192.
The following account balances are taken from Ferguson Sports at December 31.
2017
2016
Accounts receivable
$18,020
$23,450
Net sales
163,500
157,100
Calculate the number of days’ sales uncollected for both years. According to this analysis,
is the company’s collection of receivables improving? Explain.
6-136
193.
A company established a petty cash fund in April of the current year and experienced the
following transactions affecting the fund during April. Prepare journal entries to establish
the fund on April 1, to replenish it on April 25, and to record the increase in the fund on
April 25.
April
1
Prepared a company check for $300.00 to
establish the petty cash fund.
25
Prepared a company check to replenish the
fund for the following expenditures made
since April 1.
Paid $84.50 for cleaning services.
Paid $84.00 for postage expense.
Paid $103.15 for office supplies.
Counted $23.35 remaining in the petty
cash box.
25
The company decides to increase the fund
by $100.
Petty Cash
Cash
Cleaning expense
Office supplies expense
Cash Over and Short
Cash
Petty Cash
194.
The following information is available to reconcile Hinckley Company’s book balance of
cash with its bank statement cash balance as of June 30. The June 30 cash balance
according to the accounting records is $57,542, and the bank statement cash balance for
that date is $67,047.
a. The bank erroneously cleared a $295 check against the account in June that was not
issued by Hinckley. The check documentation included with the bank statement indicates
the check was actually issued by Dancer Co.
b. On June 30, the bank issued a credit memorandum for $35 interest earned on
Hinckley’s account.
c. When the June checks are compared with entries in the accounting records, it is found
that Check No. 1727 had been correctly drawn for $1,450 to pay for advertising but was
erroneously entered in the accounting records as $1,540.
d. A credit memorandum indicates that the bank collected $9,000 cash on a note
receivable for Hinckley, deducted a $30 collection fee, and credited the balance to the
company’s Cash account. Hinckley did not record this transaction before receiving the
statement.
e. A debit memorandum of $865 is enclosed with the bank statement for an NSF check for
$840 received from a customer. The bank assessed a $25 fee for processing it.
f. Hinckley’s June 30 daily cash receipts of $6,425 were placed in the bank’s night
depository on that date, but do not appear on the June 30 bank statement.
g. Hinckley’s June 30 cash disbursements journal indicates that Check No. 1737 for
$4,830 and Check No. 1740 for $3,280 were both written and entered in the accounting
records, but are not among the canceled checks.
h. A debit memorandum for $115.00 indicates the bank deducted the annual lock box fee
for the company.
Required:
1. Prepare the bank reconciliation for this company as of June 30.
2. Prepare the journal entries necessary to bring the company’s book balance of cash into
conformity with the reconciled cash balance as of June 30.
Fill in the Blank Questions
195.
A(n) ____________________________ refers to the policies and procedures managers use to
protect assets, ensure reliable accounting, promote efficient operations, and urge
adherence to company policies.
196.
When a company purchases an insurance policy against losses from theft by an employee,
that employee is ________________.
197.
Two sales clerks not being permitted to share the same cash register is an example of the
internal control principle of _______________________.
198.
A sales system with pre-numbered, controlled sales slips is an example of the internal
control principle of _______________________.
199.
A person who controls or has access to an asset must not keep that asset’s accounting
records. This describes the internal control principle of ________________________.
200.
Having external auditors test the company’s financial records and evaluate the
effectiveness of the internal control system is part of the internal control principle of
___________________.
201.
Two limitations of internal control systems are ______________ and ________________.
202.
____________________ are short-term, highly liquid investment assets that are readily
convertible to a known amount of cash.
203.
________________ includes currency, coins, and amounts on deposit in checking accounts
and savings accounts.
204.
The use of electronic communication to transfer cash from one party to another is called
__________________________________.
205.
A __________________________ is a document explaining the payment of a check.
206.
On a bank statement, deposits are shown as __________________, because the depositor’s
account is a liability on the bank’s records.
207.
__________________________ reflects the liquidity of a company’s accounts receivable.
208.
The ________________________________ account is used to record the effects of cash
overages and shortages from errors in making change or managing a petty cash fund.
209.
A ___________ is an internal document (or file) that is used to accumulate information to
control cash disbursements.
210.
A ________________ fund is used to make cash disbursements of small amounts to avoid
the time and cost of writing checks.
211.
________________ are checks written by the depositor, deducted on the depositor’s
records, and sent to the payee, but not yet recorded by the bank at the bank statement
date.
212.
Deposits made and recorded by the depositor but not yet recorded on the bank statement
are called _______________________.
213.
A ____________________ is a report explaining any differences between the checking
account balance according to the depositor’s records and the balance reported on the
bank statement.
214.
The document the purchasing department sends to the vendor that is used to place an
order is the __________________________.
215.
The document prepared by the vendor that is an itemized statement of goods listing the
customer’s name, items sold, sales prices, and terms of the sale is the _________________.
216.
The internal document that is used to notify the appropriate person that ordered goods
have been received and to describe the quantities and condition of the goods is the
_______________.
217.
The __________ requires the managers and auditors of companies whose stock is traded
on an exchange (called public companies) to document and certify the system of internal
controls.