ACC- CHAPTER 8 ( 80 – 110 )

80. An internal control system consists of the policies and procedures managers use to: A. Protect assets. B. Ensure reliable accounting. C. Promote efficient operations. D. Urge adherence to company policies. E. All of these.

81. Managers place a high priority on internal control systems because the systems assist managers in the: A. Prevention of avoidable losses. B. Planning of operations. C. Monitoring of company performance. D. Monitoring of employee performance. E. All of these.

82. The principles of internal control include: A. Establish responsibilities. B. Maintain minimal records. C. Use only computerized systems. D. Bond all employees. E. Require automated sales systems.

83. Principles of internal control include: A. Apply technological controls. B. Divide responsibilities for related transactions. C. Perform regular and independent reviews. D. Separate recordkeeping from custody of assets. E. All of these.

84. A properly designed internal control system: A. Lowers the company's risk of loss. B. Insures profitable operations. C. Eliminates the need for an audit. D. Requires the use of non-computerized systems. E. Is not necessary if the company uses a computerized system.

85. A company's internal control system: A. Eliminates the company's risk of loss. B. Monitors company and employee performance. C. Eliminates human error. D. Eliminates the need for audits. E. All of these.

86. When two clerks share the same cash register it is a violation of which internal control principle? A. Establish responsibilities. B. Maintain adequate records. C. Insure assets. D. Bond key employees. E. Apply technological controls.

87. Prenumbered printed checks are an example of which internal control principle? A. Technological controls. B. Maintain adequate records. C. Perform regular and independent reviews. D. Establish responsibilities. E. Divide responsibility for related transactions.

88. The impact of technology on internal controls includes: A. Reduced processing errors. B. Elimination of the need for regular audits. C. Elimination of the need to bond employees. D. Elimination of separation of duties. E. Elimination of fraud.

89. Internal control policies and procedures have limitations including: A. Human error. B. Human fraud. C. Cost-benefit principle. D. Collusion. E. All of these.

90. Internal control systems are: A. Developed by the Securities and Exchange Commission for public companies. B. Developed by the Small Business Administration for non-public companies. C. Developed by the Internal Revenue Service for all U.S. companies. D. Required by Sarbanes-Oxley (SOX) to be documented and certified if the company's stock is traded on an exchange. E. Required only if a company plans to engage in interstate commerce.

91. Cash, not including cash equivalents, includes: A. Postage stamps. B. Coins, currency, and checking accounts. C. IOUs. D. Two-year certificates of deposit. E. Money market funds.

92. Cash equivalents: A. Are short-term, highly liquid investment assets. B. Include 6-month CDs. C. Include checking accounts. D. Are recorded in petty cash. E. Include money orders.

93. Cash equivalents: A. Include savings accounts. B. Include checking accounts. C. Are short-term investments sufficiently close to their maturity date that their value is not sensitive to interest rate changes. D. Include time deposits. E. Have no immediate value.

94. Cash equivalents: A. Are readily convertible to a known cash amount. B. Include short-term investments purchased within 3 months of their maturity dates. C. Have a market value that is not sensitive to interest rate changes. D. Include short-term U.S. treasury bills. E. All of these.

95. The following information is available for Holland Company at December 31: Money market fund balance...... $2,790 Certificate of deposit maturing June 30 of next week....... $15,000 Postdated checks from customer........... $1,475 Cash in bank account......... $22,431 NSF checks from customers returned by bank...... $650 Cash in petty cash fund.............$200 Inventory of postage stamps...............$18 U.S treasury bill purchased on December 15 and maturing on February 28 of following year. Based on this information, Holland Company should report Cash and Cash Equivalents on December 31 of: A. $35,421 B. $50,421 C. $37,546 D. $36,246 E. $40,439

96. The following information is available for Johnson Manufacturing Company at June 30: Cash in bank accounts......... $6,455 Inventory of postage stamp........ $74 Money market fund balance....... $12,400 Petty cash balance.....$350 NSF checks from customers returned by bank...$867 Postdated checks from customers...... $391 Money orders............. $257 A nine-months certificate of deposit maturing on December 31 of current year......................$8,000 Based on this information, Johnson Manufacturing Company should report Cash and Cash Equivalents on June 30 of: A. $15,062 B. $20,146 C. $20,072 D. $19,205 E. $19,462

98. A check involves three parties: A. The writer, the cashier, and the bank. B. The maker, the payee, and the bank. C. The maker, the manager, and the payee. D. The bookkeeper, the payee, and the bank. E. The signer, the cashier, and the company.

99. A remittance advice is: A. An explanation for a payment by check. B. A bank statement. C. A voucher. D. An EFT. E. A cancelled check.

100. A bank statement includes: A. A list of outstanding checks. B. A list of petty cash amounts. C. The beginning and the ending balance of the depositor's account. D. A listing of deposits in transit. E. All of these.

101. For which item does a bank NOT issue a debit memorandum? A. To notify a depositor of all withdrawals through an ATM. B. To notify a depositor of a fee assessed to the depositor's account. C. To notify a depositor of a uncollectible check. D. To notify a depositor of periodic payments arranged in advance, by a depositor. E. To notify a depositor of a deposit to their account.

102. Preparing a bank reconciliation on a monthly basis is an example of: A. Establishing responsibility. B. Separation of duties. C. Protecting assets by proving accuracy of cash records. D. A technological control. E. Poor internal control.

103. The number of days' sales uncollected: A. Is used to evaluate the liquidity of receivables. B. Is calculated by dividing accounts receivable by sales. C. Measures a company's ability to pay its bills on time. D. Measures a company's debt to income. E. Is calculated by dividing sales by accounts receivable.

104. The days' sales uncollected ratio is used to: A. Measure how many days of sales remain until the end of the year. B. Determine the number of days that have passed without collecting on accounts receivable. C. Identify the likelihood of collecting sales on account. D. Estimate how much time is likely to pass before the amount of accounts receivable is received in cash. E. Measure the amount of layaway sales for a period.

105. The number of days' sales uncollected is calculated by: A. Dividing accounts receivable by net sales. B. Dividing accounts receivable by net sales and multiplying by 365. C. Dividing net sales by accounts receivable. D. Dividing net sales by accounts receivable and multiplying by 365. E. Multiplying net sales by accounts receivable and dividing by 365.

106. The number of days' sales uncollected: A. Measures how much time is likely to pass before the current amount of accounts receivable is received in cash. B. Can be used for comparisons to other companies in the same industry. C. Can be used for comparisons between current and prior periods. D. Reflects the liquidity of receivables. E. All of these.

107. A company had net sales of $31,500 and ending accounts receivable of $2,700 for the current period. Its days' sales uncollected equals: A. 11.7 days. B. 23.3 days. C. 31.3 days. D. 42.5 days. E. 46.6 days.

108. Mattel had net sales of $4,235 million and ending accounts receivable of $775 million. Its days' sales uncollected equals: A. 298 days. B. 66.8 days. C. 19.4 days. D. 81.8 days. E. 65.2 days.

109. The following information is taken from Hogan Company's December 31 balance sheet: Cash and cash equivalent.............. $8,419 Accounts receivable.....................70,422 Merchandise inventories ............ 60,362 Prepaid expenses...................... 4,100 Account payable....................$14,950 Notes payable.......................86,638 Other current liabilities .... 9,500 If net credit sales and cost of goods sold for the current year were $612,000 and $367,200, respectively, the firm's days' sales uncollected for the year is: A. 60 days B. 85 days C. 42 days D. 154 days E. 70 days

110. An income statement account that is used to record cash overages and cash shortages arising from petty cash transactions or from errors in making change is titled: A. Cash Lost. B. Bank Reconciliation. C. Petty Cash. D. Cash Over and Short. E. Cash Receivable.