4-96
188.
On October 31, 2018, the bank statement for the checking account of Hollybuster Video
shows a balance of $11,570, while the company’s records show a balance of $10,858.
Information that might be useful in preparing a bank reconciliation is as follows:
a. Outstanding checks are $1,120.
b. The October 31 cash receipts of $575 are not deposited in the bank until November 2.
c. One check written in payment of utilities for $115 is correctly recorded by the bank but
is recorded by Hollybuster as a disbursement of $155.
d. In accordance with prior authorization, the bank withdraws $500 directly from the
checking account as payment on a note payable. The interest portion of that payment is
$50 and the principal portion is $450. Hollybuster has not recorded the direct withdrawal.
e. Bank service fees of $50 are listed on the bank statement.
f. A deposit of $782 is recorded by the bank on October 13, but it did not belong to
Hollybuster. The deposit should have been made to the checking account of Videos
Unlimited, a separate company.
g. The bank statement includes a fee of $105 for an NSF check. The check is returned
with the bank statement and the company will seek payment from the customer.
Required:
1. Prepare a bank reconciliation for the Hollybuster checking account on October 31,
2018.
2. Record the necessary cash adjustments.
4-98
189.
The cash records and bank statement for the month of July for Jim Incorporated are shown
below.
Jim Incorporated
Cash Account Records
July 1, 2018 to July 31, 2018
Cash
Balance
July 1,
2018
Deposits
Checks
Cash
Balance
July 31,
2018
$7,250
$9,370
$8,950
$7,670
Deposits
Checks
Date
Desc.
Amount
Date
No.
Desc.
Amount
7/9
Sales
$2,610
7/7
531
Rent
7/21
Sales
3,340
7/12
532
Salaries
7/31
Sales
3,420
7/19
533
Equipment
7/22
534
Utilities
7/30
535
Advertising
$9,370
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, 2018
Beginning
Balance
July 1, 2018
Deposits and
Credits
Withdraws and
Debits
Ending
Balance
July 31, 2018
No.
Total
No.
Total
$7,750
3
$6,010
7
$8,625
$5,135
Deposits and
Credits
Withdraws 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
75
SF
7/30
5,075
$6,010
$8,625
7/31
$5,135
Desc.
DEP Customer
deposit
INT Interest
earned
SF Service fees
NOTE Note collected
CHK Customer
check
NSF Non-sufficient
funds
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, 2018.
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, 2018.
2. Record the necessary cash adjustments.
4-100
190.
Below is a summary of all transactions of Mason Furniture for the month of August 2018.
4-101
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.
4-103
191.
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.
June 2
Notes Payable
(Borrow from the bank)
June 3
Rent Expense
4-104
4-105
192.
Discuss the events leading up to the passage of the
Sarbanes-Oxley
Act
and its major
provisions.
193.
What is internal control? Briefly describe the five components of internal control outlined
by the Committee of Sponsoring Organizations (COSO).
194.
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.
195.
Describe the procedures used to reconcile a company’s cash balance.
196.
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.
197.
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.