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Exam 4: Cash and Internal Controls

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Question 41

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Which of the following is NOT correct regarding the reporting of cash?

A) Cash is reported in both the balance sheet and the statement of cash flows.
B) Cash flows from buying and selling investments and long-term productive assets are called operating cash flows.
C) Cash flows from transactions with stockholders and creditors are called financing cash flows.

D) A) and B)
E) A) and C)

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Question 42

Multiple Choice

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The company's ratio of cash to noncash assets increased in the current year from 20% to 30%? Which of the following represents the most likely reason for this increase?

A) The company maintained operations only in the United States.
B) The company declared a large dividend in the current year.
C) Management forecasts additional operating volatility in future periods.

D) A) and B)
E) A) and C)

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Question 43

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After preparing a bank reconciliation,a check outstanding for the payment of advertising would be recorded with a:

When customers pay for services with a debit card,the company should debit Cash and credit Service Revenue.

The amount of cash reported in a company's balance sheet does not include cash equivalents,defined as short-term investments that have a maturity date no longer than three months from the date of purchase.Cash equivalents are included in the cash balance.

What key piece of legislation was passed in response to corporate accounting scandals by Enron,WorldCom,and others?

Auditors of public companies can perform the full range of audit and nonaudit consulting services for their audit clients.

Issuing common stock for cash is considered a(n) :

A deposit outstanding will cause the bank's cash balance to be higher than the company's cash balance.The company's balance will be higher.

A bank reconciliation matches the balance of cash in the bank account with the balance of cash in the company's own records.

One benefit of internal control is greater reliance by investors on reported financial statements.

The following information was taken from the bank reconciliation for Mooner Sooner Inc.at the end of the year: Bank balance: $8,000 Checks outstanding: $5,800 Note collected by the bank: $1,500 Service fee: $20 Deposits outstanding: $4,000 NSF check (bad check) returned for $300 What is the correct cash balance that should be reported in Mooner Sooner's balance sheet at the end of the year?

Payment of dividends to stockholders is considered a(n) :

After preparing a bank reconciliation,the service fee charged by the bank would be recorded with a:

Providing services to customers on account is considered a(n) :

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.The cash balance needs to be updated for items used to reconcile the company's cash balance.

A framework for designing an internal control system is provided by the:

The Sarbanes-Oxley Act is also known as Generally Accepted Accounting Principles.The Sarbanes-Oxley Act is also known as the Public Company Accounting Reform and Investor Protection Act of 2002 and commonly referred to as SOX.

When a sale is made to a customer who pays with a check,the company records:

Which of the following is NOT involved in the replenishment of the petty cash fund?