Select the appropriate response.
1. The Cash account on the balance sheet should not include which of the following items?
a. Travel advances to employees
b. Currency
c. Money orders
d. Deposits in transit
2. A credit memorandum accompanying a bank statement would occur for which of the following items?
a. A previously deposited customer check which was returned NSF.
b. Bank service charges for the month.
c. The proceeds of a note collected by the bank are deposited to the account.
d. Each of the above.
3. When reconciling the ending cash balance per the bank statement to the correct adjusted cash balance, how would deposits in transit be handled?
a. Added to the balance per the bank statement.
b. Subtracted from the balance per the bank statement.
c. Added to the balance per company records.
d. Ignored.
4. A bank reconciliation sometimes points to the need for adjusting entries. In general, the source of the adjustments is:
a. the reconciliation of the ending balance per the bank statement to the adjusted cash balance.
b. the reconciliation of the cash balance per the company records to the adjusted cash balance.
c. both a and b.
d. none of the above.
5. Malory Company provides the following information about the month-end bank reconciliation:
| Ending cash per bank statement | $1,367 |
| Ending cash per company records | 7,383 |
| Monthly bank service charge | 25 |
| Deposits in transit at month-end | 8,345 |
| Outstanding checks at month-end | 2,399 |
| Customer check returned NSF | 45 |
The correct ending cash balance is:
a. $4,914
b. $7,268
c. $7,313
d. $7,383
6. Malory Company provides the following information about the month-end bank reconciliation:
| Ending cash per bank statement | $1,367 |
| Ending cash per company records | 7,383 |
| Monthly bank service charge | 25 |
| Deposits in transit at month-end | 8,345 |
| Outstanding checks at month-end | 2,399 |
| Customer check returned NSF | 45 |
What journal entry should be recorded to cause the company records to be correct?
a. Cash 70
Cash Short & Over 70
b. Miscellaneous Expense 70
Cash 70
c. Miscellaneous Expense 25
Accounts Receivable 45
Cash 70
d. Miscellaneous Expense 2,399
Cash 2,399
7. When using a petty cash system, the replenishment of the fund would normally include a debit to:
a. Cash.
b. Petty Cash.
c. Revenues.
d. None of the above.
8. The trading securities owned by a company are:
a. reported on the balance sheet as a current asset.
b. reported on the balance sheet as a noncurrent asset.
c. reported on the balance sheet as a contra-equity account.
d. reported on the balance sheet as a reduction of liabilities.
9. During its first year of operation, Lenton Company acquired three investments in trading securities. Investment A cost $50,000 and had a year-end market value of $60,000. Investment B cost $35,000 and had a year-end market value of $17,000. Investment C cost $26,000 and had a year-end market value of $24,000. What amount should be reported as a charge against income in Lenton's income statement for the first year of operation?
a. $0
b. $10,000
c. $20,000
d. $30,000
10. During its first year of operation, Lenton Company acquired three investments in trading securities. Investment A cost $50,000 and had a year-end market value of $60,000. Investment B cost $35,000 and had a year-end market value of $17,000. Investment C cost $26,000 and had a year-end market value of $24,000. The journal entry to record the decline in market value would include:
a. a debit to Unrealized Loss on Trading Securities.
b. a credit to Unrealized Gain on Trading Securities.
c. a debit to Trading Securities.
d. At least two of the above.
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