The data of Graham Brothers Company for two years are given below.

The data of Graham Brothers Company for two years are given below.

	2018	2019
Cash and cash equivalents	$5,200	$12,100
Total current liabilities	20,000	34,000

Based on the above​ information, which of the following statements is​ true?

A.

Cash ratio has increased from

0.3560.356

in 2018 to

0.260.26

in 2019.

B.

Cash ratio has increased from 0.05 in 2018 to 0.08 in 2019.

C.

Cash ratio has increased from

0.260.26

in 2018 to

0.3560.356

in 2019.

D.

Cash ratio has increased from 0.02 in 2018 to 0.03 in 2019.

The cash ratios of four companies are listed below.

Company	Cash Ratio
Juan Company	0.250.25
Rose Company	0.10.1
Freelance Company	0.180.18
Pioneer Company	0.270.27

Which company has the highest ability to repay its current​ liabilities?

A.

Rose Company

B.

Freelance Company

C.

Juan Company

D.

Pioneer Company

As proof of the deposit​ transaction, a customer receives a canceled check from the bank.

True

False

Cash is the most liquid asset reported on the balance sheet because it is the medium of exchange.

True

False

Debit cards offer the customer the convenience of buying something without having to pay cash immediately.

True

False

Mercury Company established a petty cash fund with a $400 balance. Which of the following statements is​ incorrect?

A.A journal entry is needed to debit the Cash account and credit the Petty Cash account for

$400.

B.

The petty cash custodian cashes a check for $400 and places the currency in the petty cash fund box.

C.

The sum of the cash plus the total of the petty cash tickets should equal $400 at all times.

D.There is no net effect on current assets.

Mercury Company established a petty cash fund with a​ $600 balance. Which of the following statements is​ incorrect?

A.

The sum of the cash plus the total of the petty cash tickets should equal​ $600 at all times.

B.

The petty cash custodian cashes a check for​ $600 and places the currency in the petty cash fund box.

C.

A journal entry is needed to debit the Cash account and credit the Petty Cash account for​ $600.

D.

There is no net effect on current assets.

Which is the most liquid form of​ asset?

A.

cash

B.

supplies

C.

accounts receivable

D.

inventory

Cash in the bank is more liquid than a petty cash fund.

True

False

Evaluated receipts settlement​ (ERS) is a streamlined process that bypasses paper documents altogether.

True

False

Before signing a​ check, the controller or the treasurer should examine the purchase​ order, the​ invoice, and the receiving report to determine that the company received the goods and that the company is paying only for the goods received.

True

False

When a​ lock-box system is​ used, customers send their checks to a post office box that belongs to a bank.

True

False

As long as the same person deposits customer checks and makes the journal entry to customer​ accounts, there will be good internal control over cash receipts.

True

False

A company which sells merchandise or services can receive cash from customers​ ____________.

A.

over the counter

B.

through the mail

C.

by electronic funds transfer

D.

in any of the above forms

External auditors evaluate company controls to ensure the financial statements are presented​ fairly, in accordance with Generally Accepted Accounting Principles.

True

False

Which of the following statements is true of the​ Sarbanes-Oxley Act?

A.

Those who commit securities fraud must be sentenced to 10 years in prison.

B.

All private and foreign companies must issue an internal control report evaluated by an outside auditor.

C.

Accounting firms are allowed to provide both auditing services and a full range of consulting services to their public company clients.

D.

The Public Company Accounting Oversight Board oversees the work of auditors of public companies.

Under the​ Sarbanes-Oxley Act, accounting firms are allowed to audit a public company and provide certain consulting services for the same client.

True

False

The​ Sarbanes-Oxley Act requires all private companies in the United States to maintain an internal control system.

True

False

Which of the following is an objective of internal​ control?

A.

to encourage employees to follow company policies

B.

to ensure timely collection of accounts receivable

C.

to guarantee that a business makes a profit

D.

to ensure timely payment of accounts payable

Internal control is an organizational plan that ensures that the financial statements are prepared and submitted on time.

True

False