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Question(s) / Instruction(s):

105. Bank errors a. occur because of time lags. b. must be corrected by debits. c. are infrequent in occurrence. d. are corrected by making an adjusting entry on the depositor's books.

106. An adjusting entry is not required for a. outstanding checks. b. collection of a note by the bank. c. NSF checks. d. bank service charges.

107. Which of the following would not be reported on the balance sheet as a cash equivalent? a. Money market fund b. Sixty-day certificate of deposit c. Six-month Treasury bill d. Money market savings certificate

108. Compensating balances are a restriction on the use of a company's cash and should be a. reported as a current asset. b. reported as a noncurrent asset. c. disclosed in the financial statements. d. reported as a reduction of cash.

The following questions are from the Study Guide.

s109. An example of poor internal control is a. The accountant should not have physical custody of the asset nor access to it. b. The custodian of an asset should not maintain or have access to the accounting records. c. One person should be responsible for handling related transactions. d. A salesperson should make the sale, and a different person ships the goods.

s110. Storing cash in a company safe is an application of which internal control principle? a. Segregation of duties b. Documentation procedures c. Physical controls d. Establishment of responsibility

s111. An application of good internal control over cash disbursements is a. following payment, the approved invoice should be stamped “paid”. b. blank checks should be stored in the treasurer's desk. c. each check should be compared with the approved invoice after the check is issued. d. check signers should record the cash disbursements.

s112. When making a payment from the petty cash fund for postage stamps, the following journal entry is made. a. Office Supplies XXXX Petty Cash XXXX b. Postage Expense XXXX Petty Cash XXXX c. Miscellaneous Expense XXXX Petty Cash XXXX d. No entry is made.

s113. A bank may issue a credit memoranda for a. a bank service charge. b. an NSF (not sufficient funds) check from a customer. c. the collection of a note receivable for the depositor by the bank. d. the cost of printing checks.

s114. Cash equivalents are highly liquid investments that can be converted into a specific amount of cash with maturities of a. 1 month or less when purchased. b. 3 months or less when purchased. c. 6 months or less when purchased. d. 1 year or less when purchased.

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