Chapter 4

Question 1

A bank statement is presented from the customer’s point of view. Therefore, a customer deposit reduces the bank’s liabilities. These statements are

Answer 1

False

Question 2

The bank statement for Franklin Company showed a $4,000 credit. Which of the following could have caused this credit?

Answer 2

Make a deposit

Question 3

Which of the following statements is true?

Answer 3

Interest revenue will be shown as a credit on a bank statement

Question 4

Wilson Company used a check to pay Smith Company for services provided by Smith. Smith deposited Wilson’s check in its account with the State Bank. When Smith’s most recent bank statement was examined,the company’s accountant noticed that the Wilson check had been classified as an NSF (not sufficient funds) check. The NSF check

Answer 4

Was shown as a debit on Smith’s bank (the check didn’t actually meant cash yet)

Question 5

To determine the true cash balance

Answer 5

Add deposists in transit and substract outstanding check from the unadjusted bank balance

Question 6

Outstanding check

Answer 6

Financial instrument that has not yet been deposited or cashed by the recipient. It is still a liability for the payor

Question 7

To determine the tru cash balance

Answer 7

Add bank collections of depositors’ accounts receivable to the unadjusted book balance

Substract bank service charges from the unadjusted book balance

Add interst earned from the bank to the unadjusted book balance

Question 8

Kelly Company’s unadjusted bank balance on May 31 is $9,500. An analysis of the bank statement revealed $1,400 of deposits in transit and $900 of outstanding checks. In addition, the bank statement showed a $200 NSF check. Based on this information, Kelly’s true cash balance is

Answer 8

9500 + 1400 - 900 = 10000

Question 9

The nature of the accounting profession demands that accountants assume an obligation of self-discipline above and beyond requirements of laws and regulations. This statement is

Answer 9

true

Question 10

Based on the fraud triangle, which of the following is not a factor that motivates fraud?

Answer 10

Punishment

Question 11

A strong set of internal controls is designed to minimize which of the following factors that motivate fraud?

Answer 11

Opportunity

Question 12

Which of the following is a widely recognized source of pressure to commit fraud in the business environment?

Answer 12

Intimidation from superior

Question 13

Which of the following are widely recognized forms of rationalization used to justify fraud in the business environment?

Answer 13

I am underpaid

I am only borrowing the money

I am only taking small change from a company that makes millions of dollars

Question 14

Which of the following opinions is the most favorable opinion issued by an external auditor?

Answer 14

Unqualified opinion

Question 15

Which of the following opinions is the least favorable opinion issued by an external auditor?

Answer 15

Adverse opinion

Question 16

If an auditor has insufficient information to determine whether a company’s statements are prepared in accordance with Generally Accepted Accounting Principles, the auditor should issue a(n)

Answer 16

Disclaimer of opinion