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Exam 7: Internal Control and Cash

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Question 21

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Which of the following has the greatest internal control?

A) payments made by credit card
B) payments made by cheque
C) payments made by Electronic Funds Transfer
D) payments made by cash

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Question 22

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The following is information about Pelly Car Repair's cash and related accounts at December 31, 2014: 1. Postdated cheques from customers total $5,500. The cheques are dated January 31, 2015. 2. The company has a savings account with a balance of $5,250 after all adjustments are recorded. 3. The company has guaranteed investment certificates totalling $10,000 due in 30 days. 4. The company maintains a cash float of $1,000 for use in the cash registers and which is stored in a locked safe overnight. On December 31, the sales manager borrowed $100 from the cash float, leaving an "IOU" note in the safe. 5. The chequing account is overdrawn, showing a negative balance of $12,400 after all adjustments. Instructions a. Calculate what amount of cash and cash equivalents will be reported on Pelly's December 31, 2014 balance sheet. b. For each of the items listed that is not included in cash on hand, indicate how the amount will be reported in Pelly's December 31, 2014 financial statements.

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a. Cash and cash equivalents include:
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Question 23

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Fraud is most likely committed by people inside an organization.

For efficiency of operations and better control over cash, a company should maintain only one bank account.

Independent internal and/or external checks of performance would NOT include the following.

When customers make purchases with a bank credit card, the retailer

Which one of the following would NOT cause a bank to debit a depositor's account?

Control activities are the actions that must be taken to respond to risks that threaten reliable financial reporting.

A debit memorandum would NOT be issued by the bank for

The following procedures are used by Kurtz Renovations in handling cash payments. The individuals involved in the cheque preparation and payment process are Howie, the Accounts Payable clerk, who reports to the Controller, and Jane, the Construction Manager. 1. When purchase invoices are received, Jane approves them for payment. After they are approved, Howie records the purchase invoices in the Accounts Payable subledger and then files them in an "unpaid invoices" file. Once or twice a week, Howie scans through the file and decides which invoices should be paid. 2. Howie prepares the cheques manually. He enters cheque numbers on the cheques which are not pre-numbered. 3. The unsigned cheques are put into Jane's In Box to be signed. 4. Jane does not feel she needs to see the invoices again when she signs the cheques so only the cheques are given to her. 5. Jane is often out of the office on construction projects, but she tries to make sure that she signs the cheques within two or three days. 6. After she has signed the cheques, Jane returns them to Howie for mailing. After Howie has mailed the cheques, he files the paid invoices in the vendor invoice files. Instructions For each procedure, describe what could go wrong as a result of the weakness described, and recommend an internal control to correct the weakness.

The fees for credit cards are higher than the fees for debit cards.

Proper segregation of accounting duties eliminates the need for internal control.

The concept of reasonable assurance is based on the belief that the cost of control activities should NOT be more than their expected benefits.

A system of internal control

Purchase orders are required for all cheques to be issued.

Which of the following transactions are NOT covered by the term "Electronic Funds Transfer"?

Staledated cheques would NOT be reported as cash on the Balance Sheet.

In terms of segregation of duties, which one of the following is NOT related to the other three?

Electronic Funds Transfers are used to

Electronic funds transfer