ACCT 2101 Exam 3 Study Guide (Chapters 7 � 9)

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ACCT 2101 Exam 3 Study Guide (Chapters 7–9)Chapter 71.SchwinnCompanyassembledthefollowinginformationincompletingitsMarchbankreconciliation:Balance per bank$15,280Outstanding checks$3,100Deposits in transit$5,000NSF check$320Bank service charge$100Cash balance per books$17,600As a result of this reconciliation, Schwinn willa.reduce its cash account by $1,900.b.reduce its cash account by $100.c.increase its cash account by $220.d.reduce its cash account by$420.(NSF & Bank Charge)2.The following information was taken from Mitchell Company cash budget for the month ofJuly:Beginning cash balance$100,000Cash receipts96,000Cash disbursements136,000If the company has a policy of maintaining end of the month cash balance of $100,000,the amount the company would have to borrow isa.$40,000.(100000+96000-136000=60000; 100000-60000=40000)b.$20,000.c.$60,000.d.$24,000.3.The following credit sales are budgeted by Garcia Company:January$255,000February375,000March525,000April450,000The company’s past experience indicates that 70% of the accounts receivable arecollected in the month of sale, 20% in the month following the sale, and 8% in thesecond month following the sale. The anticipated cash inflow for the month of March isa.$462,900.(525000March*70%=367500;375000Feb*20%=75000;255000Jan*8%=20400; 367500+75000+20400=462900)b.$420,000.c.$450,000.d.$441,000.4.Higgins Company gathered the following reconciling information in preparing its October bankreconciliation:Cash balance per books, 10/31$12,600Deposits in transit450Notes receivable and interest collected by bank2,550Bank charge for check printing60

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Outstanding checks6,000NSF check510Theadjusted cash balance per books on October 31 isa.$14,130.b.$12,030.c.$8,580.d.$14,580.(12600+2550-60-510)5.All of the following are examples of internal control proceduresexcepta.using prenumbered documents.b.reconciling the bankstatement.c.customer satisfaction surveys.d.insistence that employees take vacations.6.Internal control is defined, in part, as a plan that safeguardsa.all balance sheet accounts.b.assets.c.liabilities.d.capital stock.7.Having oneperson responsible for the related activities of ordering merchandise, receivinggoods, and paying for thema.increases the potential for errors and fraud.b.decreases the potential for errors and fraud.c.is an example of good internal control.d.is a good example of safeguarding the company's assets.8.When two or more people get together for the purpose of circumventing prescribed controls, itis calleda.a fraud committee.b.collusion.c.a division of duties.d.bonding of employees.9.The control principle related tonothaving the same person authorize and pay for goods isknown asa.establishment of responsibility.b.independent internal verification.c.separation of duties.d.rotation of duties.10.Physical controls to safeguard assets donotincludea.cashier department supervisors.b.vaults.c.safety deposit boxes.d.locked warehouses.11.A deposit made by a company will appear on the bank statement as aa.debit.b.credit.c.debit memorandum.

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d.credit memorandum.12.A bank reconciliation should be prepareda.whenever the bank refuses to lend the company money.b.when an employee is suspected of fraud.c.to explain any difference between the depositor's balance per books with thebalanceper bank.d.by the person who is authorized to sign checks.13.Deposits in transita.have been recorded on the company's books but not yet by the bank.b.have been recorded by the bank but not yet by the company.c.have not beenrecorded by the bank or the company.d.are customers’ checks that have not yet been received by the company.14.If a check correctly written and paid by the bank for $626 is incorrectly recorded on thecompany's books for $662, the appropriate treatment on the bank reconciliation wouldbe toa.add $36 to the book's balance.b.subtract $36 from the book's balance.c.deduct $36 from the bank's balance.d.deduct $626 from the book's balance.15.Which of the following bank reconciliation items wouldnotresult in an adjusting entry?a.Service charge.b.Deposits in transit.c.NSF check of customer.d.Collection of a note by the bank.16.James Company had checks outstanding totaling $16,200 on its June bank reconciliation. InJuly, James Company issued checks totaling $116,700. The July bank statement showsthat $78,900 in checks cleared the bank in July. A check from one of James Company'scustomers in the amount of $900 was also returned marked "NSF." The amount ofoutstanding checks on James Company's July bank reconciliation should bea.$37,800.b.$54,000.(16200 + 116700–78900)c.$53,100.d.$21,600.17.Nilson Company gathered the following reconciling information in preparing its August bankreconciliation:Cash balance per books,8/31$7,000Deposits in transit300Notes receivable and interest collected by bank1,700Bank charge for check printing40Outstanding checks4,000NSF check340The adjusted cash balance per books on August 31 isa.$8,320.(7000 +1700–40–340)b.$8,020.c.$4,620.

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