93
P.O. Box 123878
Watonga, OK 73772
(580) 377-OKIE
Reliable Union
You Can Bank On Us
Member FDIC
Account
Holder:
Jim Incorporated
519 Main Street
Watonga, OK
73772
Account
Number:
Statement
Date:
2252790471
July 31, 2021
Beginning Deposits and Withdrawals Daily
Balance Credits and Debits Balance
July 1, 2021 July 31, 2021
No.
Total
No.
Total
$7,750
3
$6,010
7
$8,625
$5,135
Deposits and Credits Withdrawals and Debits Daily Balance
Date
Amount
Desc.
Date
No.
Amount
Desc.
Date
Amount
7/10
$2,610
DEP
7/2
530
$500
CHK
7/2
$7,250
7/22
3,340
DEP
7/10
531
1,400
CHK
7/10
8,460
7/31
60
INT
7/14
532
1,950
CHK
7/14
6,510
7/18
300
NSF
7/18
6,210
7/22
533
4,000
CHK
7/22
5,550
7/26
400
EFT
7/26
5,150
7/30
7 5
SF
7/30
5,075
$6,010
$8,625
7/31
$5,135
Desc.
DEP Customer deposit
INT Interest earned
SF Service fees
Desc.
NOTE Note collected
CHK Customer check
NSF Non-sufficient
funds
Desc.
EFT Electronic funds transfer
Additional information:
a. The difference in the beginning balances in the company’s records and the bank statement
relates to check #530, which is outstanding as of June 30, 2021.
b. Check #533 is correctly processed by the bank.
c. The EFT on July 26 relates to the purchase of office supplies.
Required:
1. Prepare a bank reconciliation for Jim Incorporated’s checking account on July 31, 2021.
2. Record the necessary cash adjustments.
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222) Below is a summary of all transactions of Mason Furniture for the month of August 2021.
Cash Transactions
Cash collections from:
Customers
$82,300
Sale of unused land
11,500
Issuance of common stock
25,000
Interest earned on savings account
400
Cash payments for:
Employee salaries
(42,400)
Delivery truck
(30,000)
Advertising expense
(5,400)
Office supplies
(2,200)
Repayment of borrowing
(8,500)
Fabric
(6,300)
Noncash Transactions
Sales to customers on account
12,500
Purchase of fabric on account
6,200
Exchange common stock for building
80,000
Required:
Prepare a statement of cash flows for the month of August, properly classifying each of the
transactions into operating, investing, and financing activities. The cash balance at the beginning
of August is $6,900.
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223) For the month of June, Thomson Services has the following transactions:
June 2
Obtain cash by borrowing $22,000 from the bank.
June 3
Pay rent for the current month, $1,800.
June 7
Provide services to customers, $6,500 for cash and $2,900 on account.
June 11
Purchase equipment necessary for operations, $18,500 cash.
June 17
Pay employees’ salaries for the first half of the month, $5,200.
June 22
Pay dividends to stockholders, $2,300.
June 25
Receive cash in advance from customers, $2,800.
June 28
Pay utilities for the month, $1,900.
June 30
Record salaries earned by employees for the second half of the month,
$5,200. Payment will be made on July 2.
Required:
1. Record each transaction.
2. Identify the transactions involving cash.
3. Assuming the balance of cash at the beginning of June is $12,500, post each cash transaction
to the Cash T-account and compute the ending cash balance.
4. Prepare a statement of cash flows for the month of June, properly classifying each of the cash
transactions into operating, investing, and financing activities.
5. Verify that the net cash flows reported in the statement of cash flows equal the change in the
cash balance for the month.
100
224) Discuss the events leading up to the passage of the Sarbanes-Oxley Act and its major
provisions.
225) What is internal control? Briefly describe the five components of internal control outlined
by the Committee of Sponsoring Organizations (COSO).
226) Explain the different types of cash, including cash equivalents, which would be reported as
Cash in the balance sheet.
102
227) A company uses the following process for its cash receipts:
At the end of each day, the secretary places all cash and checks received from customers in a
desk drawer. Each Monday, the secretary totals all amounts received, records this in the
accounting records, and deposits the money in the bank account. Then, once every three months,
the office manager requests information from the bank necessary to prepare a bank
reconciliation. Discuss the company’s internal control procedures related to cash receipts.
228) Describe the procedures used to reconcile a company’s cash balance.
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229) Discuss internal controls related to the use of debit cards, credit cards, and petty cash for
employee purchases.
230) What is the purpose of the statement of cash flows? List the three major categories of cash
flows and give an example of a cash transaction for each category.
104
231) What is the link between the balance sheet and the statement of cash flows? Describe the
operating, investing, and financing sections of the statement of cash flows.