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Exam 4: Cash and Internal Controls

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Question 81

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The balance shown in the August bank statement of Colt Company was $23,200. After examining the August bank statement and items included with it, the company's accountant found: What is the amount of cash that should be reported in the balance sheet as of August 31?

A) $20,700.
B) $17,200.
C) $18,700.
D) $22,200.

E) C) and D)
F) None of the above

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Question 82

True/False

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Generally, when a company's net income and free cash flows trend in the same direction over time, earnings are believed to have higher quality.

A) True
B) False

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Question 83

Multiple Choice

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Which of the following is correct with respect to a bank reconciliation?

The final step in reconciling the bank's cash balance and the company's cash balance is to update the company's cash balance for the items used to reconcile the bank's cash balance.

Interest earned on a bank account is an example of a cash transaction recorded by the company and then later by the bank after notification.

What is internal control? Briefly describe the five components of internal control outlined by the Committee of Sponsoring Organizations (COSO).

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term by placing the letter designating the term in the space provided. Terms: -____ Procedures for maintaining separation of duties.

Listed below are five terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term by placing the letter designating the term in the space provided. Terms: -____ Minor amount of cash kept on hand.

Listed below are six terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term by placing the letter designating the term in the space provided Terms: -____ Money earned on the average daily balance of the checking account.

____ Sell office building.

A company's bank statement shows a cash balance of $4,230. Comparing the company's cash records with the monthly bank statement reveals several additional cash transactions such as checks outstanding of $3,880, deposits outstanding of $1,230, NSF check of $300, and service fee of $50. Calculate the correct balance of cash.

A minor amount of cash kept on hand to pay for small purchases is referred to as a:

When preparing a bank reconciliation, a deposit outstanding would be:

An NSF check is an example of a cash transaction that is initially recorded by the bank and later by the company after notification.

At the time a $400 petty cash fund is being replenished, the company's accountant finds vouchers totaling $350 and petty cash of $50. The vouchers include: postage, $100; business lunches, $150; delivery fees, $75; and office supplies, $25. Which of the following is not recorded when recognizing expenditures from the petty cash fund?

At the beginning of the current year, a company issued stock for $100,000 and borrowed $50,000 from the bank. By the end of the year, the company had provided services of $80,000 for cash, paid employee salaries of $30,000, and paid utilities of $10,000. Determine the amount of financing cash flows the company will report in the current year.

Investing activities include cash investments in long-term assets and investment securities.

Consider the following transactions: 1. Pay employees' salaries. 2. Repay borrowing to the bank. 3. Purchase equipment with note payable. 4. Provide services to customers on account. 5. Pay dividends to stockholders. 6. Collect cash from customers for services provided. 7. Purchase supplies on account. 8. Pay for supplies purchased in transaction 7 above. For each transaction, indicate the type of cash flow involved based on the classifications in the statement of cash flows. If a transaction does not involve cash, write 'No Cash.'

A company's free cash flows equal operating cash flows plus financing cash flows during the period.

Giving only management the right to make purchases over a certain amount is an example of which preventive control?