Question 1

The acid-test ratio

Accepted Answer

The acid-test ratio is also called the quick ratio and measures liquidity. Option A is correct, and B is incorrect as it measures liquidity and not profitability. Option C is incorrect as it only measures liquidity and not profitability. So, option D is the best choice. Option E is incorrect because it includes option B, which is incorrect.

Question 2

Identify the principles of internal control.

Accepted Answer

The answer of Identify the principles of internal control....

Question 3

A petty cash fund was originally established with a cheque for $150. On December 31, you find the following items in the petty cash fund:
 $$\begin{array} { | l | r | } 
\hline \text { Postage } & \$ 43.50 \
\hline \text { Office supplies } & 51.85 \
\hline \text { Office equipment repair } & 49.00 \
\hline \text { Cash } & 4.25 \
\hline
\end{array}$$ Prepare the general journal entry to record the replenishment of the petty cash fund on December 31.

Accepted Answer

The answer of A petty cash fund was originally established...

Question 4

Identify whether each of the following items affects the bank side or the book side of a bank statement reconciliation._____ (1) Bank service charges _____ (2) Outstanding cheques _____ (3) Deposits in transit _____ (4) NSF cheque _____ (5) Interest on a chequing account _____ (6) The bank recorded a cheque for $958. The company wrote the cheque for $9,580 _____ (7) The bank printed cheques for the depositor. ____ (8) Debit memo _____ (9) Credit memo _____ (10) The bank collected a $1,000 note for the depositor.

Accepted Answer

The answer of Identify whether each of the following items...

Question 5

Z-Mart made a bank deposit on September 30 that did not appear on September's bank statement. In preparing September's bank reconciliation, the company should

Accepted Answer

The deposit is an outstanding deposit that has not yet been recorded by the bank, so it should be added to the bank statement balance to reconcile it with the company's records.

Question 6

In reconciling the bank balance, the amount of an unrecorded bank service charge should be:

Accepted Answer

Bank service charges are expenses that have been deducted by the bank but not yet recorded in the company's book. Therefore, to reconcile the bank balance, these charges should be deducted from the book balance of cash to reflect the actual available cash balance.

Question 7

Discuss the purpose of an internal control system.

Accepted Answer

The answer of Discuss the purpose of an internal control...

Question 8

Z-Mart's current assets were $17,980. Its quick assets were $11,420. Its current liabilities were $12,190. Its quick ratio is

Accepted Answer

The quick ratio is calculated by dividing quick assets by current liabilities. Quick ratio = $11,420 / $12,190 = 0.94.

Question 9

On September 1, Bartoletti Company established a petty cash fund for $100. On September 10, the petty cash fund was replenished when there was $16.50 on hand and there were petty cash receipts for office supplies, $27; transportation-in, $32; and postage, $21.50. On September 15, the petty cash fund was increased to $125. Record these transactions in general journal format.

Accepted Answer

The answer of On September 1, Bartoletti Company established a...

Question 10

Identify each of the following items as either (a) cash or (b) cash equivalent._____ 1. Coins _____ 2. Petty cash _____ 3. Three-month certificate of deposit _____ 4. Currency _____ 5. Certified cheque _____ 6. Cashier's cheque _____ 7. Loose change in a coffee tin _____ 8. Money orders

Accepted Answer

The answer of Identify each of the following items as...

Question 11

Identify how each of the following items would be treated on a bank reconciliation by entering one of the following codes in the space provided.
 $$\begin{array} { | l | l | } 
\hline \text { B+ } & \text { Bark balance increased } \
\hline \text { B- } & \text { Bark balance decreased } \
\hline \text { G+ } & \text { General ledger (book) balance increased } \
\hline \text { G- } & \text { General ledger (book) balane decreased } \
\hline \text { NE } & \text { No effect on the bark reconciliation } \
\hline
\end{array}$$

Accepted Answer

The answer of Identify how each of the following items...

Question 12

Explain the difference between cash and cash equivalents.

Accepted Answer

The answer of Explain the difference between cash and cash...

Question 13

The quick ratio differs from the current ratio

Accepted Answer

The quick ratio, also known as the acid-test ratio, excludes inventory and prepaid expenses from the calculation. This is because these assets may not be easily converted to cash in order to meet short-term financial obligations. The current ratio, on the other hand, includes these assets in the calculation. The quick ratio is not a measure of profitability, but rather a measure of a company's ability to meet short-term liabilities with its most liquid assets. Therefore, the correct answer is B, as it correctly states that prepaid expenses and inventory are excluded from the calculation.

Question 14

Liquidity problems exist for a company when its quick ratio

Accepted Answer

A quick ratio lower than 1 to 1 indicates that the company may have difficulty meeting its short-term financial obligations with its current assets. This means the company's liquidity is limited, which can lead to liquidity problems.

Question 15

A cheque that was outstanding on last month's bank reconciliation was not among the cancelled cheques returned by the bank this month. As a result, in preparing this month's reconciliation, the amount of this cheque should be

Accepted Answer

The cheque is still outstanding, meaning it has not yet been cleared by the bank. Therefore, it should be deducted from the bank balance of cash in the reconciliation.

Question 16

Discuss how the principles of internal control apply to cash receipts.

Accepted Answer

The answer of Discuss how the principles of internal control...

Question 17

You just joined XYZ Company as their junior accountant. Your first task is to prepare a bank reconciliation in good form at June 30. Your boss provides you with the bank statement and the following information from the accounting records at June 30 $$\begin{array} { | l | r | } 
\hline \text { Non-sufficient funds (NSF) cheque retuned by bark } & \$ 350 \
\hline \text { Deposit in trarsit on June } 30 & \$ 1,015 \
\hline \text { Outstarding cheques at Jure } 30 & \$ 2,660 \
\hline \text { Balance per bark statement on June } 30 & \$ 16,280 \
\hline \text { Bark service charges } & \$ 35 \
\hline
\end{array}$$ Your review the bank statement at June 30 shows that a cheque incorrectly recorded by company as $2,500 was correctly recorded by the bank at $2,050. What is the unadjusted (opening) balance of cash in XYZ's general ledger on June 30?

Accepted Answer

To determine the unadjusted (opening) balance of cash in XYZ's general ledger on June 30, we need to start with the balance per the bank statement and make adjustments for any transactions that have not yet been recorded in the accounting records.

The balance per the bank statement at June 30 is $16,200. We then need to make the following adjustments:

1. Add outstanding deposits: According to the accounting records, there were $4,500 of deposits that had been made but had not yet been credited by the bank. Adding this to the bank balance gives us a total of $20,700.

2. Deduct outstanding cheques: According to the accounting records, there were three cheques outstanding at June 30 totaling $6,130. Deducting this from the bank balance gives us a total of $14,570.

3. Correct errors: The accounting records show that a cheque for $2,500 was incorrectly recorded as $2,050. We need to add $450 to the bank balance to correct this error, bringing the balance to $15,020.

Therefore, the unadjusted (opening) balance of cash in XYZ's general ledger on June 30 is $14,570. The correct option is C.

Question 18

The quick assets are

Accepted Answer

Quick assets are assets that can be quickly converted into cash without losing value. These include cash, short-term investments, and accounts receivable, but not inventory or prepaid expenses, which are not as liquid or might not be directly convertible to cash in the short term.

Question 19

Match between columns
                        Premises: Z-Mart buys an insurance policy to protect against employee theft.
Z-Mart has an internal auditor on staff.
Z-Mart uses a voucher system.
The cashier does not have access to the cash register record tape and file.:
Z-Mart uses a computerized point of sale system.
Two clerks share the same cash drawer.
Z-Mart hires Nelson and McGuire, CAs, to perform an audit.
Z-Mart has separate departments for purchasing, receiving, and accounts payable.
The bookkeeper prepares and signs cheques.
Z-Mart uses a cheque protector.

Accepted Answer

The Answer of Establish responsibility. and Divide responsibility for related is...

Question 20

What is the purpose of the petty cash account?

Accepted Answer

The answer of What is the purpose of the petty...

Quiz 7: Internal Control and Cash