Question

An example of good internal control over Accounts Receivable? is:

A.

there are separate employees for cash?handling

and cash?accounting duties.

B.

The employee who handles the daily cash receipts also records Accounts Receivable transactions.

C.

The employee who opens the mail is also in charge of recording Accounts Receivable.

D.

All of the above are examples of good internal controls.

?Salty's Seafood has?2,000 shares of? $12 par common stock outstanding. During the current?year, the company distributed a? 10% stock dividend. The market value of the stock at that time was?$19/share. After the?distribution, Salty's total? Stockholders' Equity should increase or decrease? by:

A.$1,400.

B $0.

C.($3,800).

D.$2,400.

Answer 1

• Answer to Question 1

The correct answer is Option ‘D’: All of the above are examples of Goods Internal Controls.

There is proper internal control of Accounts receivables if:
there are separate people for cash related treatment,
same person to record accounts receivables who receives cash receipts.

• Answer to Question 2

Shares outstanding = 2000 shares
10% stock dividend = 2000 shares x 10% = 200 shares x $ 19 per share (market price) = $ 3,800

Now, this $ 3,800 would increase Common Stock Value (by 200 shares x $12 par = $ 2,400) and Additional Paid in capital (by 200 shares x $ 7 = $ 1,400).

Also, since dividend account is closed by debiting Retained earnings, the retained earnings balance will be decreased by $ 3,800.

Hence, overall the net effect would be ‘zero’ change in the total stockholder’s equity because all (Common Stock, Additional paid in capital and Retained earnings) are parts of total stockholder’s equity

Hence, the correct answer is Option ‘B’: $ 0