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

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Question 51

Multiple Choice

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The term cash includes

A) coins, currency (paper money) , checks
B) money orders, and money on deposit that is available for unrestricted withdrawal
C) short-term receivables
D) both a and b

E) A) and C)
F) B) and C)

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Question 52

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A compensating balance occurs when a bank may require a company to maintain a maximum cash balance.

A) True
B) False

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Question 53

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Sarbanes-Oxley's purpose is to improve financial reporting.

An example of good internal controls over cash payments is the taking of all cash discounts offered.

Which of the following is not an internal control activity for cash?

Green Valley Bank sent Comstock Industries its end of month bank statement for July. The end of month balance by the bank is $11,237.00. The statement shows that a deposit for $4,250.00 is in transit at the end of the statement period. The statement also revealed that checks for $87.00, $105.00, and $95.00 are outstanding. Green Valley collected a 90-day, 12% interest, $4,000.00 note receivable, charging $20.00 for the service. No interest has been accrued on the note. The bank charges a monthly account fee of $35.00. The end of month balance per company books is $11,135.00. Complete a bank/account reconciliation and write any necessary journal entries for the reconciliation.

The following data were gathered to use in reconciling the bank statement of Build-A-Lot: Required: (1) What is the adjusted balance on the bank reconciliation? (2) Journalize any necessary entries for Build-A-Lot based on the bank reconciliation.

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.

Using the following information, prepare a bank reconciliation for Young Co. for August 31, 2011:

The amount of the "adjusted balance" appearing on the bank reconciliation as of a given date is the amount that is shown on the balance sheet for that date.

List the objectives of internal control and give an example of how each is implemented.

The cash account for Santiago Co. on May 31, 2011 indicated a balance of $15,515.00. The March bank statement indicated an ending balance of $20,245.00. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items: Prepare a bank reconciliation as of May 31, 2011. Journalize the necessary entries. Santiago Co. Bank Reconciliation May 31, 2011 Journal

Groceries R Us, Inc. reported the following date in it's December 31, 2011 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? (3) Interpret the ratio you computed in part 2. What are the implications for Groceries R Us, Inc.?

The bank statement for Gatlin Co. indicates a balance of $7,735.00 on June 30, 2010. After the journals for June had been posted, the cash account had a balance of $4,098.00. Record the appropriate journal entries that would be necessary for Gatlin Co.

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 bank reconciles its statement to the company's records.

Meredith Company gathered the following reconciling information in preparing its May bank reconciliation: $\begin{array}{ll}\$2,500 & \text { Cash balance per books, } 5 / 31 \\150 & \text { Deposits in transit } \\650 & \text { Notes receivable and interest collected by bank }\\40&\text { Bank charge for check printing }\\1,800&\text { Outstanding checks }\\140&\text { NSF check }\end{array}$ The adjusted cash balance per books on May 31 is

Roper Electronics received its bank statement for the month of August with an ending balance of $11,740.00. Roper determined that check #613 for $155.00 and check #601 for $420.00 were both outstanding. Also, a $6,900.00 deposit for August 30th was in transit as of the end of the month. Northern Regional Bank also collected a $5,000.00 notes receivable on August 1st that was issued March 1st at 12% annual interest. No interest revenue has been accrued on this note and Northern Regional Bank charged a $35.00 fee for the collection service.The bank statement reveals a bank service charge of $20.00. A customer check for $68.00 was returned with the bank statement marked "NSF". The ending balance of the Roper cash account is $12,938.00. Complete a bank/account reconciliation and prepare any necessary journal entries for the reconciliation.

Which of the following would be subtracted from the balance per bank on a bank reconciliation?

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