92
191) The following account balances are taken from Everest Events at December 31.
Year 2
Year 1
Accounts receivable
170,230
260,450
Net sales
1,500,750
1,450,600
Calculate the number of days’ sales uncollected for both years. According to this analysis, is the
company’s collection of receivables improving? Explain.
192) The following account balances are taken from Ferguson Sports at December 31.
Year 2
Year 1
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.
193) On May 1, a company established a $125 petty cash fund. On May 22, the petty cash fund
contains $6 in cash and the following paid petty cash receipts: transportation-in on merchandise
inventory $25; postage, $21; and office supplies, $66. Record the general journal entry to
reimburse the fund.
May 22
Merchandise Inventory
Postage Expense
Office Supplies
Cash Over and Short
194) 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.
Apr.
1
Petty Cash
Cash
25
Cleaning expense
Postage expense
Office supplies
Cash Over and Short
Cash
25
Petty Cash
Cash
95
195) 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. $35 interest earned on Hinckley’s cash balance in the bank is not yet recorded by Hinckley.
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. The bank collected $8,970 cash on a note receivable for Hinckley. Hinckley did not record this
transaction before receiving the statement.
e. An $865 NSF check received from a customer is shown on the bank statement, but not yet
recorded by Hinckley Company.
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 payments 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. The bank lock box fee for $115.00 is shown on the bank statement, but not yet recorded by
Hinckley Company.
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.
196) An ________ refers to the policies and procedures managers use to protect assets, ensure
reliable accounting, promote efficient operations, and urge adherence to company policies.
197) When a company purchases an insurance policy against losses from theft by an employee,
that employee is ________.
198) Two sales clerks not being permitted to share the same cash register is an example of the
internal control principle of ________.
199) A sales system with pre-numbered, controlled sales slips is an example of the internal
control principle of ________.
200) 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 ________.
201) 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 ________.
202) Two limitations of internal control systems are ________ and ________.
203) ________ are short-term, highly liquid investment assets that are readily convertible to a
known amount of cash.
204) ________ includes currency, coins, and amounts on deposit in checking accounts and
savings accounts.
205) The use of electronic communication to transfer cash from one party to another is called
________.
206) A ________ is a document explaining the payment of a check.
207) On a bank statement, deposits are shown as ________, because the depositor’s account is a
liability on the bank’s records.
208) ________ reflects the liquidity of a company’s accounts receivable.
209) The ________ account is used to record the effects of cash overages and shortages from
errors in making change or managing a petty cash fund.
210) A ________ is an internal document (or file) that is used to accumulate information to
control cash payments.
211) A ________ fund is used to make cash payments of small amounts to avoid the time and
cost of writing checks.
212) ________ 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.
213) Deposits made and recorded by the depositor but not yet recorded on the bank statement are
called ________.
214) 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.
215) The document the purchasing department sends to the vendor that is used to place an order
is the ________.
216) 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 ________.
217) 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 ________.
218) Document used to place an order with a vendor is a ________.
219) 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.