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Exam 7: Sarbanes-Oxley, internal Control, and Cash

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Question 31

True/False

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Businesses who have several bank accounts,petty cash,and cash on hand,would maintain a separate ledger account for each type of cash.

A) True
B) False

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Question 32

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A check outstanding for two consecutive months will appear only on the first month's bank reconciliation.

A) True
B) False

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Question 33

Multiple Choice

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In management's internal control report that is now required of all public companies,which of the following does not have a direct effect on a company's internal control system?

A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430.What entry is required in the company's accounts?

Credit memos from the bank

In the normal operation of business you receive a check from a customer and deposit it into your checking account.With your bank statement you are advised that this check for $775 is "NSF".The bank also informs you that due to the amount of activity on your business account the monthly service charge is $75.During a bank reconciliation,you will:

Cash equivalents

Accompanying a bank statement for Marsh Land Properties is a credit memo for payment on a $15,000 note receivable that had been collected by the bank.The rate of interest on the note is 6%.Marsh Land Properties had been notified by the bank at the time of collection,but had made no entries.Journalize the entry that should be made by Marsh Land to bring the accounting records up to date.

Most companies who have several bank accounts,petty cash,and cash on hand,would list each separately on the balance sheet.

Receipts from cash sales of $3,200 were recorded incorrectly in the cash receipts journal as $2,300.What entry is required in the company's accounts?

Money orders are considered cash.

A debit or credit memo describing entries in the company's bank account may be enclosed with the bank statement.An example of a credit memo is

Harris Company had checks outstanding totaling $15,400 on its May bank reconciliation.In June,Harris Company issued checks totaling $64,900.The June bank statement shows that $47,600 in checks cleared the bank in June.A check from one of Harris Company's customers in the amount of $300 was also returned marked "NSF." The amount of outstanding checks on Harris Company's June bank reconciliation should be

Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the customer.What entry is required in the company's accounts?

An example of a preventive control is

Accompanying the bank statement was a debit memo for bank service charges.What entry is required in the company's accounts?

A person authorized to write checks drawn on a checking account at a bank must sign and have on file with the bank a

Sarbanes-Oxley requires companies to maintain strong and effective internal controls and thus prevent fraud and misleading financial statements.

Internal control is enhanced by separating the control of a transaction from the record-keeping function.

If the balance in Cash Short and Over at the end of a period is a credit,it indicates that cash shortages have exceeded cash overages for the period.