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Exam 9: Cash Receipts, Cash Payments, and Banking Procedures

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Question 51

Multiple Choice

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To arrive at an accurate balance on a bank reconciliation statement, a service charge should be:

A) added to the bank statement balance.
B) deducted from the bank statement balance.
C) added to the book balance.
D) deducted from the book balance.

E) A) and D)
F) B) and C)

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Question 52

Multiple Choice

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To record the payment of a purchase invoice when a cash discount is taken, the accountant would:

A) debit Accounts Payable and credit Cash.
B) debit Accounts Payable, credit Purchases Discounts, and credit Cash.
C) debit Purchases, credit Purchases Discounts, and credit Cash.
D) debit Accounts Payable, debit Purchases Discounts, and credit Cash.

E) A) and B)
F) A) and C)

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Question 53

Multiple Choice

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Identify the procedure below that is NOT essential for proper control over cash payments.

Hawthorne Inc. uses the perpetual inventory system when recording its cash payments and cash receipts. If the company issues a check to pay for goods purchased and they pay within the discount period, identify the account used to record the discount.

Record the following transactions for the month of November 2019 on page 8 of a cash receipts journal. Total, prove, and rule the cash receipts journal as of November 30. Nov. 1 Collected $3,600 from Katie Bing, a credit customer on account. 10 Received a check from Mike Drake to pay his $5,600 promissory note plus interest of $336. 13 Received $6,400 from Jessie Cole, a credit customer, in payment of her account. 15 Had cash sales of $18,000 plus sales tax of $1,260. There was a cash overage of $5.

Purchases Discounts is a contra cost of goods sold account.

The entry to record an additional cash investment by the owner is recorded in:

A firm's bank reconciliation statement shows a book balance of $16,640, a non-interest note collected by the bank of $3,400 an NSF check of $1,650, and a service charge of $60. Its adjusted book balance is:

Which of the following statements is NOT correct regarding the cash receipts journal?

On March 31, 2019, Home Decorating Pavilion received a bank statement with an ending balance of $9,750. The balance in the firm's checkbook and Cash account on the same date was $10,290. The difference between the two balances is caused by the items listed below. -A $2,875 deposit made on March 30 does not appear on the bank statement. -Check 358 for $485 issued on March 29 and Check 359 for $1,650 issued on March 30 have not yet been paid by the bank. -A credit memorandum shows that the bank has collected a $1,100 note receivable and interest of $110 for the firm. -A service charge of $25 appears on the bank statement. -A debit memorandum shows an NSF check for $525. (The check was issued by Dane Smithey, a credit customer.) -The firm's records indicate that Check 341 of March 1 was issued for $900 to pay the month's rent. However, the canceled check and the listing on the bank statement show that the actual amount of the check was $800. -The bank made an error by deducting a check for $560 issued by another business from the balance of Home Decorating Pavilion's account. Instructions: 1. Prepare a bank reconciliation statement for the firm as of March 31, 2019. 2. Record entries for any items on the bank reconciliation statement that must be journalized. Date the entries March 31, 2019. Use page 4 of a general journal.

The process of determining why a difference exists between a firm's records and the bank's records and bringing the two sets of records into balance is known as ________ the bank statement.

Grouping all transactions involving cash payments together in the cash payments journal strengthens the audit trail.