Ch 8 Solutions

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AC 116 MIDTERM QUESTIONS AND ANSWERS

Chapter 8

1. A necessary element of internal control is
a.database
b.systems design
c.systems analysis
d.information and communication

ANS:D

2. An example of a preventive control is
a.the use of a bank account
b.separation of the Purchasing Department and Accounting Department personnel c.bonding employees who handle cash
d.accepting payment in currency only

ANS:B

3. Under the voucher system, every transaction is recorded at the time of a.requisitioning
b.ordering
c.incurring
d.paying

ANS:C

4. A debit or credit memorandum describing entries in the depositor's bank account may be enclosed with the bank statement. An example of a credit memorandum is a.deposited checks returned for insufficient funds

b.a promissory note left for collection
c.a service charge
d.notification that a customer's check for $375 was recorded by the depositor as $735 on the deposit ticket

ANS:B

5. Journal entries based on the bank reconciliation are required in the depositor's accounts for a.outstanding checks
b.deposits in transit
c.bank errors
d.book errors

ANS:D

6. Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the customer. What entry is required in the depositor's accounts? a.debit Notes Receivable; credit Cash

b.debit Cash; credit Miscellaneous Income
c.debit Cash; credit Notes Receivable
d.debit Accounts Receivable; credit Cash

ANS:C

7. Accompanying the bank statement was a debit memorandum for an NSF check received from a customer. What entry is required in the depositor's accounts? a.debit Other Income; credit Cash
b.debit Cash; credit Other Income
c.debit Cash; credit Accounts Receivable
d.debit Accounts Receivable; credit Cash

ANS:D

8. Which of the following would be subtracted from the balance per bank on a bank reconciliation? a.Outstanding checks
b.Deposits in transit
c.Notes collected by the bank
d.Service charges

ANS:A

9. Marcus Company developed the following reconciling information in preparing its September bank reconciliation:

Cash balance per bank, 9/30$11,000
Note receivable collected by bank6,000
Outstanding checks9,000
Deposits-in-transit4,500
Bank service charge75
NSF1,200

Using the above information, determine the cash balance per books (before adjustments) for the Marcus Company. a.$9,775
b.$15,725
c.$15,500
d.$1,775

ANS:D

10. A $100 petty cash fund contains $92 in petty cash receipts, and $6.50 in currency and coins. The journal entry to record the replenishment of the fund would include a a.credit to Petty Cash for $93.50

b.credit to Cash for $92
c.debit to Cash Short and Over for $1.50
d.credit to Cash Short and Over for $1.50

ANS:C

11. In the normal operation of business you receive a check from a customer and deposit it into your checking account. With your bank statement you are advised that this check for $450 is “NSF”. The bank also informs you that due to the amount of activity on your business account the monthly service charge is $40. During a bank reconciliation:

a.subtract both values from balance according to bank.
b.add both values from balance according to books.
c.add both values from balance according to bank.
d.subtract both values from balance according to books.

ANS:D

Chapter 9

12. The receivable that is usually evidenced by a formal instrument of credit is a(n) a.trade receivable.
b.note receivable.
c.accounts receivable.
d.income tax receivable.

ANS:B

13. The type of account and normal balance of Allowance for Doubtful Accounts is a.contra asset, credit
b.asset, debit
c.liability, credit
d.expense, debit
e.expense, credit

ANS:A

14. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account...
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