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Exam 7: Fraud, Internal Control, and Cash

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Question 31

Multiple Choice

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Schwinn Company assembled the following information in completing its March bank reconciliation: $\begin{array} { l r } \text { Balance per bank } & \$ 15,280 \\\text { Outstanding checks } & \$ 3,100 \\\text { Deposits in transit } & \$ 5,000 \\\text { NSF check } & \$ 320 \\\text { Bank service charge } & \$ 100 \\\text { Cash balance per books } & \$ 17,600\end{array}$ As a result of this reconciliation, Schwinn will

A) 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.

E) B) and D)
F) A) and B)

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Question 32

Multiple Choice

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Which of the following is not one of the main factors that contribute to fraudulent activity?

A) Opportunity.
B) Incompatible duties.
C) Financial pressure.
D) Rationalization.

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

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Question 33

True/False

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Cash restricted in use should be separately reported on the balance sheet.

At Emerson Company, one bookkeeper prepares the cash deposits while the other bookkeeper enters the collections in the journal and ledger. Which of the following is the best explanation of this type of internal control principle over cash receipts?

In the month of November Gavin Company Inc. wrote checks in the amount of $27,750. In December, checks in the amount of $37,974 were written. In November, $25,404 of these checks were presented to the bank for payment, and $32,649 in December. What is the amount of outstanding checks at the end of December?

Which of the following is not included in the cash disbursements section of a cash budget?

Management of cash is the responsibility of the company

Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry:

Expected direct materials purchases in Wade Company are $525,000 in the first quarter and $675,000 in the second quarter. Forty percent of the purchases are paid in cash as incurred, and the balance is paid in the following quarter. The budgeted cash payments for purchases in the second quarter are:

Which one of the following is not an objective of a system of internal controls?

All of the following are true regarding bank statements except

On a bank statement, paid checks are shown as

For which of the following errors should the appropriate amount be added to the balance per bank on a bank reconciliation?

The responsibility for keeping the records for an asset should be separate from the physical custody of that asset.

Checks received in the mail should be immediately stamped "NSF" to prevent unauthorized cashing of the check.

Internal control over cash disbursements is more effective when payments are made by ______________, rather than by ______________.

A bank statement

A company's past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5% in the second month after the sale; the remainder is never collected. Budgeted credit sales were: $\begin{array} { l r } \text { July } & \$ 240,000 \\\text { August } & 144,000 \\\text { September } & 360,000\end{array}$ The cash inflow in the month of September is expected to be

Important objectives of a system of internal controls are to safeguard assets and to enhance the accuracy and reliability of the accounting records. Briefly discuss how (1) cost-benefit considerations, (2) the human element, and (3) the size of the business affect the implementation of a system of internal controls.

An adjusting entry is not required for