61. The term cash equivalent refers to:
A. An item such as a money order, travelers' check, or check from a customer.
B. An account receivable from a reliable customer who has always paid bills within the discount period.
C. A guaranteed line of credit at the company's bank.
D. Very liquid short-term investments such as U.S. Treasury Bills and commercial paper.
62. Under the allowance method, when a receivable that had been previously written off is collected:
A. Net income is increased.
B. Net assets are increased.
C. Net income and net assets are not affected.
D. Net assets and net income are both increased.
63. Which of the following is not an example of internal control over cash?
A. Preparation of a cash budget.
B. Daily deposits of cash receipts at the bank.
C. Combining the functions of signing checks with the approval of expenditures.
D. Preparation of bank reconciliation.
64. Which of the following practices best illustrates efficient management of cash?
A. The accountant records all cash receipts and payments when reconciling the bank account at the end of each month.
B. Management arranges for a loan to cover projected cash shortages during the production phase of the business cycle each year.
C. Cash budgets (forecasts) are prepared only one month in advance in order to avoid the need for constant revision.
D. All cash resources are held in the checking account to maximize liquidity.
65. Efficient management of cash includes which of the following concepts?
A. Pay each bill as soon as the invoice is received.
B. Deposit all cash receipts and make all cash disbursements at the end of each week.
C. Prepare monthly cash budgets (forecasts) up to a year in advance.
D. Pay suppliers in cash out of cash sales receipts before depositing them in the bank.
66. Which of the following are always listed on the balance sheet at face amount?
A. Cash.
B. Short-term investments.
C. Receivables.
D. All three of the above.
67. With a line of credit, a liability arises:
A. As soon as the line is created.
B. As soon as any money is borrowed.
C. Upon repayment of the debt.
D. At maturity date.
68. Interest received is shown on which section of the statement of cash flows?
A. Operating.
B. Investing.
C. Financing.
D. Leveraging.
69. Which of the following does not contribute toward achieving internal control over cash payments?
A. The practice of making small cash disbursements directly from the current day's cash receipts.
B. The use of a voucher system.
C. The use of a petty cash fund.
D. The practice of approving every expenditure before the cash disbursement is made.
70. Which of the following is not a basic means of achieving internal control over cash receipts?
A. Separate the functions of cash handling and maintenance of accounting records.
B. Prepare a daily listing of cash received through the mail.
C. Deposit all cash receipts daily in the petty cash fund.
D. Use cash registers or pre-numbered sales tickets to record cash sales.