Chapter 7 | MC Practice

Which of the following statements is correct? a. Control is most effective when two or three people are given responsibility for the same task. b. The person who has custody of assets should not perform the record keeping for the assets. c. The person who has custody of assets should also perform the record keeping for the assets. d. It is often a waste of company resources to have an employee perform independent internal verification

Which one of the following statements is correct? a. The public accountants conducting annual audits are responsible for continuous evaluations of a company's system of internal control. b. Only large companies employ internal auditors and utilize a system of internal controls. c. Internal auditors are company employees who evaluate the effectiveness of the company's system of internal control on a continuous basis. d. External auditors are company employees who evaluate the effectiveness of the company's system of internal control on a continuous basis.

Which of the following was not a result of the Sarbanes-Oxley Act? a. The Public Company Accounting Oversight Board was created to establish auditing standards and regulate auditor activity. b. Corporate executives and board of directors must ensure that controls are reliable and effective, and they can be fined or imprisoned for failure to do so. c. Companies must file financial statements with the Internal Revenue Service. d. All publicly traded companies must maintain adequate internal controls.

Which one of the following is not a control procedure used for over-the-counter receipts? a. Use of a cash register where the amount rung up is clearly visible to the customer. b. Pre-numbered checks are used to buy supplies. c. A cash register's tape is locked in the register and only a supervisor can access it. d. Providing the customers with an itemized receipt.

Springer Company listed outstanding checks totaling $4,500 on its September bank reconciliation. In October, the company issued checks totaling $45,700. The October bank statement shows that checks totaling $39,800 cleared the bank. In addition, a check from one of Springer's customers in the amount of $500 was returned as NSF. The outstanding checks on the October bank reconciliation should total a. $1,400. b. $9,900. c. $10,400. d. $5,900.

Which is the adjusting entry Max Company would prepare when the bank collects a $200 note receivable from one of Max's customers? a. Cash - 200 Sales Revenues - 200 b. Account Payable - 200 Cash - 200 c. Cash - 200 Customer funds - 200 d. Cash - 200 Notes Receivable - 200

Which one of the statements below is true? a. The deposits in transit are added to the balance per the bank statement, and outstanding checks are deducted from the balance per the bank statement during the bank reconciliation process. b. Both deposits in transit and outstanding checks are deducted from the balance per the bank statement during the bank reconciliation process. c. Both deposits in transit and outstanding checks are added to the balance per the bank statement during the bank reconciliation process. d. Deposits in transit are deducted from the balance per the bank statement, and outstanding checks are added to the balance per the bank statement during the bank reconciliation process.

A company's monthly bank statement shows a collection of a note receivable by the bank in the amount of $500. Which of the following is one part of the journal entry needed to record the note collection by the company? a. Credit to Note Expense for $500 b. Credit to Notes Receivable for $500 c. Credit to Cash for $500 d. Debit to Notes Receivable for $500

A company has the following items at year end: cash on hand, $1,000; cash in a checking account, $3,000; cash in a savings account, $5,000; postage stamps, $50; and Treasury bills, $10,000 that mature in less than 90 days. How much should the company report as cash and cash equivalents on its balance sheet? a. $19,000 b. $19,050 c. $9,000 d. $9,050

Which of the following items in a cash drawer at November 30 is not reported as cash on the November 30 balance sheet? a. Coins and currency b. Money orders c. A customer check dated December 1 d. A customer check dated November 28

Which of the following would not be an example of good cash management? a. Carefully monitoring payments so that payments are not made too early. b. Providing discounts to customers to encourage early payment. c. Employing just-in-time inventory methods to keep inventory low. d. Investing temporary excess cash into the stock of a small company.

Which of the following is not a basic principle of cash management? a. Invest idle cash b. Keep inventory levels low c. Grant customers as much time as they want to pay their receivables d. Delay the payment of liabilities

Which of the following is not a basic principle of cash management? a. Invest idle cash b. Increase collection of receivables c. Keep inventory levels high d. Delay payment of liabilities

With respect to cash management, most companies try to a. keep as much spare cash on hand as possible in case of emergency. b. keep a lot of cash in a non-interest-bearing checking account because that type of account has the lowest fees. c. invest idle cash, even if only overnight. d. invest idle cash in illiquid investments because this will generate the greatest return.

If the company has a policy of maintaining an end of the month cash balance of $50,000, how much will the company need to borrow during July? a. $20,000 b. $10,000 c. 30,000 d. $12,000

If the company has a policy of maintaining a minimum cash balance of $37,000, how much will the company need to borrow? a. $14,000 b. $24,000 c. $8,000 d. $16,000

Burt Company estimates that sales revenue will be $70,000 during July, $60,000 for June, and $75,000 for May In the past, the company collected 60% of its receivables in the month of sale, 30% in the month following the sale, and 10% in the second month following the sale. How much are the budgeted collections from customers for the month of July? a. $60,000 b. $67,500 c. $70,000 d. $42,000

A check is written to replenish a $100 petty cash fund when the fund contains $3 of cash and $94 of receipts. Which of the following is one part of the entry to be used in recording the check to replenish? a. Petty Cash will be debited for $94 b. Petty Cash will be credited for $3 c. Cash will be credited for $94 d. Cash Over and Short will be debited for $3

When replenishing the petty cash fund, which of the following accounts will not be involved in the accounting entry? a. Petty cash b. Cash c. Various expense and asset accounts d. All of these answer choices are correct.

Springer Company listed outstanding checks totaling $4,500 on its September bank reconciliation. In October, the company issued checks totaling $45,700. The October bank statement shows that checks totaling $39,800 cleared the bank. In addition, a check from one of Springer's customers in the amount of $500 was returned as NSF. The outstanding checks on the October bank reconciliation should total a. $1,400. b. $9,900. c. $10,400. d. $5,900.