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Exam 4: Cash and Internal Controls

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Question 1

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The components of internal control do not directly include:

A) Risk assessment.
B) Inflation adjustment.
C) Monitoring.
D) Control activities.

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

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Question 2

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The balance in the Colt Company's Cash account on August 31 was $19,700,before the bank reconciliation was prepared.After examining the August bank statement and items included with it,the company's accountant found: $\begin{array}{lr}\text { Checks outstanding } & \$ 4,300 \\\text { NSF check } & 140 \\\text { Note collected by bank for the Colt Company } & 1,200 \\\text { Deposits outstanding } & 1,800 \\\text { Bank service fees } & 60\end{array}$ 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) B) and D)
F) A) and C)

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Question 3

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Providing employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties is an example of which preventive control?

Which of the following would NOT represent good controls over cash receipts?

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

A company's general ledger shows a cash balance of $2,380.Comparing the company's cash records with the monthly bank statement reveals several additional cash transactions such as deposits outstanding of $1,760,note collected by the bank on the company's behalf of $1,000,and interest earned of $20.The company also finds an error by the bank of an additional deposit of $100.Calculate the correct balance of cash.

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

Cash is typically reported as a current asset in the balance sheet.

During the current year,a company purchases equipment for $250,000,paying $50,000 immediately and promising to pay the remainder within 30 days after the end of the year.Determine the amount of investing cash flows the company will report in the current year.

What is the concept behind separation of duties in establishing internal controls?

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

Describe the procedures used to reconcile a company's cash balance.

Cash may not include:

Below is a summary of all the transactions of Sampson Consulting for the month of April 2012. Prepare a statement of cash flows for the month of April,properly classifying each of the transactions into operating,investing,and financing activities.The cash balance at the beginning of April is $14,800.

Cash transactions that have been recorded by the company but not the bank include:

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

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.

The control environment refers to the overall top-to-bottom attitude of the company with respect to internal controls.

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

Which of the following would NOT need to be accounted for in a bank reconciliation?