Question Details

CHAPTER 8 INTERNAL CONTROL AND CASH PART 8

MULTIPLE CHOICE QUESTIONS

8 - 18 Test Bank for Accounting Principles, Eighth Edition
121. Jansen Company gathered the following reconciling information in preparing its April bank
reconciliation:
Cash balance per books, 4/30 $6,600
Deposits in transit 900
Notes receivable and interest collected by bank 2,220
Bank charge for check printing 75
Outstanding checks 4,500
NSF check 420
The adjusted cash balance per books on April 30 is
a. $9,225.
b. $8,820.
c. $8,325.
d. $9,165.
122. Barns Company developed the following reconciling information in preparing its
September bank reconciliation:
Cash balance per bank, 9/30 $15,400
Note receivable collected by bank 8,400
Outstanding checks 12,600
Deposits in transit 6,300
Bank service charge 105
NSF check 1,680
Using the above information, determine the cash balance per books (before adjustments)
for the Barns Company.
a. $13,685
b. $21,700
c. $2,485
d. $21,000
123. In the month of November, Joles Company Inc. wrote checks in the amount of $9,250. In
December, checks in the amount of $12,658 were written. In November, $8,468 of these
checks were presented to the bank for payment, and $10,883 were presented in
December. What is the amount of outstanding checks at the end of November?
a. $1,775
b. $782
c. $2,557
d. $3,550
124. In the month of November, Joles Company Inc. wrote checks in the amount of $9,250. In
December, checks in the amount of $12,658 were written. In November, $8,468 of these
checks were presented to the bank for payment, and $10,883 were presented in
December. What is the amount of outstanding checks at the end of December?
a. $1,775
b. $782
c. $2,557
d. $3,550
Internal Control and Cash 8 - 19
125. At April 30, Beckett Company has the following bank information: cash balance per bank
$4,600; outstanding checks $280; deposits in transit $550; credit memo for interest $10;
bank service charge $20. What is Beckett- adjusted cash balance on April 30?
a. $4,860
b. $4,880
c. $4,330
d. $4,870
126. At June 30, Coulsen Company has the following bank information: cash balance per bank
$3,600; outstanding checks $280; deposits in transit $550; credit memo for interest $10;
bank service charge $20. What is Coulsen- adjusted cash balance on June 30?
a. $3,860
b. $3,880
c. $3,330
d. $3,870
127. Pierce Company wrote checks totaling $8,540 during October and $9,325 during
November. $8,120 of these checks cleared the bank in October, and $9,110 cleared the
bank in November. What was the amount of outstanding checks on November 30?
a. $635
b. $115
c. $305
d. $990
128. Rhoden Company wrote checks totaling $17,080 during October and $18,650 during
November. $16,240 of these checks cleared the bank in October, and $18,220 cleared the
bank in November. What was the amount of outstanding checks on November 30?
a. $1,270
b. $230
c. $610
d. $1,980
129. Perkins Company assembled the following information in completing its March bank
reconciliation: balance per bank $3,820; outstanding checks $775; deposits in transit
$1,250; NSF check $80; bank service charge $25; cash balance per books $4,400. As a
result of this reconciliation, Perkins will
a. reduce its cash account by $475.
b. reduce its cash account by $25.
c. increase its cash account by $55.
d. reduce its cash account by $105.
130. Reisner Company assembled the following information in completing its July bank
reconciliation: balance per bank $11,460; outstanding checks $2,325; deposits in transit
$3,750; NSF check $240; bank service charge $75; cash balance per books $13,200. As
a result of this reconciliation, Reisner will
a. reduce its cash account by $1,425.
b. reduce its cash account by $75.
c. increase its cash account by $165.
d. reduce its cash account by $315.
8 - 20 Test Bank for Accounting Principles, Eighth Edition
131. If a check correctly written and paid by the bank for $491 is incorrectly recorded on the
company- books for $419, the appropriate treatment on the bank reconciliation would be
to
a. add $72 to the book- balance.
b. subtract $72 from the book- balance.
c. deduct $72 from the bank- balance.
d. deduct $491 from the book- balance.
132. In the month of May, Klein Company Inc. wrote checks in the amount of $27,750. In June,
checks in the amount of $37,974 were written. In May, $25,404 of these checks were
presented to the bank for payment, and $32,649 in June. What is the amount of
outstanding checks at the end of May?
a. $5,325
b. $2,346
c. $7,671
d. $10,650
133. In the month of May, Klein Company Inc. wrote checks in the amount of $27,750. In June,
checks in the amount of $37,974 were written. In May, $25,404 of these checks were
presented to the bank for payment, and $32,649 in June. What is the amount of
outstanding checks at the end of June?
a. $5,325
b. $2,346
c. $7,671
d. $10,650
134. Cash equivalents include each of the following except
a. bank certificates of deposit.
b. money market funds.
c. petty cash.
d. U.S. Treasury bills.
135. Which of the following would not be reported on the balance sheet as a cash equivalent?
a. Money market fund
b. Sixty-day certificate of deposit
c. Six-month Treasury bill
d. Money market savings certificate
136. Compensating balances are a restriction on the use of a company's cash and should be
a. reported as a current asset.
b. reported as a noncurrent asset.
c. disclosed in the financial statements.
d. reported as a reduction of cash.
Additional Multiple Choice Questions
137. The principles of internal control include all of the following except
a. establishment of responsibility.
b. combining of duties.
c. physical, mechanical, and electronic controls.
d. independent internal verification.
Internal Control and Cash 8 - 21
138. An example of poor internal control is
a. The accountant should not have physical custody of the asset nor access to it.
b. The custodian of an asset should not maintain or have access to the accounting
records.
c. One person should be responsible for handling related transactions.
d. A salesperson makes the sale, and a different person ships the goods.
139. Having different individuals receive cash, record cash receipts, and hold the cash is an
example of
a. establishment of responsibility.
b. segregation of duties.
c. documentation procedures.
d. independent internal verification.
140. Storing cash in a company safe is an application of which internal control principle?
a. Segregation of duties
b. Documentation procedures
c. Physical controls
d. Establishment of responsibility
141. Using prenumbered checks and having an approved invoice for each check is an example
of
a. establishment of responsibility.
b. segregation of duties.
c. documentation procedures.
d. independent internal verification.
142. An application of good internal control over cash disbursements is
a. following payment, the approved invoice should be stamped PAID.
b. blank checks should be stored in the treasurer's desk.
c. each check should be compared with the approved invoice after the check is issued.
d. check signers should record the cash disbursements.
143. When making a payment from the petty cash fund for postage stamps, the following
journal entry is made.
a. Office Supplies ......................... XXXX
Petty Cash ........................ XXXX
b. Postage Expense ..................... XXXX
Petty Cash ........................ XXXX
c. Miscellaneous Expense............ XXXX
Petty Cash ........................ XXXX
d. No entry is made.
144. All of the following would involve a debit memorandum except
a. a bank service charge.
b. an NSF check.
c. the cost of printing checks.
d. interest earned.
8 - 22 Test Bank for Accounting Principles, Eighth Edition
145. A bank may issue a credit memorandum for
a. a bank service charge.
b. an NSF (not sufficient funds) check from a customer.
c. the collection of a note receivable for the depositor by the bank.
d. the cost of printing checks.
146. Journal entries are required by the depositor for all of the following except
a. collection of a note receivable.
b. bank errors.
c. bank service charges.
d. an NSF check.
147. Cash equivalents are highly liquid investments that can be converted into a specific
amount of cash with maturities of
a. 1 month or less when purchased.
b. 3 months or less when purchased.
c. 6 months or less when purchased.
d. 1 year or less when purchased.