Q&A Hero

Q: Use the information above to answer the following question. What was the cash balance on the companys books (before the adjustments for items on the bank reconciliation)? A) $18,000 B) $17,230 C) $19,000 D) $20,270

Q: Hedge funds commonly engage in short selling. a. True b. False

Q: Use the information above to answer the following question. What is the up-to-date ending Cash balance? A) $18,000 B) $17,230 C) $19,000 D) $19,270

Q: Closed-end funds are closed to new investment but allow redemptions by shareholders. a. True b. False

Q: Which of the following items appearing on a bank reconciliation require a journal entry to bring the Cash account up-to-date? A) Deposit in transit B) Check from customers returned as NSF C) Outstanding check D) An error made by the bank in recording a deposit

Q: Because money market funds contain instruments with short-term maturities, their market values are not very sensitive to movements in market interest rates. a. True b. False

Q: Which of the following items on a bank reconciliation would require a journal entry? A) An error by the bank B) Outstanding checks C) A bank service charge D) A deposit in transit

Q: Portfolio managers are hired by the mutual fund to invest in a portfolio of securities that satisfies the desires of investors. a. True b. False

Q: Which of the following bank reconciliation items would not result in a journal entry? A) Service charge B) Outstanding checks C) A customer's check returned NSF D) Interest earned on deposits

Q: Equity REITs essentially represent fixed-income portfolios, so their market values are heavily influenced by interest rate movements. a. True b. False

Q: What journal entry must be prepared when the company is notified by the bank that a customer's check that had been deposited in the amount of $776 was returned NSF? A) Debit Accounts Receivable and credit Cash in the amount of $776 B) Debit Cash and credit Accounts Receivable in the amount of $776 C) Debit NSF Check Expense and credit Accounts Receivable in the amount of $776 D) No journal entry is necessary.

Q: Hedge funds try to obtain an information advantage by using expert networks, whereby they hire consultants with expertise in specific industries. a. True b. False

Q: All of the following bank reconciliation items would result in a journal entry on the company's books except: A) interest earned. B) deposits in transit. C) service charge. D) a customer's check returned NSF.

Q: Private equity funds use most of their money to invest in stocks of publicly traded companies. a. True b. False

Q: On October 31, 2015, the bank statement shows that your company has $12,956.73 in its checking account. You are aware of three outstanding checks for a total of $2,112.19. During October, 2015, the bank rejected two deposited checks from customers totaling $654.19 because of insufficient funds and charged you $12.00 in service fees. You had not yet received notice about the bad checks, but you were aware of and have recorded the $12.00 of service fees. Prior to adjustment on October 31, 2015, your Cash account would have a balance of: A) $14,402.73. B) $15,711.11. C) $11,498.73. D) $10,202.35.

Q: The returns on international stock mutual funds are affected only by foreign companies' stock prices and are independent of currency movements. a. True b. False

Q: On October 31, 2015, your company's records say that the company has $16,451.03 in its checking account. A review of the bank statement shows you have three outstanding checks totaling $5,643.01, and the bank has paid you interest of $12.19 and charged you $9.00 in service charges. The bank statement dated October 31, 2015 would report a balance of: A) $22,090.85. B) $16,454.22. C) $22,097.23. D) $10,804.83.

Q: Compared to open-end mutual funds, exchange-traded funds generate much more capital gain income that must be distributed to their shareholders, who must pay tax on the gains. a. True b. False

Q: The net asset value of a mutual fund is estimated once every week. a. True b. False

Q: The following information was available to the accountant of Horton Company when preparing the monthly bank reconciliation: Cash balance per bank statement $975 Cash balance per books (prior to reconciliation) 660 Outstanding check #643 502 Outstanding check #651 43 Bank service charges 25 Customer check returned by bank as NSF 20 Deposits in transit 190 Interest received from bank 5 The amount of cash that should appear on the balance sheet following completion of the reconciliation and adjustment of the accounting records is: A) $660. B) $640. C) $620. D) $305.

Q: Investors can sell exchange-traded funds short. a. True b. False

Q: Before reconciling its bank statement, Lauren Cosmetics Corporation's general ledger had a month-end balance in the cash account of $5,250. The bank reconciliation for the month contained the following items: Deposits in transit $750 Outstanding checks 465 Interest earned 20 NSF check returned to bank 100 Bank service charge 10 Given the above information, what up-to-date ending cash balance should Lauren report at month-end? A) $4,500 B) $4,820 C) $5,160 D) $5,590

Q: Index mutual funds are not traded throughout the day, while exchange-traded funds are. a. True b. False

Q: In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 2889 for December's utilities was correctly written and drawn for $790 but was erroneously entered into the accounting records as $970. The journal entry to adjust the books for the bank reconciliation would include a debit to: A) Utility Expense and a credit to Cash for $180. B) Cash and a credit to Utility Expense for $180. C) Utility Expense and a credit to Cash for $790. D) Cash and a credit to Utility Expense for $790.

Q: The term "mutual funds" is normally used to refer to closed-end funds and does not include open-end funds. a. True b. False

Q: When preparing this months bank reconciliation, you find that you failed to record a $95 deposit for a payment you received from a customer. You immediately prepare a journal entry to record the deposit. Which of the following describes the actions to be taken when preparing next months bank reconciliation? A) You must decrease the balance per bank by $95 B) You must increase the balance per bank by $95 C) You must increase the balance per books by $95 D) No further action is necessary.

Q: Capital appreciation funds are suited to investors who are more willing to risk a possible loss in value. a. True b. False

Q: A check that was outstanding on last periods bank reconciliation was not among the cancelled checks returned by the bank this period. In preparing the bank reconciliation for this period, the amount of this check should be A) added to the bank balance of cash. B) ignored in preparing this periods bank reconciliation. C) deducted from the bank balance of cash. D) deducted from the companys balance of cash.

Q: Venture capital funds typically invest in stocks of publicly traded companies. a. True b. False

Q: A deposit in transit on last months bank reconciliation is shown as a deposit on the bank statement this month. As a result, in preparing this period's reconciliation, the amount of this deposit should: A) be added to the book balance of cash. B) be deducted from the book balance of cash. C) be added to the bank balance of cash. D) not be included as a reconciling item.

Q: A mutual fund's performance is usually unrelated to market conditions. a. True b. False

Q: On a bank reconciliation, the amount of an unrecorded bank service charge is A) added to the bank balance of cash. B) added to the companys balance of cash. C) deducted from the bank balance of cash. D) deducted from the companys balance of cash.

Q: DigDug Corporation had outstanding checks totaling $5,400 on its June bank reconciliation. In July, DigDug issued checks totaling $38,900. The July bank statement shows that $26,300 in checks cleared the bank in July. The amount of outstanding checks on DigDug's July bank reconciliation should be: A) $12,600. B) $18,000. C) $5,400. D) $7,200.

Q: Shares of open-end mutual funds are purchased and sold on exchanges. a. True b. False

Q: When you identify outstanding checks in performing a bank reconciliation, you must: A) deduct the amount of the outstanding checks from the balance per books. B) deduct the amount of the outstanding checks from the balance per bank. C) add the amount of the outstanding checks to the balance per books. D) add the amount of the outstanding checks to the balance per bank.

Q: A front-end load is a withdrawal fee assessed when you withdraw money from the mutual fund. a. True b. False

Q: A company made a bank deposit on September 30 that did not appear on the bank statement dated September 30. In preparing the September 30 bank reconciliation, the company should: A) deduct the deposit from the bank statement balance. B) send the bank a debit memorandum. C) deduct the deposit from the September 30 book balance and add it to the October 1 book balance. D) add the deposit to the end cash balance per bank statement.

Q: Most studies that assess mutual fund performance find that mutual funds almost always outperform a benchmark market index. a. True b. False

Q: Deposits in transit have: A) been recorded by the company but not yet by the bank. B) been recorded by the bank but not yet by the company. C) not been recorded by the bank or the company. D) been recorded by both the bank and the company.

Q: Diversification among types of mutual funds usually does little to reduce the volatility of returns on the overall investment. a. True b. False

Q: Which of the following situations would cause the balance per bank to be more than the balance per books? A) Deposits in transit B) Service charges C) Outstanding checks D) Checks from customers returned as NSF

Q: Indicate whether the statement is true or false.Mutual funds must register with the U.S. Treasury and provide interested investors with a prospectus that discloses details about the components of the funds and the risks involved.a. Trueb. False

Q: Which of the following is NOT true regarding mutual funds? a. They are a key financial intermediary. b. They provide an important service to individual investors seeking to invest funds. c. Most mutual funds use experienced portfolio managers, so investors do not have to manage the portfolio themselves. d. They provide a way for individual investors to diversify, but most individual investors are unable to afford the purchase of mutual fund shares.

Q: Outstanding checks refer to checks that have been: A) written, recorded, sent to payees, and received and paid by the bank. B) written and not yet recorded in the company books. C) written, recorded, sent to the payees, but not yet paid by the bank. D) paid by the bank.

Q: Which one of the statements appearing below is correct regarding bank reconciliations? A) A bank reconciliation is an external report prepared to report the cash balance to investors and creditors. B) After preparing a bank reconciliation, no journal entries need to be made for outstanding checks or deposits in transit. C) If a company's records show a different cash balance from that shown on the company's bank statement, either the company or the bank has made an error. D) The up-to-date ending cash balance on the bank statement side should not equal the up-to-date ending cash balance on the book side.

Q: Funds that are designed to mimic particular stock indexes and are traded on a stock exchange are known as a. index mutual funds. b. exchange-traded funds. c. money market funds. d. None of these are correct.

Q: A check is said to have cleared the bank when: A) it is returned NSF. B) it bounces. C) the bank withdraws the amount of the check from the check writers account. D) it is presented to a financial institution for deposit or cash.

Q: Hedge funds commonly use financial leverage, which can a. magnify their returns and magnify their losses. b. magnify their returns and limit their losses. c. reduce their risk and limit their losses. d. magnify their returns and not affect their risk.

Q: An investor who believes that technology stocks will perform well but does not want to select individual technology stocks might invest in a. Spiders. b. WEBs. c. Cubes. d. Diamonds.

Q: An internal report prepared to verify the accuracy of both the bank statement and the cash accounts of a business or individual is a (n): A) internal audit. B) bank reconciliation. C) bank audit. D) trial reconciliation.

Q: ​When interest rates decline, investors who want to earn a high return may ____ their investments in stock mutual funds and ____ their deposits in depository institutions. a. ​reduce; reduce b. ​reduce; increase c. ​increase; reduce d. ​increase; increase

Q: The services provided by banks help businesses to control cash by meeting all of the following control objectives except: A) document procedures. B) independently verify. C) segregate duties. D) restrict access.

Q: Which of the following statements is NOT correct? a. Commercial paper is commonly purchased by money market funds. b. Money market funds usually have a low level of credit risk. c. Money market funds tend to have lower interest rate risk than bond funds. d. If money market fund managers expect interest rates to decrease, they should use funds generated from maturing securities to purchase new securities with shorter maturities.

Q: Which of the following statements concerning a petty cash fund is not correct? A) A petty cash fund acts as a control by establishing a limited amount of cash to use for specific types of expenses. B) A petty cash fund is similar to an imprest payroll account. C) The companys petty cash custodian is responsible for operating the petty cash fund. D) To avoid the administrative costs of the use of purchasing cards, or Pcards, many organizations have started using petty cash funds.

Q: The majority of closed-end funds invest in a. derivatives. b. bonds and other debt securities. c. stocks representing a particular sector or country. d. international equity securities.

Q: A system used to reimburse employees for expenditures they have made on behalf of the organization is referred to as a: A) electronic funds transfer. B) voucher system. C) petty cash system. D) internal control system.

Q: ​A mutual fund prospectus is not required to disclose the a. ​minimum amount of investment required. b. ​return on the fund since its inception in comparison to the returns of other funds in its category. c. ​investment objective of the mutual fund. d. ​exposure of the mutual fund to various types of risk. e. ​fees incurred by the mutual fund and passed on to investors.

Q: Which of the following statements correctly describes an imprest system? A) An imprest system is an internal control procedure relating to cash receipts. B) There is no difference between a petty cash fund and an imprest bank account. C) If the transfers from the payroll account to the employees checking accounts occur without error, the imprest payroll bank account will equal zero after all employees have been paid. D) The use of an imprest system eliminates the need for bank reconciliations.

Q: Which of the following are most likely to invest in mortgages? a. stock mutual funds b. real estate investment trusts c. Treasury bond funds d. money market funds

Q: Most companies pay salaries and wages to employees through EFTs, which are known by employees as: A) direct deposits. B) vouchers. C) remittance advices. D) checks.

Q: Exchange-traded funds (ETFs) a. are traded on an exchange, and their share price changes throughout the day. b. invest only in bonds. c. are actively managed. d. None of these are correct.

Q: Which of the following statements concerning a voucher is not correct? A) The voucher consists of the purchase requisition, the purchase order, the receiving report, and the invoice. B) The voucher is marked paid so that it cannot be accidentally or intentionally resubmitted for duplicate payment C) The voucher must be prepared before the goods or services are ordered. D) After the voucher is prepared, the company processes a check or electronic funds transfer to pay for the items purchased and received.

Q: The majority of mutual fund assets are a. common stocks. b. corporate bonds. c. U.S. government bonds. d. municipal bonds.

Q: Which of the following statements is correct regarding a voucher system? A) The journal entry to record the asset purchased and liability owed should be recorded when the bill for goods or services is received. B) A voucher system is most commonly used in very small companies to make up for the lack of other internal controls. C) A well-designed voucher system will allow employees requiring office supplies to place orders directly with suppliers for control purposes. D) A well designed voucher system will eliminate fraud and errors.

Q: Which of the following is NOT correct about money market funds (MMFs)? a. The credit risk of MMFs is normally perceived to be lower than that of corporate bond funds. b. MMFs have higher interest rate risk than long-term bond funds. c. MMFs are normally characterized as having relatively low risk and low expected returns. d. All of these are correct.

Q: Assume a voucher system is in use. When the bill for goods or services is obtained, which control principle(s) must be met when the related control procedures are designed? A) Establish responsibility B) Segregate duties C) Segregate duties and restrict access D) Document procedures and independently verify

Q: ​A mutual fund consisting only of stocks of firms that are in a specific industry is an example of a ____ fund. a. ​specialty b. ​growth c. ​capital appreciation d. ​growth and income

Q: A voucher is an internal file that: A) is prepared after an invoice is received. B) is used as a substitute for an invoice. C) is a collection of documents prepared at each step in the voucher system. D) takes the place of a bank check. E) is prepared before the company orders goods.

Q: _______ are promoted strictly by the mutual fund of concern and do not involve a sales charge. a. Closed-end funds b. Load mutual funds c. No-load mutual funds d. Open-end mutual funds

Q: Based on the market value of total assets, which is the dominant type of mutual fund? a. high-yield (junk) bond funds b. hybrid funds c. stock funds d. taxable bond funds e. municipal bond funds

Q: Which of the following is not an internal control procedure relating to cash payments? A) Using an voucher system B) Using an imprest system C) Preparing a bank reconciliation D) The use of cash count sheets

Q: ​Which of the following statements is incorrect? a. ​Mutual funds serve as a key financial intermediary. b. ​Managers of mutual funds do not analyze economic and industry trends. c. ​Because of their diversification, management expertise, and liquidity, mutual funds have grown at a rapid pace. d. ​Some mutual funds offer check-writing privileges.

Q: Which of the following is the primary goal of internal controls for cash payments? A) Ensure that the business pays only for properly authorized transactions B) Confirm that the request for payments is made by someone who is approved to order goods or services of the type and amount requested C) Ensure that the supplier charges only for items received at approved prices D) Make payments only when a purchase is supported by complete voucher documentation

Q: Which of the following statements concerning electronic funds transfers is not correct? A) Businesses sometimes receive payments from customers via EFT. B) An EFT occurs when a customer electronically transfers funds from his or her bank account to the companys bank account. C) Because electronic funds transfers are deposited directly into the companys bank account, they require additional internal control procedures. D) To process an EFT, the accounting department merely records journal entries to debit Cash and credit Account Receivable from each customer.

Q: Which of the following statements is NOT correct? a. Exchange-traded funds (ETFs) are designed to mimic particular stock indexes and are traded on a stock exchange. b. ETFs have very high expense ratios. c. ETFs differ from most open-end and closed-end funds in that they are not actively managed. d. One disadvantage of ETFs is that each purchase of additional shares must be done through the exchange where they are traded.

Q: When cash is received from a remote source, the accounting department then compares the total on the cash receipts list with the stamped deposit slip received from the bank. Which internal control principle is being met with this procedure? A) Document procedures B) Independently verify C) Restrict access D) Segregate duties

Q: An investment in a(n) ____ fund incurs a sales charge. a. load b. no-load c. closed-end d. open-end e. None of these are correct.

Q: The customer typically explains the purpose of the payment using a(n): A) remittance advice. B) invoice. C) purchase order. D) check.

Q: Which of the following is NOT a way in which mutual funds generate returns for their shareholders? a. They can pass on any earned income as dividend payments to shareholders. b. They distribute the capital gains resulting from the sale of securities within the fund. c. The mutual fund price appreciates. d. All of these are ways in which a mutual fund generates returns to its shareholders.

Q: Which of the following is not a correct statement regarding the Cash Shortage account? A) It account normally has a debit balance. B) It is reported on the balance sheet. C) It is reported as a miscellaneous expense. D) If the recorded cash exceeds the cash counted, a shortage exists.