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Exam 5: Internal Control and Cash

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Question 31

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Which internal control activity is followed when management authorizes the purchasing department to order goods and services for the company?

A) Segregation of duties
B) Physical security
C) Independent verification
D) Establishing responsibility

E) All of the above
F) C) and D)

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Question 32

Multiple Choice

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Madrid Consulting, Inc. Madrid Consulting, Inc. prepared a bank reconciliation as of March 31, 2011. The following items were identified. - Refer to the information provided for Madrid Consulting, Inc. What is Madrid's unadjusted cash balance in its accounting records at March 31st before the reconciliation was completed?

A) $28,700
B) $29,165
C) $28,300
D) $29,600

E) A) and D)
F) A) and C)

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Question 33

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Jennitt Inc. established a petty cash fund for $400 on May 1, 2011. By the end of the month, the petty cash custodian requested reimbursement of $322 for the following expenditures from the fund: Record the entry to establish Jennitt's petty cash fund, then record the entry to recognize expenses paid from the fund as of the end of May and increase the fund balance to $500.

Drucker Dynamics Inc. The current assets section of the balance sheets of Drucker Dynamics as of December 31, 2012 and 2011, is presented below. Refer to the information provided for Drucker Dynamics. Complete a horizontal analysis of cash and cash equivalents for 2012. Your answers should be expressed as percentages and rounded to one decimal place. Provide a short explanation of this analysis.

During the bank reconciliation process, an accountant identified an error. This error involved a company check written for $200 to pay a supplier for goods purchased on credit by the company. The check was erroneously recorded in the company's records for $2,000. Which of the following entries would correct this error in the company's records?

If the balance on the bank statement does not equal the balance per the company's records, then it can be assumed that:

Which of the following statements is true regarding a credit memorandum and its relationship to a company's bank reconciliation procedures?

Which internal control activity is followed when the work of one department acts as a check on the work of another?

Explain how a company can control small cash payments that are made in cash rather than by check.

List and define each of the five elements of internal control.

____________________ represents the cash flow that a company is able to generate after considering the maintenance or expansion of its assets (capital expenditures) and payment of dividends.

Which of the following is an example of a debit memorandum?

Bloom's Garden Center Company Selected data from the financial statements of Bloom's Garden Center are provided below. - Refer to the selected data provided for Bloom's Garden Center Company. Which of the following would result from a horizontal analysis of Bloom's cash and cash equivalents?

Bloom's Garden Center Company Selected data from the financial statements of Bloom's Garden Center are provided below. -Refer to the selected data provided for Bloom's Garden Center Company. Which of the following would result from a vertical analysis of Bloom's cash and cash equivalents?

The practice of monitoring activities within the internal control system is likely to be carried out by each of the following groups except:

Sparrow Corporation The items listed below were identified while preparing a bank reconciliation for the checking account of Sparrow Corporation as of March 31, 2012. -Refer to the information presented for Sparrow Corporation. How will the customer's bounced checks be handled within a bank reconciliation?

____________________ are those investments and deposits with financial institutions that are readily convertible into known amounts of cash and that have original maturities of three months or less.

If a company erroneously records a $500 deposit as $50 in its records, which of the following must occur when reconciling its bank statement?

Robert and Karen are planning to open a coffee shop near the local college campus. They will make both cash and credit sales. They will hire college students to make coffee and to operate the coffee makers and cash registers. Either Robert or Karen will act as manager during most hours that the business will be open. One student will be designated as assistant manager when they cannot be present. Describe at least five procedures that Robert and Karen might use to provide adequate internal control over cash and credit sales and bank deposits.

Madrid Consulting, Inc. Madrid Consulting, Inc. prepared a bank reconciliation as of March 31, 2011. The following items were identified. -Refer to the information provided for Madrid Consulting, Inc. What is net amount of the adjustments to Madrid's cash balance as a result of the bank reconciliation?