CHAPTER 8 — PRACTICE WORKSHEET

Identify the elements that make fraud likely.

1. a
   Which factor does a company have the MOST control over?

   a) Opportunity b) Financial pressure c) Rationalization d) Inflation
2. b
   An employee justifies theft by telling herself she is 'underpaid.' This is:

   a) Opportunity b) Financial pressure c) Rationalization d) Segregation

Match each control to the internal-control principle it illustrates.

1. a
   Only the treasurer is authorized to sign checks.

   a) Establishment of responsibility b) Physical controls c) Human resource controls d) Documentation procedures
2. b
   Cash is kept in a safe and records are password-protected.

   a) Segregation of duties b) Physical controls c) Independent internal verification d) Documentation procedures
3. c
   A supervisor makes a surprise count of the cash drawer and compares it to the register.

   a) Independent internal verification b) Establishment of responsibility c) Human resource controls d) Physical controls
4. d
   Employees who handle cash are bonded and required to take vacations.

   a) Documentation procedures b) Human resource controls c) Segregation of duties d) Physical controls

Evaluate cash controls.

1. a
   The same clerk receives cash from customers AND records the receipts in the accounts. The weakness is:

   a) No segregation of duties b) No physical control c) No documentation d) There is no weakness
2. b
   The best fix is to:

   a) Fire the clerk b) Have one person handle cash and a different person record it c) Stop accepting cash d) Count the cash yearly

Brookline Co. establishes a petty cash fund of $150 by writing a check.

1. a
   Record the establishment of the fund.

   Accounts available: Petty Cash · Cash · Supplies · Accounts Payable · Cash Over and Short

Brookline's $150 fund now holds receipts for postage $52, delivery $38, and supplies $41, plus $17 in cash.

1. a
   Total receipts
2. b
   Cash that SHOULD remain (fund − receipts)
3. c
   Cash shortage (should-remain − actual $17)
4. d
   Cash needed to replenish (fund − cash on hand)
5. e
   Record the replenishment.

   Accounts available: Postage Expense · Delivery Expense · Supplies · Cash Over and Short · Cash · Petty Cash

Harbor Co.'s $200 petty cash fund holds receipts for postage $60, freight-out $45, and supplies $50, plus $43 in cash.

1. a
   Total receipts
2. b
   Cash shortage
3. c
   Cash needed to replenish

Harbor Co. decides to raise its petty cash fund from $200 to $300.

1. a
   Amount of the increase
2. b
   Record the increase.

   Accounts available: Petty Cash · Cash · Supplies · Cash Over and Short

Delmar Co.'s balance per bank is $15,000; deposits in transit are $3,000; outstanding checks are $4,500. Its balance per books is $12,900; the bank collected an $800 note; a customer's NSF check was $150; the bank service charge was $50.

1. a
   Adjusted cash balance per BANK
2. b
   Adjusted cash balance per BOOKS

For each item, choose how it is treated in the reconciliation.

1. a
   Deposits in transit:

   a) Add to bank balance b) Subtract from bank balance c) Add to book balance d) Subtract from book balance
2. b
   Outstanding checks:

   a) Subtract from bank balance b) Add to bank balance c) Subtract from book balance d) Add to book balance
3. c
   Note collected by the bank:

   a) Add to book balance b) Subtract from book balance c) Add to bank balance d) Subtract from bank balance
4. d
   NSF check and bank service charge:

   a) Subtract from book balance b) Add to book balance c) Subtract from bank balance d) Add to bank balance

Record the book-side adjustments from Delmar Co.'s reconciliation: an $800 note collected by the bank (including $50 interest), a $150 NSF customer check, and a $50 service charge.

1. a
   Record the note collected by the bank.

   Accounts available: Cash · Notes Receivable · Interest Revenue · Accounts Receivable · Bank Charge Expense
2. b
   Record the NSF check.

   Accounts available: Accounts Receivable · Cash · Notes Receivable · Interest Revenue
3. c
   Record the bank service charge.

   Accounts available: Bank Charge Expense · Cash · Miscellaneous Expense · Accounts Receivable

Fenwick Co.: balance per bank $20,000; deposits in transit $4,200; outstanding checks $6,700. Balance per books $16,000; note collected by bank $2,000; NSF check $300; service charge $200.

1. a
   Adjusted balance per bank
2. b
   Adjusted balance per books

At year-end, Cliffside Co. has cash in bank $42,000, petty cash $150, a money-market investment maturing in two months $8,000, accounts receivable $9,000, and inventory $30,000.

1. a
   Cash and cash equivalents to report

A $100 change fund's register shows cash sales should total $842, but the drawer counts $845.

1. a
   Amount over
2. b
   Cash Over and Short is recorded as a:

   a) Credit (an overage) b) Debit (a shortage) c) It is ignored d) An asset

After a reconciliation, decide which items require a journal entry on the company's books.

1. a
   Deposits in transit require a book entry?

   a) No — they clear on their own b) Yes
2. b
   A bank service charge requires a book entry?

   a) Yes b) No
3. c
   Outstanding checks require a book entry?

   a) No — they clear on their own b) Yes

Northgate Co.: balance per bank $9,600; deposits in transit $1,900; outstanding checks $2,000. Balance per books $9,000; note collected by bank $600; bank service charge $100.

1. a
   Adjusted balance per bank
2. b
   Adjusted balance per books

Riverbend Co. has: cash in bank $30,000, petty cash $200, cash on hand $1,300, a 60-day Treasury bill $5,000, a stock investment $12,000, and restricted cash for a bond payment $7,000.

1. a
   Cash and cash equivalents