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Exam 8: Cash and Internal Controls

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Question 21

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Liquidity refers to a company's ability to pay its near-term obligations.

A) True
B) False

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Question 22

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The entry to increase the balance in petty cash from $50 to $75 would include a credit to Petty Cash of $25.

A) True
B) False

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Question 23

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Control of cash disbursements is important for companies as most large thefts occur from payment of fictitious invoices.

Identify whether each of the following items 1 through 10 would on appear on 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.Interest 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.

The following information is available for Johnson Manufacturing Company at June 30: Based on this information,Johnson Manufacturing Company should report Cash and Cash Equivalents on June 30 of:

Factors that cause the bank statement balance for a checking account to be different from the company's checking account balance include: outstanding checks,deposits in transit,deductions for bank fees,additions for interest,and errors.

The following account balances are taken from Mesky Sports at December 31. Calculate the number of days' sales uncollected for both years.According to this analysis,is the company's collection of receivables improving? Explain.

A person who controls or has access to an asset must not keep that asset's accounting records.This describes the internal control principle of ________________________.

Outstanding checks are checks the bank has paid and deducted from the customer's account during the month.

The clerk who has access to the cash in the cash register should not have access to the cash register tape or file.

List the principles of internal control.

Describe the banking activities that promote the control of cash and identify the internal control objectives served by the banking activities.

Discuss how the principles of internal control apply to cash receipts.

In reimbursing the petty cash fund:

An invoice is an itemized statement of goods prepared by the vendor listing the customer's name,items sold,sales prices,and terms of sale.

A seller (or provider) of goods or services to a business organization,usually a manufacturer or wholesaler,is known as a:

The internal document that is used to notify the appropriate person that ordered goods have been received and to describe the quantities and condition of the goods is the _______________.

A properly designed internal control system is a key part of systems design,analysis,and performance.

Discuss the purpose of a bank reconciliation.

A company established a petty cash fund in April of the current year and experienced the following transactions affecting the fund during April.Prepare journal entries to establish the fund on April 1,to replenish it on April 25,and to record the increase in the fund on April 25.