Chapter Review
8-9gProblems: Series A
Evaluating Internal Control of Cash
OBJ. 2, 3
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The following procedures were recently installed by Raspberry Creek Company:
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After necessary approvals have been obtained for the payment of a voucher, the treasurer signs and mails the check. The treasurer then stamps the voucher and supporting documentation as paid and returns the voucher and supporting documentation to the accounts payable clerk for filing.
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The accounts payable clerk prepares a voucher for each disbursement. The voucher along with the supporting documentation is forwarded to the treasurer’s office for approval.
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Along with petty cash expense receipts for postage, office supplies, etc., several postdated employee checks are in the petty cash fund.
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At the end of the day, cash register clerks are required to use their own funds to make up any cash shortages in their registers.
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At the end of each day, all cash receipts are placed in the bank’s night depository.
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At the end of each day, an accounting clerk compares the duplicate copy of the daily cash deposit slip with the deposit receipt obtained from the bank.
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All mail is opened by the mail clerk, who forwards all cash remittances to the cashier. The cashier prepares a listing of the cash receipts and forwards a copy of the list to the accounts receivable clerk for recording in the accounts.
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The bank reconciliation is prepared by the cashier, who works under the supervision of the treasurer.
Instructions
Indicate whether each of the procedures of internal control over cash represents (1) a strength or (2) a weakness. For each weakness, indicate why it exists.
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Transactions for Petty Cash, Cash Short and Over
OBJ. 3, 6
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Jeremiah Restoration Company completed the following selected transactions during January:
Jan. 1. Established a petty cash fund of $900. 12. The cash sales for the day, according to the cash register records, totaled $6,148. The actual cash received from cash sales was $6,180. 31. Petty cash on hand was $75. Replenished the petty cash fund for the following disbursements, each evidenced by a petty cash receipt: Jan. 3. Store supplies, $470. 7. Express charges on merchandise sold, $55 (Delivery Expense). 9. Office supplies, $30. 13. Office supplies, $11. 19. Postage stamps, $55 (Office Supplies). 21. Repair to office file cabinet lock, $60 (Miscellaneous Administrative Expense). 22. Postage due on special delivery letter, $30 (Miscellaneous Administrative Expense). 24. Express charges on merchandise sold, $85 (Delivery Expense). 30. Office supplies, $14. Jan. 31. The cash sales for the day, according to the cash register records, totaled $4,550. The actual cash received from cash sales was $4,536. 31. Decreased the petty cash fund by $200. Instructions
Journalize the transactions.
Bank Reconciliation and Entries
OBJ. 5
The cash account for Norwegian Medical Co. at April 30 indicated a balance of $403,784. The bank statement indicated a balance of $468,460 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:
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Checks outstanding totaled $73,870.
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A deposit of $51,230, representing receipts of April 30, had been made too late to appear on the bank statement.
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The bank collected $50,630 on a $48,220 note, including interest of $2,410.
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A check for $9,160 returned with the statement had been incorrectly recorded by Norwegian Medical Co. as $916. The check was for the payment of an obligation to Universal Supply Co. for a purchase on account.
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A check drawn for $680 had been erroneously charged by the bank as $860.
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Bank service charges for April amounted to $170.
Instructions
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Prepare a bank reconciliation.
AnswerChecked Figure: Adjusted balance: $446,000
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Journalize the necessary entries. The accounts have not been closed.
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If a balance sheet is prepared for Norwegian Medical Co. on April 30, what amount should be reported as cash?
Bank Reconciliation and Entries
OBJ. 5
The cash account for Brentwood Bike Co. at May 1 indicated a balance of $34,250. During May, the total cash deposited was $140,300, and checks written totaled $138,880. The bank statement indicated a balance of $43,525 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:
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Checks outstanding totaled $6,440.
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A deposit of $1,850 representing receipts of May 31 had been made too late to appear on the bank statement.
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The bank had collected for Brentwood Bike Co. $5,250 on a note left for collection. The face of the note was $5,000.
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A check for $390 returned with the statement had been incorrectly charged by the bank as $930.
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A check for $210 returned with the statement had been recorded by Brentwood Bike Co. as $120. The check was for the payment of an obligation to Adkins Co. on account.
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Bank service charges for May amounted to $30.
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A check for $1,325 from Jennings Co. was returned by the bank due to insufficient funds.
Instructions
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Prepare a bank reconciliation as of May 31.
AnswerChecked Figure: Adjusted balance: $39,475
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Journalize the necessary entries. The accounts have not been closed.
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If a balance sheet is prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?
Bank Reconciliation and Entries
OBJ. 5
Beeler Furniture Company deposits all cash receipts each Wednesday and Friday in a night depository after banking hours. The data required to reconcile the bank statement as of June 30 have been taken from various documents and records and are reproduced as follows. The sources of the data are printed in capital letters. All checks were written for payments on account.
CASH ACCOUNT: | |
Balance as of June 1 | $9,317.40 |
CASH RECEIPTS FOR MONTH OF JUNE | $9,223.76 |
DUPLICATE DEPOSIT TICKETS: | |
Date and amount of each deposit in June: |
Date | Amount | Date | Amount | Date | Amount |
June 1 | $1,080.50 | June 10 | $ 996.61 | June 22 | $ 897.34 |
3 | 854.17 | 15 | 882.95 | 24 | 947.21 |
8 | 840.50 | 17 | 1,606.74 | 30 | 1,117.74 |
CHECKS WRITTEN: | |||||
Number and amount of each check issued in June: |
Check No. | Amount | Check No. | Amount | Check No. | Amount |
740 | $237.50 | 747 | Void | 754 | $ 449.75 |
741 | 495.15 | 748 | $450.90 | 755 | 272.75 |
742 | 501.90 | 749 | 640.13 | 756 | 113.95 |
743 | 761.30 | 750 | 276.77 | 757 | 407.95 |
744 | 506.88 | 751 | 299.37 | 758 | 259.60 |
745 | 117.25 | 752 | 537.01 | 759 | 901.50 |
746 | 298.66 | 753 | 380.95 | 760 | 486.39 |
Total amount of checks issued in June | $8,395.66 | ||||
BANK RECONCILIATION FOR PRECEDING MONTH: |
Instructions
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Prepare a bank reconciliation as of June 30, 20Y2. If errors in recording deposits or checks are discovered, assume that the errors were made by the company. Assume that all deposits are from cash sales. All checks are written to satisfy accounts payable.
AnswerChecked Figure: Adjusted balance: $13,216
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Journalize the necessary entries. The accounts have not been closed.
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What is the amount of Cash that should appear on the balance sheet as of June 30?
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Assume that a canceled check for $390 has been incorrectly recorded by the bank as $930. Briefly explain how the error would be included in a bank reconciliation and how it should be corrected.
JUNE BANK STATEMENT: