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Exam 4: Cash and Internal Controls

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Question 51

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A company provides services on account during the current year totaling $400,000. By the end of the year, $350,000 of this amount had been received. In addition, $75,000 was received on account from customers for services provided in the prior year. Determine the amount of operating cash flows the company will report as received from customers in the current year.

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$350,000 ...

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Question 52

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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: -____ Formal policies to evaluate internal and external threats to achieving company objectives.

A) Monitoring
B) Oversight board
C) Control activities
D) Corporate executive accountability
E) Nonaudit services
F) Control environment
G) Internal control
H) Information and communication
I) Auditor rotation
J) Risk assessment

K) D) and I)
L) B) and E)

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Question 53

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Earnings quality is the ability of net income to report the true underlying performance of the company.

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: -____ Cash receipts received by the company but not yet recorded by the bank.

The following data were obtained from the bank statement and from the process of reconciling it: Bank service charges = $20 Deposit outstanding = $150 Interest earned on the bank account = $10 Checks outstanding = $400 Which items should be deducted from and added to the bank balance in completing the reconciliation?

The Sarbanes-Oxley Act (SOX) mandates which of the following?

A company had the following transactions: 1. Paid $150 for office supplies using a debit card. 2. Purchased office equipment costing $700 using a credit card. 3. Paid utilities bill of $400 by issuing a check. Record each transaction.

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: -____ Executives must personally certify the financial statements.

Regarding a bank reconciliation, which one of the following is an item recorded by the company but not by the bank?

In response to corporate accounting scandals and to public outrage over seemingly widespread unethical behavior of top executives, Congress passed the Sarbanes-Oxley Act.

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

Which of the following does not represent a major provision of the Sarbanes-Oxley Act?

On May 31, Money Corporation's Cash account showed a balance of $10,000 before the bank reconciliation was prepared. After examining the May bank statement and items included with it, the company's accountant found the following items: What is the amount of cash that should be reported in the company's balance sheet as of May 31?

Managers of the company act as stewards or caretakers of the company's assets.

Risk assessment procedures include periodic reviews of internal controls, assessing management's oversight of the internal control, developing solutions to known cases of internal control failures, and determining whether each division or operation within a company is meeting its objectives.

A company's general ledger shows a cash balance of $4,570. Comparing the company's cash records with the monthly bank statement reveals several additional cash transactions such as checks outstanding of $2,840, bank service fees of $110, and interest earned of $15. Calculate the correct balance of cash.

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

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.

Madison Company's cash ledger reports the following for the month ending March 31, 2012. Information from March's bank statement and company records reveals the following additional information: a. The ending cash balance recorded in the bank statement is $6,790. b. Cash receipts of $2,100 from 3/26-3/31 are outstanding. c. Checks 545 and 547 are outstanding. d. The deposit on 3/11 included a customer's check for $400 that did not clear the bank (NSF check). e. Check 543 was written for $2,800 for office supplies in March. The bank properly recorded the check for this amount. f. An automatic withdrawal for March rent was made on March 4 for $1,500. g. Madison's checking account earns interest based on the average daily balance. The amount of interest earned for March is $50. h. Last year, one of Madison's top executives borrowed $4,000 from Madison. On March 24, the executive paid $4,200 ($4,000 borrowed amount plus $200 interest) directly to the bank in payment for the borrowing. i. The bank charged the following service fees: $30 for NSF check, $10 for automatic withdrawal for rent payment, and $20 for collection of the loan amount from the executive. Prepare a bank reconciliation for March 31, 2012, and record the necessary cash adjustments.

Cash receipts of the company that have not been added to the bank's record of the company's balance are referred to as checks outstanding.