CHAPTER 8 INTERNAL CONTROL AND CASH PART 7 MULTIPLE CHOICE QUESTIONS 101. Which one of the following would not cause a bank to debit a depositor’s account? a. Bank service charge b. Collection of a note receivable c. Wiring of funds to other locations d. Checks marked NSF 102. A company maintains the asset account, Cash in Bank, on its books, while the bank maintains a reciprocal account which is a. a contra-asset account. b. a liability account. c. also an asset account. d. an owner’s equity account. Internal Control and Cash 8 – 15 103. A remittance advice attached to a company check provides a. details about the running cash balance in the checking account. b. the magnetic bank routing numbers. c. the explanation of the purpose of the check. d. the signature space for the maker. 104. A deposit made by a company will appear on the bank statement as a a. debit. b. credit. c. debit memorandum. d. credit memorandum. 105. A check returned by the bank marked “NSF” means a. no service fee. b. no signature found. c. not satisfactorily filled-out. d. not sufficient funds. 106. A debit memorandum would not be issued by the bank for a. a bank service charge. b. the issuance of traveler’s checks. c. the wiring of funds. d. the collection of a notes receivable. 107. On a bank reconciliation, deposits in transit are a. added to the bank balance. b. deducted from the bank balance. c. added to the book balance. d. deducted from the book balance. 108. A bank reconciliation should be prepared a. whenever the bank refuses to lend the company money. b. when an employee is suspected of fraud. c. to explain any difference between the depositor’s balance per books and the balance per bank. d. by the person who is authorized to sign checks. 109. Deposits in transit a. have been recorded on the company’s books but not yet by the bank. b. have been recorded by the bank but not yet by the company. c. have not been recorded by the bank or the company. d. are checks from customers which have not yet been received by the company. 110. In preparing a bank reconciliation, outstanding checks are a. added to the balance per bank. b. deducted from the balance per books. c. added to the balance per books. d. deducted from the balance per bank. 8 – 16 Test Bank for Accounting Principles, Eighth Edition 111. If a check correctly written and paid by the bank for $428 is incorrectly recorded on the company’s books for $482, the appropriate treatment on the bank reconciliation would be to a. add $54 to the bank’s balance. b. add $54 to the book’s balance. c. deduct $54 from the bank’s balance. d. deduct $428 from the book’s balance. 112. Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry: a. Accounts Receivable Cash b. Cash Accounts Receivable c. Miscellaneous Expense Accounts Receivable d. No adjusting entry is necessary. 113. Tolan Company had checks outstanding totaling $5,400 on its June bank reconciliation. In July, Tolan Company issued checks totaling $38,900. The July bank statement shows that $24,300 in checks cleared the bank in July. A check from one of Tolan Company’s customers in the amount of $300 was also returned marked “NSF.” The amount of outstanding checks on Tolan Company’s July bank reconciliation should be a. $14,600. b. $20,000. c. $19,700. d. $9,200. 114. Each of the following items affect the cash balance per books except a. bank service charges. b. notes collected by the bank. c. NSF checks. d. outstanding checks. 115. Grant Company gathered the following reconciling information in preparing its July bank reconciliation: Cash balance per books, 7/31 $5,500 Deposits in transit 150 Notes receivable and interest collected by bank 850 Bank charge for check printing 20 Outstanding checks 2,000 NSF check 170 The adjusted cash balance per books on July 31 is a. $6,160



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