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Exam 8: Cash and Internal Controls

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Question 81

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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.

F) A) and B)
G) A) and C)

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Question 82

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What is the purpose of the days' sales uncollected ratio?

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The days' sales uncollected ratio is a l...

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Question 83

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The use of internal controls provides guaranteed protection against losses due to operating activities.

The Sarbanes-Oxley Act (SOX)requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls.What are some of the specific requirements for auditors specifically ?

At the end of the current period,a company reported $475,000 in net credit sales and $75,000 in ending accounts receivable.Calculate this company's days' sales uncollected at the end of the current period.

The treasurer of a company is responsible for cash management.List five cash management principles that are essential for effective cash management.

On August 25,a company purchased $5,000 worth of merchandise on terms 2/10,n/30; on September 4,the amount due was paid.Using the net method of recording purchases,prepare general journal entries to record (a)the purchase on August 25,and (b)the cash payment on September 4.

Marbel had $2,816 million in sales and $555 million in ending accounts receivable for the current period.For the same period,Maxtel reported $4,885 million in sales and $491 million in ending accounts receivable.Calculate the days' sales uncollected for both companies as of the end of the current period.Which company is doing a better job in managing the collection of its receivables?

Technology such as cash registers,check protectors,time clocks and personal identification scanners can improve internal control.

The payee is the person who signs a check,authorizing its payment.

Match each of the following transactions 1 through 10 with the applicable internal controlprinciple listed in "a" through "g" (some answers refer to more than one principle).

________________ are checks written (or drawn)by the depositor,deducted on the depositor's records,and sent to the payee,but not yet recorded by the bank for payment at the bank statement date.

The impact of technology on internal controls includes:

The days' sales uncollected ratio measures a company's ability to manage its debt.

A company records invoices at net amounts.On March 5,the company recorded merchandise purchased,invoice price $17,000,terms 2/15,n/60.On March 24,this company discovered that the invoice had been incorrectly filed and the discount had been lost.The invoice was paid on April 1.Prepare journal entries to record these events.

Cash equivalents:

At the end of the day,the cash register's record shows $1,250,but the count of cash in the cash register is $1,245.The correct entry to record the cash sales is

Cash equivalents:

Following are seven items a through g that would cause Xavier Company's book balance of cash to differ from its bank statement balance of cash. a.A service charge imposed by the bank. b.A check listed as outstanding on the previous period's reconciliation and still outstanding at the end of this month. c.A customer's check returned by the bank is marked "Not Sufficient Funds(NSF)". d.A deposit that was mailed to the bank on the last day of the current month and is unrecorded on this month's bank statement. e.A check paid by the bank at its correct $190 amount was recorded in error in the company's Check Register at $109. f.An unrecorded credit memorandum indicated that bank had collected a note receivable for Xavier Company and deposited the proceeds in the company's account. g.A check was written in the current period that is not yet paid or returned by the bank. Indicate where each item a through g would appear on Xavier Company's bank reconciliation by placing its identifying letter in the parentheses in the proper section of the form below.

A company using the net method of recording purchases failed to take advantage of a discount available.When they pay the full (gross) amount of an invoice at the end of the credit period the journal entry will include a debit to: