CPA Financial Accounting and Reporting (FAR) : Bank Reconciliations
Study concepts, example questions & explanations for CPA Financial Accounting and Reporting (FAR)
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Example Questions
Example Question #1 : Bank Reconciliations
Turblad Company has several items in its safe at December 31, Year 1. Which of these items would not be included in Turblad's cash & cash equivalents in its Year 1 balance sheet?
A treasury bill for $5,000 that matures in January of Year 2
A check written to Turnblad for $1,200 from a customer, that has not yet been deposited
A certificate of stock with a market value $100 per share, which is classified as an investment security
A note receivable signed by a loyal customer which matures in March of Year 3
A treasury bill for $5,000 that matures in January of Year 2
A treasury bill would be considered an investment, not cash or a cash equivalent.
Example Question #1 : Bank Reconciliations
Globe Company began April of Year 3 with a cash balance of $68,000 in its operating account. During the month of April, Globe issued new checks totaling $14,000 to vendors. Of these newly issued checks, $9,000 cleared the bank in April. Globe also transferred $8,000 to its payroll account to pay employees during the month. Globe received $22,000 in checks from its customers in April and deposited $18,000 of those checks during the month. Also during April $6,000 of checks issued during March of Year 3 cleared the bank. What is Globe's cash balance in its operating account at the end of April, Year 3?
$68,000
$64,000
$59,000
$55,000
$64,000
Globe's adjusted cash balance is calculated by taking the beginning balance of $68K - $14K for newly issued checks - $8K transferred to payroll + $18K deposited checks. It is irrelevant when Globe's issued checks actually cleared the bank.
Example Question #1 : Bank Reconciliations
ABC Company is reconciling its cash balance at December 31, Year 1. Which of the following items would require an adjusting entry to the cash account by ABC Company?
ABC transferred funds to its payroll impress account on December 29 via a same-day wire. ABC recorded the transfer in the general ledger on the day it was made. The funds were used to issue checks from the payroll account and the majority of these checks were still outstanding at December 31.
ABC paid for merchandise from one of its suppliers via check before the supplier notified ABC that the goods were out of stock. ABC cancelled its order and contacted its bank to void the check.
At December 31, several thousand dollars in checks were still sitting on the controller's desk, signed and waiting to be mailed
ABC received multiple checks and direct deposits from customers during the year, and several of these cash receipts were applied to the wrong customer's account
ABC paid for merchandise from one of its suppliers via check before the supplier notified ABC that the goods were out of stock. ABC cancelled its order and contacted its bank to void the check.
ABC has cancelled its check with the bank, but this adjustment is not yet reflected in its ledger. Therefore, ABC would need to make an adjustment to its ledger to increase its cash balance.
Example Question #3 : Bank Reconciliations
Of the following, which would not be included in the cash and cash equivalent account?
Stock investments
Savings account
Petty cash
Bank draft
Stock investments
Stock investments classify as their own asset class and are not a cash account.
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