Question 1

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

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Question 2

For each of the independent cases below, identify the principle of internal control that is violated, and recommend what should be done to remedy the violation.
1. In order to save money, Indigo Company has decided to drop its property insurance on assets; and stop bonding the cashiers who handle upwards of $5,000 in cash each day.
2. Jobs Company records each sale on a preprinted invoice. Because invoices are sometimes damaged in the process of preparation, the invoices are not prenumbered. Instead, the sales clerk writes the next number on each invoice as it is prepared.
3. Keegan Company is a very small business. Dylan Epps, one of the two office clerks, opens the mail each day and removes the cash receipts that come in the mail. Dylan also records the receipts in the cash records and the customer's account and deposits the cash in the bank.
4. Ludwig Company prides itself on hiring only the most competent employees. The owner, Jeremy Ludwig, believes that since the employees are highly competent he can show he trusts them completely by not checking up on their performance.
5. Maple Industries is a small business with three accounting employees. Each employee is well-trained and able to perform any of the accounting tasks, including handling cash receipts and cash disbursements, and preparing the bank reconciliation. Because of this cross-training, the employees share responsibilities for all of the tasks.

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Question 3

On June 1, a company established a $75 petty cash fund. On June 27, the petty cash fund contains $5.25 in cash and the following paid petty cash receipts: postage, $19.50; office supplies, $36.25; and miscellaneous expense $14.00. Give the general journal entry to reimburse the fund on June 27.

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Question 4

Plenty Co. established a petty cash fund of $150 on October 1. On October 10, the petty cash fund was reimbursed when there was $49 remaining and there were petty cash receipts for: office supplies, $47; transportation-in on inventory purchased, $32; and postage, $22. On October 15, the petty cash fund was decreased to $125 in total. Plenty Co. uses a perpetual inventory system. Record the above transactions in general journal form.

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Question 5

Discuss how the principles of internal control apply to cash receipts through the mail by giving several examples of good control measures that should be implemented.

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Question 6

At the end of the day on March 15, the cash register's record shows $1,957, but the count of cash in the register is $1,965. Prepare the general journal entry to record the day's cash sales.

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Question 7

Quibble Company established a $300 petty cash fund by issuing a check to the petty cashier on February 1. On February 15, the petty cash fund was reimbursed and increased to $800 in total. The contents of the petty cash fund at the time of the February 15 reimbursement were:  Prepare Quibble's general journal entry to record both the reimbursement and the increase of the petty fund on February 15.

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Question 8

Norman Co. had $5,925 million in sales and $1,155 million in ending accounts receivable for the current period. For the same period, Opal Co. reported $5,885 million in sales and $790 million in ending accounts receivable. Calculate the days' sales uncollected for both companies as of the end of the current period and indicate which company is doing a better job in managing the collection of its receivables.

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Question 9

What is a voucher system and what are the two areas for which it establishes control procedures?

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Question 10

Describe a bank reconciliation and discuss its purpose.

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Question 11

Following are seven items a through g that would cause Rembrandt 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 mailed to the bank on the last day of the current month and not recorded on this month's bank statement.
e. A check paid by the bank at its correct $190 amount recorded in error in the company's check register at $109.
f. An unrecorded credit memorandum indicating that bank collected a note receivable for Rembrandt Company and deposited the proceeds in the company's account.
g. A check written in the current period that is not yet paid or returned by the bank.
Indicate where each item, letters a-g, would appear on Rembrandt Company's bank reconciliation by placing its identifying letter in the parentheses in the proper section of the form below.

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The answer of Following are seven items a through g...

Question 12

At the end of the current period, a company reported $725,000 in net credit sales and $100,000 in ending accounts receivable. Calculate this company's days' sales uncollected at the end of the current period.

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Question 13

When using a voucher system, what are the steps on the invoice approval checklist that must be completed before an invoice approval is complete and a voucher prepared?

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Question 14

A company established a petty cash fund in November of the current year and experienced the following transactions affecting the fund during November:  Prepare the journal entries to establish the fund on November 1 and to reimburse the fund on November 28.

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The answer of A company established a petty cash fund...

Question 15

A petty cash fund was originally established with a check for $100. On August 31, which is the period end, the petty cash fund included the following:
Petty cash receipts:  Prepare the general journal entry to record the reimbursement of the petty cash fund on August 31.

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Question 16

Discuss how the principles of internal control apply to cash receipts over-the-counter by giving several examples of good control measures that should be implemented.

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Question 17

Describe a petty cash account and its purpose.

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Question 18

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 the specific requirements for auditors set forth by SOX?

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Question 19

A company reported net sales for 2016 of $265,000 and $545,000 for 2017. The year-end balances of accounts receivable were $39,000 for 2016 and $92,000 for 2017. Calculate the days' sales uncollected at the end of each year for this company and describe any changes in the apparent liquidity of the company's receivables.

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Question 20

On March 1, a company established a $75 petty cash fund. On March 12, the petty cash fund contains $3 in cash and the following paid petty cash receipts: transportation-in on merchandise inventory $14.25; postage, $19.50; and office supplies, $36. Give the general journal entry to reimburse the fund and to increase its amount to $150 on March 12.

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The answer of On March 1, a company established a...

Quiz 6: Reporting and Analyzing Cash and Internal Controls