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FAR EASTERN UNIVERSITY1ST Preliminary ExaminationFin ACT 1 Financial Acctg. Part I – Multiple Choice Theory 30%
1.To be reported as “cash and cash equivalent”, the cash item must be, (a) Unrestricted in use for current operation; (b) Available for the purchase of property, plant and equipment; (c) Set aside for the liquidation of long-term debt; (d). Deposited in the bank. Answer: (a) 2. Which of the following shall not be considered cash for financial reporting purposes? (a) Petty cash fund and change fund; (b) Money orders, certified checks and personal checks; (c) Coins currency and available funds; (d) Postdated checks and IOU’s. Answer: (d) 3. If material, deposits in foreign bank which are subject to foreign exchange restriction shall be classified: (a) Separately as current assets, with appropriate disclosure; (b) Separately as non-current asset with appropriate disclosure; (c) Be written off as an extraordinary loss; (d) as part of cash and cash equivalents. Answer: (b) 4. Bank Overdraft (a) Is a debit balance in a cash in bank account; (b) Is offset against demand deposit account in another bank; (c) Which cannot be offset is classified as current liability; (d) Which cannot be offset is classified as noncurrent liability. Answer: (c) 5. A compensating balance (a) Must be included in cash and cash equivalents; (b) Which is legally restriced and related to long-term loan is classified as current asset; (c) Which is legally restricted and related to short-term loan is classified separately as current asset; (d) Which is not legally restricted as to withdrawal is classified separately as current asset. Answer: (c) 6. The internal control feature that is specific to petty cash is (a) Separation of duties; (b) Assignment of responsibility; (c) Proper authorization; (d) Imprest system. Answer: (d) 7. What happens when a petty cash is in use? (a) Most small amounts are paid from cash receipts before they are deposited; (b) Expenses paid with petty cash are recorded when the fund is replenished; (c) Petty cash is debited when the fund is replenished; (d) Petty cash is credited when the fund is replenished. Answer: (b) 8. What is the major purpose of an imprest petty cash fund? (a) To effectively plan cash inflows and outflows; (b) To ease the payment of a cash to vendors; (c) To determine the honesty of the petty cash fund cashier; (d) To effectively control cash disbursements. Answer: (d) 9. The petty cash fund account under the imprest fund system is debited (a) Only when the fund is created; (b) When the fund is created and every time it is replenished; (c) When the fund is created and when the size of the fund is increased; (d) When the fund is created and when the fund is decreased. Answer: (c) 10. Which of the following items must be added to the cash balance per ledger in preparing a bank reconciliation which ends with adjusted cash balance? (a) NSF customer check; (b) Bank service charge; (c) Note collected by bank in favor of the depositor and credited to the account of the depositor; (d) Checks outstanding. Answer: (c) 11. A bank reconciliation is (a) A formal financial statement that lists all of the bank account balances of an entity; (b) A merger of two banks that previously were competitors; (c) A statement sent by the bank to the depositor on a monthly basis; (d) A schedule that accounts for the differences between an entity’s cash balance as shown on its bank statement and the cash balance shown in its general ledge. Answer: (d) 12. In preparing a monthly bank reconciliation, which of the following items would be added to the balance per bank statement to arrive at the correct cash balance? (a) Outstanding checks; (b) Deposit in transit; (c) A customer’s note collected by the bank on behalf of the depositor; (d) Bank service charge. Answer: (b). 13. Bank statements provide information about all of the following except (a)...
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