Question

When replenishing the petty cash fund: The journal entry includes a credit to:

	1.	Postage expense
	2.	Supplies Expense
	3.	Cash
	4.	Petty Cash

Selected data from the financial statements of Bloom's Garden Centre are provided below.

	2017	2016
Cash and cash equivalents	$ 60000	$ 38000
Inventory	$30000	$28000
Total assets	450000	380000
Cash flow from operations	$4500000	$3390000
Dividends	$340000	$320000
Capital expenditures	$2000000	$1800000

Which of the following would result from a vertical analysis of Bloom's cash and cash equivalents?

	1.	Cash and cash equivalents are 13.3 per cent of total assets in 2017
	2.	Cash and cash equivalents increased $60,000 in 2017
	3.	Cash and cash equivalents increased by 36.7% in 2017
	4.	Cash and cash equivalents are 10 per cent of total assets in 2017

Sarbanes-Oxley Act requires companies to:

	1.	include an annual report in their internal control report
	2.	include a petty cash summary in their annual report
	3.	include a bank reconciliation in their annual report
	4.	include an internal control report in their annual report

Answer 1

• Question #1

Correct Answer is Option #3 Cash is credited when replenishing the petty cash fund.

The Petty Cash fund is debited, and Cash gets credited.

• Question #2

Vertical analysis on Balance sheet takes into account percentage figure of Asset item with ‘total asset’ as the base, and Liabilities and Equity items with ‘total liabilities & Stockholder’s equity’ as the base.

Hence, for 2017, Cash and Cash Equivalent vertical analysis will show that Cash and Cash Equivalent are 13.3 % of Total Assets .

($60,000 / $450,000) x 100 = 13.33%

Correct Answer = Option #1: Cash and cash equivalents are 13.3 per cent of total assets in 2017

Note: Increase or Decrease is ascertained in horizontal analysis.

• Question #3

Correct Answer is Option #4: The Act requires companies to include an internal control report in their annual report.

The Act clearly states and asks companies to prepare an internal control report and get it included in Annual report.