Cash and Cash Equivalents.

Conceptual

1. Which of the following is not considered cash for financial reporting purposes?
a. Petty cash funds and change funds
b. Money orders, certified checks, and personal checks
c. Coin, currency, and available funds
d. Postdated checks and I.O.U.'s
2. Which of the following is considered cash?
a. Certificates of deposit (CDs)
b. Money orders
c. Money market savings certificates
d. Postdated checks
3. Travel advances should be reported as _______.
a. supplies.
b. cash because they represent the equivalent of money.
c. investments.
d. none of these.
4. Which of the following items should not be included in the Cash caption on the
statement of financial position
a. Coins and currency in the cash register
b. Checks from other parties presently in the cash register
c. Amounts on deposit in checking account at the bank
d. Postage stamps on hand
5. All of the following may be included under the heading of "cash" except _______.
a. currency.
b. money market funds.
c. checking account balance.
d. savings account balance.
6. In which account are post-dated checks received classified?
a. Receivables.
b. Prepaid expenses.
c. Cash.
d. Payables.
7. In which account are postage stamps classified?
a. Cash.
b. Office supplies.
c. Receivables.
d. Inventory.
8. What is a compensating balance?
a. Savings account balances.
b. Margin accounts held with brokers.
c. Temporary investments serving as collateral for outstanding loans.
d. Minimum deposits required to be maintained in connection with a
borrowing arrangement.
9. Under which section of the statement of financial position is "cash restricted for plant
expansion" reported?
a. Current assets.
b. Non-current assets.
c. Current liabilities.
d. Equity.
10. A cash equivalent is a short-term, highly liquid investment that is readily convertible
into known amounts of cash and ____________.
a. is acceptable as a means to pay current liabilities.
b. has a current market value that is greater than its original cost
c. bears an interest rate that is at least equal to the prime rate of interest at
the date of liquidation.
d. is so near its maturity that it presents insignificant risk of changes in
interest rates.
11. Bank overdrafts generally should be ____________.
a. reported as a deduction from the current asset section.
b. reported as a deduction from cash.
c. netted against cash and a net cash amount reported.
d. reported as a current liability.
12. Deposits held as compensating balances __________.
a. usually do not earn interest.
b. if legally restricted and held against short-term credit may be included as
cash.
c. if legally restricted and held against long-term credit may be included
among current assets.
d. none of these.
13. The category "trade receivables" includes __________.
a. advances to officers and employees.
b. income tax refunds receivable.
c. claims against insurance companies for casualties sustained.
d. none of these.
14. Which of the following should be recorded in Accounts Receivable?
a. Receivables from officers
b. Receivables from subsidiaries
c. Dividends receivable
d. None of these
15. What is the preferable presentation of accounts receivable from officers, employees,
or affiliated companies on a statement of financial position
a. As offsets to equity.
b. By means of footnotes only.
c. As assets but separately from other receivables.
d. As trade notes and accounts receivable if they otherwise qualify as current
assets.
16. Which of the following is an appropriate reconciling item to the balance per bank in a
bank reconciliation?
a. Bank service charge.
b. Deposit in transit.
c. Bank interest.
d. Chargeback for NSF check.
17. Which of the following is not true?
a. The imprest petty cash system in effect adheres to the rule of disbursement by
check.
b. Entries are made to the Petty Cash account only to increase or decrease the
size of the fund or to adjust the balance if not replenished at year-end.
c. The Petty Cash account is debited when the fund is replenished.
d. All of these are not true.
18. A Cash Over and Short account
a. is not generally accepted.
b. is debited when the petty cash fund proves out over.
c. is debited when the petty cash fund proves out short.
d. is a contra account to Cash.
19. The journal entries for a bank reconciliation
a. are taken from the "balance per bank" section only.
b. may include a debit to Office Expense for bank service charges.
c. may include a credit to Accounts Receivable for an NSF check.
d. may include a debit to Accounts Payable for an NSF check.
20. When preparing a bank reconciliation, bank credits are
a. added to the bank statement balance.
b. deducted from the bank statement balance.
c. added to the balance per books.
d. deducted from the balance per books.
21. The effect of compensating balance is ___________.
a. to provide greater security for the borrower.
b. to decrease the yield on the loan to the lender.
c. to increase the yield on the loan to the borrower.
d. to increase the yield on the loan to lender.
22. Which of the following may properly be included as part of cash to be reported in
the December 31, 2016 statement of financial position?
a. Treasury bills maturing on March 31, 2017, acquired on December 1, 2016.
b. Customer’s check dated January 1, 2017 and sent to bank for deposit on
December 31, 2016.
c. Shares of stocks to be sold on the first week of January 2017.
d. Preference shares with mandatory redemption and acquired three
months prior to redemption date.
23. Which of the following statements is correct?
a. Cash which is restricted and not available for use within one year of the
reporting period should be included in noncurrent assets.
b. Cash in a demand deposit account, being held specifically for the retirement
of long term-debts not maturing currently , should be excluded from
current assets and shown as a noncurrent investment.
c. Investments which can be liquidated at once and with little risk of loss of
principal may be classified as cash equivalent and included in the caption
“cash and Cash equivalent”
d. Cash and cash equivalents is always presented first in statement of
financial position when presenting current and non-current
classifications.
24. These are short-term, highly liquid investments that are so near their maturity
that they represent insignificant risk of changes in value due to changes in
interest rates.
a. Cash and cash equivalents
b. Treasury bills
c. Treasury notes
d. Cash equivalents.
25.Compensating balance agreements that do not legally restrict the amount of funds
shown on the balance sheet should:
a. be reported in the current asset section.
b. be reported in the long-term investment section.
c. be reported in the other asset section.
d. be reported in the footnotes.
26. Bank overdraft
a. is a debit balance in 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 non current liability.
27. Cash in foreign currency is valued at
a. face value
b. current exchange rate
c. current exchange rate reduced by allowance for expected decline in peso.
d. estimated realizable value.
28. If material, deposit in foreign countries which are subject to foreign exchange
restriction should be shown separately as
a. current asset with no disclosure of the restriction
b. non-current asset with no disclosure of the restriction
c. current assets with disclosure of the restriction
d. non-current asset with disclosure of the restriction.
29. Which of the following is least likely the purpose of preparing bank
reconciliation?
a. to bring cash in bank balance per books and per bank statement in
agreement.
b. as an internal control procedure for safeguarding assets.
c. to detect fraud.
d. to recognize items such as expenses and assets not recorded.
30. For effective control over the disbursement of payroll checks , an enterprise makes
a specific amount of cash available in a checking account for this limited purpose. The
type of account used for this purpose is called a(n):
a. general checking account
b. imprest bank account
c. lockbox account
d. compensating balance.
31. The principal purpose of voucher system is to provide assurance that
a. all cash receipts are deposited intact in the bank.
b. all cash disbursements are approved before a check is issued.
c. all cash receipts are recorded in the accounting records.
d. all purchase invoices are supported by debit memoranda.
32. Which is not a key element of internal control over cash receipts?
a. daily recording of all cash receipts in the accounting records.
b. daily entry in a voucher register
c. immediate counting by the person opening the mail or using the cash
register.
d. daily deposit intact.
33. This occurs when collection of receivable from one customer is misappropriated
and then concealed by applying a subsequent collection from another customer.
a. lapping c. window dressing
b. kiting d. fraud.
34. This occurs when cash shortage is concealed by overstating the balance of cash.
This is performed by exploiting the float period (the time it needs for a check to
clear at the bank it was drawn).
a. lapping c. window dressing
b. kiting d. fraud
35. This refers to measures taken by management to make a business looks as strong
as possible in its statement of financial position, statement of profit and loss and
other comprehensive income, statement of cash flows. It occurs when books are
not closed at year-end and transactions in the subsequent period are deliberately
recorded in current period in order to improve the entity’s financial performance or
financial ratios.
a. lapping c. imprest system
b. kiting d. window dressing.