FAR EASTERN UNIVERSITY 1ST Preliminary Examination Fin ACT 1 Financial Acctg.
Part I – Multiple Choice Theory 30%
1.To be reported as “cash and cash equivalent”, the cash item must be, (a) Unrestricted in use for current operation; (b) Available for the purchase of property, plant and equipment; (c) Set aside for the liquidation of long-term debt; (d). Deposited in the bank. Answer: (a)
2. Which of the following shall not be considered cash for financial reporting purposes? (a) Petty cash fund and change fund; (b) Money orders, certified checks and personal checks; (c) Coins currency and available funds; (d) Postdated checks and IOU’s. Answer: (d)
3. If material, deposits in foreign bank which are subject to foreign exchange…show more content… Answer: (c)
14. If the balance shown on an entity’s bank statement is less than the correct cash balance and neither the entity nor the bank has made any errors, there must be (a) Deposit credited by the bank but not yet recorded by the entity; (b) Outstanding checks; (c) Deposit in transit; (d) Bank charges not yet recorded by the entity. Answer: (c).
15. If the cash balance shown on an entity’s accounting records is less than the correct cash balance and neither the entity’s nor the bank has made any errors, there must be (a) Deposits in transit; (b) Deposit credited by the bank but not yet recorded by the entity; (c) Outstanding checks; (d) Bank charges not recorded yet by the entity. Answer: (b).
16. What is the adjusting entry for an customer NSF check? (a) Dr. cash and Cr. Accounts receivable; (b) Dr. Accounts receivable and credit cash; (c) Dr. Accounts payable and Cr. Cash; (d) No adjustment is necessary. Answer: (b).
17. A proof of cash would be useful for (a) Discovering cash receipts that have been recorded in the journal; (b) Discovering time lag in making deposits; (c) Discovering cash receipts that have been recorded but have not been deposited; (d) Discovering an inadequate separation of incompatible duties of employees. Answer: (c)
18. 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