Chapter 9

Question 1

The journal entry to record the collection of the amount due on an interest-bearing promissory note from a customer would debit Cash, credit Interest Income, and:

Answer 1

credit Notes Receivable.

Question 2

What is a written promise to pay a specified amount of money at a specified time?

Answer 2

promissory note

Question 3

Which of the following statements is not correct?

a) In accounting, the term “cash” includes checks, money orders, and funds on deposit in a bank as well as currency and coins.

b) In a well-managed business, most bills are paid by cash.

c) The cash register tape is used to enter the cash sales and sales tax in the journal.

d) The petty cash account balance is usually listed separately from the Cash account on the Balance Sheet.

Answer 3

b) In a well-managed business, most bills are paid by cash.

Question 4

George’s Grocers keeps a $100 change fund in its cash register. The cash sales per the cash register tape on January 30 were $405. The cash count was $502. Identify the correct journal entry below to record the sales and cash overage (or shortage) for January 30.

Answer 4

Debit: cash $402
Debit: cash short or over $3
Credit: Sales $405

Question 5

The entry to replenish a petty cash fund typically includes:

Answer 5

debits to various asset and expense accounts and a credit to Cash.

Question 6

The Petty Cash account:

Answer 6

is an asset account with a normal debit balance.

Question 7

Which of the following is not an essential cash receipt internal control?

a) Have the monthly bank statement sent to and reconciled by someone other than the employees who handle, record, and deposit the funds.

b) Before a bank deposit is made, check the funds to be deposited against the record made when the cash was received.

c) Keep cash receipts in a cash register, a locked cash drawer, or a safe while they are on the premises.

d) Ensure that the person who records cash receipts is the same person who receives and deposits the funds.

Answer 7

d) Ensure that the person who records cash receipts is the same person who receives and deposits the funds.

Question 8

Which of the following is a signature that transfers a check to a specific party for a specific purpose?

Answer 8

restrictive endorsement

Question 9

A check dated in the future is a(n):

Answer 9

postdated check.

Question 10

To arrive at an accurate balance on a bank reconciliation statement, outstanding checks should be:

Answer 10

deducted from the bank statement balance.

Question 11

To arrive at the accurate balance on a bank reconciliation statement, it is necessary to:

Answer 11

deduct outstanding checks from the company’s bank statement balance.

Question 12

Which of the following is a form received from the bank showing all transactions recorded in the depositor’s account during the month?

Answer 12

bank statement

Question 13

When a bank deducts any amount other than a paid check from a depositor’s account, it issues a form called a(n):

Answer 13

debit memorandum.

Question 14

On March 30, a firm’s bank reconciliation statement shows a book balance of $31,640, an NSF check of $800, and a service charge of $40. The journal entry on March 30 to record these items would be:

Answer 14

Debit: Accounts receivable $800

debit: bank fees expense $40

credit: cash $840

Question 15

If a check written by a firm is not canceled by the bank and returned with the month’s bank statement, the firm should:

Answer 15

consider this check as outstanding when preparing the bank reconciliation.

Question 16

A firm’s bank reconciliation statement shows a book balance of $15,940, an NSF check of $460, and a service charge of $26. Its adjusted book balance is:

Answer 16

$15,454.

Question 17

A check issued for $890 to pay a vendor on account was recorded in the firm’s records as $980; the canceled check was properly listed on the bank statement at $890. To arrive at an accurate balance on a bank reconciliation statement, the error should be:

Answer 17

added to the book balance.

Question 18

Included with its bank statement a firm may receive a credit memorandum, which could indicate:

Answer 18

an addition to the firm’s account balance because the bank collected the amount due on a promissory note from a customer of the firm.

Question 19

Of the four categories listed in a bank reconciliation, which ones require a journal entry(ies) in the firm’s records?

Answer 19

Book Balance of Cash Additions and Book Balance of Cash Deductions

Question 20

A good internal control system has:

Answer 20

one employee approves payments

another employee prepares the checks

another employee records the transactions

Question 21

A good system of internal control requires payments be made by:

Answer 21

check

Question 22

How many people control the petty cash fund

Answer 22

only one. that person should also keep receipts for all expenditures

Question 23

Only items on the _____ section have to have adjusting entries

Answer 23

book