Cash and Cash Equivalents Flashcards by Leo III

Which of the following should not be considered cash?
a. Petty cash fund
b. Money orders
c. Coin and currency
d. IOUS

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Which of the following is usually considered cash?
a. Certificate of deposit
b. Checking account
c. Money market saving certificate
d. Postdated check

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A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amount of cash and
a. Is acceptable as a means to pay current liabilities.
b. Has a current market value that is greater than the original cost.
c. Bears an interest rate that is at least equal to the prime interest rate at the date of liquidation.
d. Is so near maturity that it presents insignificant risk of change in interest rate,

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All of the following can be classified as cash and cash equivalents, except
a. Redeemable preference shares acquired and due in 60 days
b. Commercial papers held and due for repayment in 90 days
c. Equity investments
d. A bank overdraft

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Bank overdraft generally should be
a. Reported as a deduction from current assets.
b. Reported as a deduction from cash.
c. Netted against cash and a net cash amount reported.
d. Reported as a current liability.

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Deposits in foreign bank which are subject to foreign exchange restriction should be classified
a. Separately as current asset with appropriate disclosure.
b. Separately as noncurrent asset with appropriate disclosure.
c. Be written off as loss.
d. As part of cash and cash equivalents.

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What is a compensating balance?
a. Saving account balance
b. Demand deposit account balance
c. Temporary investment serving as collateral for outstanding loan
d. Minimum deposit required to be maintained in connection with a borrowing arrangement

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A compensating balance
a. Must be included in cash and cash equivalent.
b. Which is legally restricted and related to a long-term loan is classified as current asset.
c. Which is legally restricted and related to a short-term loan is classified separately as current asset.
d. Which is not legally restricted as to withdrawal is classified separately as current asset.

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Which of the following should not be considered “cash”?
a. Change fund
b. Certified check
c. Personal check
d. Postdated check

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All of the following may be included in “cash”, except
a. Currency
b. Money market instrument
c. Checking account balance
d. Saving account balance

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Deposits held as compensating balance
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

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Which of the following is not considered as a cash equivalent?
a. A three-year treasury note maturing on January 31 of the next year purchased by the entity on December 1 of the current year
b. A three-year treasury note maturing on January 31 of the next year purchased by the entity on October 1
of the current year
c. A 90-day T-bill
d. A 60-day money market placement

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At the end of the current year, an entity had cash accounts at three different banks. One account is segregated solely for payment into a bond sinking fund. A second account, used for branch operations, is overdrawn. The third account, used for regular corporate operations, has a positive balance. How should these accounts be reported?
a. The segregated account should be reported as a noncurrent asset, the regular account should be reported as a current asset, and the overdraft should be reported as a current liability
b. The segregated and regular accounts should be reported as current assets and the overdraft should be reported as a current liability
c. The segregated account should be reported as a noncurrent asset and the regular account should be reported as a current asset net of the overdraft
d. The segregated and regular accounts should be reported as current assets net of the overdraft

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Petty cash fund is
a. Separately classified as current asset
b. Money kept on hand for making minor disbursements of coin and currency rather than by writing checks
c. Set aside for the payment of payroll
d. Restricted cash

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The internal control feature specific to petty cash is
a. Separation of duties
b. Assignment of responsibility
c. Proper authorization
d. Imprest system

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What is the major purpose of an imprest petty cash fund?
a. To effectively plan cash inflows and outflows
b. To ease the payment of cash to vendors
c. To determine the honesty of the petty cashier
d. To effectively control cash disbursements

The petty cash fund account under the imprest fund system is debited
a. Only when the fund is created.
b. When the fund is created and everytime it is replenished.
c. When the fund is created and when the size of the fund is increased.
d. When the fund is created and when the fund is decreased.

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.

Which statement in relation to an imprest petty cash is incorrect?
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. The petty cash fund is reported as part of current assets.

When an imprest petty cash fund is used, which statement is true?
a. The balance of the petty cash fund should be reported in the statement of financial position as a long-term investment.
b. The petty cashier’s summary of petty cash payments serves as a journal entry that is posted to the appropriate general ledger account.
c. The reimbursement of the petty cash fund should be credited to the cash account.
d. Entries that include a credit to the cash account should be recorded at the time the payments from the petty cash fund are made.

Which statement in relation to petty cash fund is false?
a. Each disbursement from petty cash should be supported by a petty cash voucher.
b. The creation of a petty cash fund requires a journal entry to reflect the transfer of fund out of the general cash account.
c: At any time, the sum of the cash in the petty cash fund and the total of petty cash vouchers should equal the amount for which the imprest petty cash fund was established.
d. With the establishment of an imprest petty cash fund, one person is given the authority and responsibility for issuing checks to cover minor disbursements.

Which of the following items must be added to the cash balance per ledger in preparing a bank reconciliation which ends with adjusted cash balance?
a. Note receivable collected by bank in favor of the depositor and credited to the account of the depositor
b. NSF customer check
c. Service charge
d. Erroneous bank debit

In preparing a bank reconciliation, interest paid by the bank on the combined current and saving account is
a. Added to the bank balance
b. Subtracted from the bank balance
c. Added to the book balance
d. Subtracted from the book balance

Which of the following would be added to the balance per bank statement to arrive at the correct cash balance?
a. Outstanding check
b. Bank service charge
c. Deposit in transit
d. A customer’s note collected by the bank on behalf of the depositor

Which of the following must be deducted from the bank statement balance in preparing a bank reconciliation which ends with adjusted cash balance? a. Deposit in transit b. Outstanding check C. Reduction of loan charged to the account of the depositor d. Certified check

If the balance shown in the bank statement is less than the correct cash balance and neither the entity nor the bank has made any errors, there must be a. Deposits credited by the bank but not yet recorded by the entity b. Outstanding checks c. Deposits in transit d. Bank charges not yet recorded by the entity

If the cash balance shown in the accounting records is less than the correct cash balance and neither the entity nor the bank has made any errors, there must be a. Deposits credited by the bank but not yet recorded by the entity b. Deposits in transit c. Outstanding checks d. Bank charges not yet recorded by the entity

Bank reconciliations are normally prepared on a monthly basis to identify adjustments needed in the depositor's records and to identify bank errors. Adjustments on the part of the depositor should be recorded for a. Bank errors, outstanding checks and deposits in transit. b. All items except bank errors, outstanding checks and deposits in transit. c. Book errors, bank errors, deposits in transit and outstanding checks. d. Outstanding checks and deposits in transit.

Bank statements provide information about all of the following, except a. Checks cleared during the period b. NSF checks c. Bank charges for the period d. Errors made by the depositor

Which statement in relation to a certified check is false? a. A certified check is a liability of the bank certifying it. b. A certified check will be accepted by many persons who would not otherwise accept a personal check. c. A certified check is one drawn by a bank upon itself. d. A certified check should not be included in the outstanding checks.

Which statement in relation to bank reconciliation is true? a. Bank service charge will cause the cash balance per ledger to be higher than that reported by the bank, all other things being equal.. b. Credit memos will cause the cash balance per ledger to be higher than that reported by the bank, all other things being equal. c. Outstanding checks will cause the cash balance per ledger to be greater than the balance reported by the bánk, all other things being equal. d. The cash amount reported in the statement of financial position must be the balance reported in the bank statement.