Pure Water\'s complete assets and liabilities are Accounts Receivable ($800), Eq

Question

Pure Water's complete assets and liabilities are Accounts Receivable ($800), Equipment ($10,000), Accounts Payable ($4,200), Prepaid Rent ($2,000), Supplies ($400), Bank Loan ($1,600), and Tools ($300). Pure Water's total assets are:

A. $11,100.

B. $11,500.

C. $13,100.

D. $13,500.

E. None of these.

Which statement about internal control for cash disbursements is false?

A. All significant disbursements should be made by check.

B. Cash in the ledger should be reconciled to cash reported by the bank.

C. The individual responsible for signing checks should not also prepare the checks.

D. Petty cash receipts should be destroyed once paid.

E. None of these.

Explanation / Answer

Pure Water's Total Assets are $ 800 + $ 10,000 + $ 2,000 + $ 300 = $ 13,100. The individual responsible for signing checks should not also prepare the checks. This statement for cash disbursements is false.

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