1.All of the following are objectives of internal control EXCEPT

a.ensuring the accuracy of business information.

b.ensuring compliance with laws and regulations by employees and managers.

c.eliminating errors.

d.safeguarding assets and ensuring their use for business purposes.

2.Which of the following is NOT an internal control activity for cash?

a.The functions of cash record keeping and cash custody should be combined.

b.Bank accounts should be reconciled at least monthly.

c.All cash receipts should be correctly documented according to the amount and reason.

d.The number of persons who have access to cash should be limited.

3.Given the following information for the year ended December 31, what is the ratio of cash to monthly cash expenses?

Negative cash flow from operations	$(552)
Cash and cash equivalents as of year-end	506

a.13.1

b.11.0

c.12.0

d.None of these choices are correct.

4.The petty cash fund is

a.established by estimating payments needed.

b.a special cash fund.

c.used to pay small amounts that occur often.

d.All of these choices are correct.

5.If the same person orders supplies, verifies receipt of the supplies, and pays the supplier, which of the following is a possible negative result?

a.The quantity and quality of supplies received may not be verified, thus causing the company to pay for supplies not received or for poor-quality supplies.

b.Supplies may be stolen by employees.

c.Orders may be placed on the basis of friendship rather than on price, quality, and quantity of supplies.

d.All of these choices are correct.

6.Which of the following is NOT a reason that Congress passed the Sarbanes-Oxley Act of 2002?

a.To require companies to maintain strong and effective internal controls over the preparation of financial statements

b.To regulate private companies

c.To require companies to maintain strong and effective internal controls over the recording of financial transactions

d.To answer the public outcry related to the financial scandals of the early 2000s

7.The credit recorded in the journal to reimburse the petty cash fund is to

a.Cash.

b.various accounts for which the petty cash was disbursed.

c.Accounts Receivable.

d.Petty Cash.

8.Cash equivalents include

a.commercial paper.

b.money market funds.

c.U.S. Treasury bills.

d.All of these choices are correct.

9.Sometimes startup companies

a.report losses.

b.use the ratio of cash to monthly cash expenses.

c.report negative net cash flows from operations.

d.All of these choices are correct.

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

a.Checks marked NSF

b.Wiring of the depositor's funds to other locations

c.Interest earned by the account

d.Bank service charge

11.Which of the following is NOT an internal control activity for cash?

a.Banking facilities should be used as much as possible.

b.Surprise audits of cash on hand should be made occasionally.

c.All cash receipts should be recorded promptly.

d.All cash payments should be made with cash.

12.Monthly cash expenses are

a.estimated from the financing section of the cash flow statement.

b.estimated from the investing section of the cash flow statement.

c.referred to as cash burn.

d.None of these choices are correct.

13.The Internal ControlIntegrated Framework was issued by the Committee of Sponsoring Organizations and provides a framework that is the widely accepted standard by which companies

a.design, analyze, and evaluate internal controls.

b.structure their organizations.

c.design financial statements.

d.evaluate financial results.

14.Journal entries based on the bank reconciliation are required in the depositor's accounts for

a.bank errors.

b.NSF items.

c.deposits in transit.

d.outstanding checks.

15.A $99 petty cash fund contains $95 in petty cash receipts and $15 in currency and coins. The journal entry for the replenishment of the fund would include a

a.debit to Cash Short and Over for $11.

b.credit to Cash Short and Over for $11.

c.credit to Petty Cash for $95.

d.credit to Cash for $95.

16.Cash equivalents

a.are highly liquid investments that earn interest.

b.will be converted to cash within 120 days.

c.will be converted to cash within 2 years.

d.are illegal in some states.

17. If the adjusted balances in the bank and company sections of the bank reconciliation are not equal, this means

a.a fraud has been committed.

b.the differing amounts will be reconciled in the next period.

c.an item has been overlooked and must be found.

d.the bank has made an error.

18.A bank statement

a.is a bill from the bank for services rendered.

b.provides a summary of all checking account transactions recorded by the bank.

c.lets a depositor know the financial position of the bank as of a certain date.

d.is a credit reference letter written by the depositor's bank.

19.Hector Company gathered the following reconciling information in preparing its March bank reconciliation:

Cash balance per books, March 31	$12,200
Note receivable collected by bank	6,100
Outstanding checks	9,300
Deposits in transit	4,400
Bank service charge	75
NSF check	1,350

Using the above information, determine the adjusted cash balance for March.

a.$12,475

b.$15,500

c.$7,800

d.$16,875