c.  Promote efficient operations
d.  Urge adherence to company policies
e.  All of the above
2. The principles of internal control include:
a.  Establish responsibilities.
b.  Maintain minimal records.
c.  Insure assets.
d.  Bond all employees.
e.  A and C above.
3. Prenumbered printed checks are an example of which internal control principle?
a.  Technological controls.
b.  Maintain adequate records.
c.  Perform regular and independent reviews.
d.  Establish responsibilities.
e.  Divide responsibility for related transactions.
4. The most serious limitation of internal control is
a.  Computer error.
b.  Human fraud or human error.
c.  Cost-benefit principle.
d.  No internal control system is perfect.
e.  Management fraud.
5. Cash equivalents:
a.  Are short-term, highly liquid investments.
b.  Include 6-month CDs.
c.  Include checking accounts.
d.  Are recorded in petty cash.
e.  Include money orders.
6. Banking activities include:
a.  Bank accounts.
b.  Bank deposits.
c.  Checking.
d.  Electronic funds transfer.
e.  All of the above.
7. A check:
a.  Involves the writer, the signers, the casher, and the bank.
b.  Involves the maker, the payee, and the bank.
c.  Involves the maker and the payee.
d.  Involves the bookeeeper, the payee, and the bank.
e.  Involves the signer, the casher, and the company.
8. A bank statement includes:
a.  A list of outstanding checks.
b.  A list of petty cash amounts.
c.  The beginning and the ending balance of the depositor's checking account.
d.  A listing of deposits in transit.
e.  All of the above.
9. Mattel had net sales of $4,235 million and ending accounts receivable of $775 million. Its days' sales uncollected was:
a.  298 days
b.  66.8 days
c.  19.4 days
d.  81.8
e.  65.2 days
10. A company had $62 in extra cash at the end of the day. The proper entry for this excess includes a:
a.  Credit to Cash for $62.
b.  Debit to Expense for $62.
c.  Credit to Cash Over and Short for $62.
d.  Debit to Cash Over and Short for $62.
e.  Debit to Petty Cash for $62

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Part II: Short Problems

Short Problem #1

Identify whether each of the following items 1 through 10 affects the bank side or the book side of a bank reconciliation.

_____
1.
Bank service charges
_____
2.
Outstanding Checks
_____
3.
Deposits in transit
_____
4.
NSF check
_____
5.
Inerest on a checking account
_____
6.
The bank incorrectly recorded a check for $9.58. The company properly wrote the check for $95.80.
_____
7.
The bank printed checks for the depositor for a fee.
_____
8.
Bank debit memorandum
_____
9.
Bank credit memorandum
_____
10.
The bank collected a $1,000 note for the depositor.


Short Problem #2

A company established a $1,000 petty cash fund by issuing a check to the custodian (petty cashier) on October 1. On October 15, the petty cash fund was replenished and increased to $1,250 in total. The contents of the petty cash fund at the time of the October 15 replenishment were:

Currency and coins
 
$112
Petty cash receipts for:
 
 
   Transportation-in for inventory
$139
 
   Delivery expense
238
 
   Repairs to office equipment
147
 
   Postage
214
 
   Entertainment of customers
153
891
Total
 
$1,003

Prepare the general journal entry to record both the reimbursement and the increase of the petty cash fund on October 15.


Short Problem #3

A company purchased merchandise inventory costing $15,000 with credit terms of 2/10, n/30. Eight days after the purchase, this company paid 1/3 of the amount due. The remaining balance was paid in 30 days.

Required:

  1. Record the journal entries related to this transaction using the gross method or recording purchases.
  2. Record the journal entries related to this transaction using the net method of recording purchases.


Part III: Problems

Brown Company's bank statement for September 30, showed a cash balance of $1,350. the company's Cash account in its general ledger showed a $995 debit balance. The following information was also available as of September 30.

  1. a customer's check for $100 marked NSF was returned to Brown Company by the bank. The bank charged the company's account a $25 processing fee.
  2. The September 30 cash receipts, $1,250 were placed in the bank's night depository after banking hours on that date and this amount did not appear on the September 30 bank statement.
  3. A $15 debit memorandum for checks printed by the bank was included with the canceled checks.
  4. Outstanding checks amounted to $1,145.
  5. A customer's note for $900 was collected by the bank. a collection fee of $25 was deducted by the bank.
  6. Included with the canceled checks was a check for $275, drawn on another company, Browne, Inc.

Required:

  1. Prepare a bank reconciliation as of September 30.
  2. Prepare any necessary adjusting journal entries necessary as a result of the bank reconciliation.


         

Last Modified September 19, 2002