156. The following data were gathered to use in reconciling the bank statement of Build-A-Lot:
Balance per bank
$14,355
Balance per company records
14,010
Bank service charges
80
Deposits in transit
4,100
NSF checks
775
Outstanding checks
5,300
Required:
(1) What is the adjusted balance on the bank reconciliation?
(2) Journalize any necessary entries for Build-A-Lot based on the bank reconciliation.
157. The bank statement for Gatlin Co. indicates a balance of $7,735.00 on June 30, 2010. After the journals
for June had been posted, the cash account had a balance of $4,098.00.
(a)
Cash sales of $742.00 had been erroneously recorded in the cash receipts journal as $724.
(b)
Deposits in transit not recorded by bank, $425.00.
(c)
Bank debit memo for service charges, $35.00.
(d)
Bank credit memo for note collected by bank, $2,475 including $75 interest.
(e)
Bank debit memo for $256.00 NSF (not sufficient funds) check from Janice Smith, a customer.
(f)
Checks outstanding, $1,860.00.
Record the appropriate journal entries that would be necessary for Gatlin Co.
Cash
2,493.00
Notes Receivable
2,400.00
Interest Revenue
75.00
Sales
18.00
Accounts Receivable-Janice Smith
256.00
Cash
291.00
Accounts Receivable
775
Miscellaneous Adm. Expense
80
Cash
855
158. Journalize the entries to record the following:
Mar 1
Established a petty cash fund of $300
Mar 31
The amount of cash in the petty cash fund is now $64. The fund is replenished based on the following receipts: office
supplies, $137; selling expenses, $112.
Record any discrepancy in the cash short and over account.
Journal
Date
Description
Post Ref
Debit
Credit
Date
Description
Post Ref
Debit
Credit
Mar 1
Petty Cash
Cash
Mar 31
Office Supplies
Selling Expenses
Cash
159. On April 2nd, Granger Sales decides to establish a $125.00 Petty Cash Account to relieve the burden on
Accounting.
(a) Journalize this event.
(b) On April 10th, the petty cash fund has receipts for mail and postage of $43.50, contributions and donations
of $29.50, meals and entertainment of $38.25 and $13.55 in cash. Journalize the replenishment of the fund.
(c) On April 11th, Granger Sales decides to increase petty cash to $200.00. Journalize this event.
160. The last custodian of the petty cash fund was hospitalized and you have been asked to take stock of the
fund and replenish it. When you receive the fund, it has $299 in cash and receipts as follows:
Office supplies
$295
Advertising
120
Transportation by Taxi
75
The petty cash fund was established to have $800 in it.
Based on what you have found, what journal entry should be recorded to replenish the fund?
(a) Apr 2
Petty Cash
125.00
Cash
125.00
(b) Apr 10
Mail and Postage Expense
43.50
Contributions and Donations Expense
29.50
Meals and Entertainment Expense
38.25
Cash Short and Over
0.20
Cash
111.45
(c) Apr 11
Petty Cash
75.00
Cash
75.00
161. Journalize the entries to record the following:
Jun 1 Established a petty cash fund of $200
Jun 30 The amount of cash in the petty cash fund is now $57. The fund is replenished based on the following
receipts: postage, $25; entertainment $100; miscellaneous $20.
Record any discrepancy in the cash short and over account.
Journal
Date
Description
Post Ref.
Debit
Credit
Date
Description
Post Ref.
Debit
Credit
Jun 1
Petty Cash
Cash
Jun 30
Postage Expense
Entertainment Adm. Expense
Miscellaneous Expense
Cash Short and Over
2
Cash
162. Journalize the entries to record the following:
Sept 1 Established a petty cash fund of $350
Sept 30 The amount of cash in the petty cash fund is now $130. The fund is replenished based on the following
receipts: office supplies, $116; postage $100.
Record any discrepancy in the cash short and over account.
Journal
Date
Description
Post Ref.
Debit
Credit
163.
(a)
Where are cash equivalents disclosed in the financial statements?
(b)
List three examples of cash equivalents.
(a)
Cash account on the balance sheet.
(b)
Money market funds; notes of major corporations (commercial paper); United States Treasury Bills.
Date
Description
Post Ref.
Debit
Credit
Sept 1
Petty Cash
Cash
Sept 30
Office Supplies Expense
Postage Expense
Cash Short & Over
4
Cash
164. You began your new job as the accountant for Morton Company. You were surprised to find that the
company had a $2,000 petty cash fund, which sits in the break room. The President of the company told you:
“Our petty cash system here works quite smoothly. Since everyone is honest here, everyone has access to the
fund for incidentals that might pop up in the course of the business day. Most of these situations don’t have
any receipts tied to them, so I just put the money back in the fund when my secretary tells me that we have run
out and debit the amount to Miscellaneous Expense.”
Required:
(a) Should you implement some controls on petty cash? Why?
(b) If so, what controls could be used for petty cash?
165. Why would a bank require a company to maintain a compensating balance?
166. Farm Store, Inc. reported the following data in its December 31, 2011 annual report.
Cash and cash equivalents
$1,050,000
Negative cash flows from operations
(420,000)
Required:
(1) What is the company’s “cash burn” per month?
(2) What is the company’s ratio of cash to monthly cash expenses?
(3) Interpret the ratio you computed in part 2. What are the implications for Farm Store, Inc.
167. Peaches, Inc. reported the following data in it’s December 31, 2011 annual report:
Cash and cash equivalents
$460,000
Cash flow from operations
(240,000)
Required:
(1) What is the company’s “cash burn” per month?
(2) What is the company’s ratio of cash to monthly cash expenses?
168. The following data is from the Miser Company for years ended 2008-2011.
Year Ending
December 31 Data
2008
2009
2010
2011
Cash & Cash Equivalents
23,788
45,776
52,899
82,744
Cash Flow from Operations
(32,556)
(47,880)
(32,357)
(16,450)
Calculate the following:
Year Ending
December 31 Data
2008
2009
2010
2011
Monthly Cash Expenses
Ratio of Cash to Monthly Cash Expenses
Year Ending
2008
2009
2010
2011
Ratio of Cash to Monthly Cash Expenses
8.8
11.5
19.6
60.4
169. The following data were gathered to use in reconciling the bank account of Savannah Company:
Balance per bank
$16,750
Balance per company records
16,125
Bank service charges
80
Deposit in transit
2,195
NSF check
950
Outstanding checks
3,850
What is the adjusted balance on the bank reconcilition?
170. Match the following elements of internal control:
identify, analyze and assess likeliness of
3. Information and
provides reasonable assurance that business goals
used by management for guiding operations and
171. List and define each of the five elements of internal control.
(4)
Monitoring. Monitoring locates deficiencies in the internal control system and improves control effectiveness.
172. Two features of internal control are presented in the following sections. Each is followed by a list of four
irregularities that occurred in processing data. Identify the one irregularity from each list that would be
discovered or prevented by the feature of internal control described.
(a)
The sum of the balances of the accounts in the customers ledger
is compared at the end of each month with the balance of the
accounts receivable account in the general ledger by a person
who has no responsibility for maintaining either the general
ledger or the customers ledger.
(1)
Five hours of services were rendered but the customer was only billed
for four hours.
(2)
A cash receipt of $750 was recorded correctly in the accounts
receivable controlling account but was posted to the customers ledger as
$75.
(3)
A bill for services rendered to Cole Co. was erroneously posted to the
account of Coleman Co. in the customers ledger.
(4)
No entry was made in the accounting records for services rendered to a
customer.
(b)
Both cash and credit charges for services rendered are recorded
on prenumbered invoices. At the end of the day, all invoices are
accounted for before the duplicate copies of the invoices are
routed to the accounting department for entry into the accounts
and the cash is sent to the cashier’s department for deposit.
(1)
Some charge customers complained that the monthly statements of
account did not add all amounts correctly.
(2)
Some clerks used incorrect hourly rates in preparing invoices.
(3)
Some clerks destroyed duplicate copies of cash invoices and
misappropriated the cash.
(4)
Some charge customers complained that the monthly statement of
account did not indicate credits for payments made.
(a)
(2)
(b)
(3)
173. The Scharf Company is a retailer located in a state without sales tax. The following data was given to you
to complete the transactions for the day’s sales to be recorded. All cash drawers start with $100 in change.
Reg. #1
Reg. #2
Reg. #3
Reg.#4
Cash in Drawer
974.50
1,383.66
939.46
1,137.91
Sales Reading
879.50
1,298.16
839.46
1,030.33
Difference
Record the Journal Entries for EACH cash register to determine the cashier’s accuracy.
Account
Debit
Credit
First item for the student to remember is that EACH cash drawer starts with $100. This must be subtracted
from the total cash in drawer to determine the cash over/short amount.
Journal Entries:
Reg #
Account
Debit
Credit
1
Cash
874.50
Cash Short and Over
5.00
Sales
879.50
2
Cash
1,283.66
Cash Short and Over
14.50
Sales
1,298.16
3
Cash
839.46
Sales
839.46
4
Cash
1,037.91
Cash Short and Over
7.58
174. Roper Electronics received its bank statement for the month of August with an ending balance of
$11,740.00. Roper determined that check #613 for $155.00 and check #601 for $420.00 were both outstanding.
Also, a $6,900.00 deposit for August 30th was in transit as of the end of the month. Northern Regional Bank
also collected a $5,000.00 notes receivable on August 1st that was issued March 1st at 12% annual interest. No
interest revenue has been accrued on this note and Northern Regional Bank charged a $35.00 fee for the
collection service.The bank statement reveals a bank service charge of $20.00. A customer check for $68.00
was returned with the bank statement marked “NSF”. The ending balance of the Roper cash account is
$12,938.00.
Complete a bank/account reconciliation and prepare any necessary journal entries for the reconciliation.
175. Green Valley Bank sent Comstock Industries their end of month bank statement for July. The end of month
balance by the bank is $11,237.00. The statement shows that a deposit for $4,250.00 is in transit at the end of
the statement period. The statement also revealed that checks for $87.00, $105.00, and $95.00 are outstanding.
Green Valley collected a 90 day, 12% interest $4,000.00 note receivable charging $20.00 for the service. No
interest has been accrued on the note. The bank charges a monthly account fee of $35.00. The end of month
balance per company books is $11,135.00.
Complete a bank/account reconciliation and write any necessary journal entries for the reconciliation.
176. The cash account for Santiago Co. on May 31, 2014 indicated a balance of $20,915. The March bank
statement indicated an ending balance of $25,645. Comparing the bank statement, the canceled checks, and the
accompanying memos with the records revealed the following reconciling items:
a.
Checks outstanding totaled $5,975
b.
A deposit of $3,796 had been made too late to appear on the bank statement.
c.
A check for $1,482 returned with the statement had been incorrectly recorded as $482. The check was originally issued to pay on
account.
d.
The bank collected $4,515 on a note left for collection.
e.
Bank service charges for May amounted to $70.
f.
A check for $894 was returned by the bank because of insufficient funds.
Prepare a bank reconciliation as of May 31, 2014. Journalize the necessary entries.
Santiago Co.
Bank Reconciliation
May 31, 2014
Journal
Date
Description
Post Ref
Debit
Credit
177. On April 3rd, Snappy Sales decides to establish a $135.00 Petty Cash Account to relieve the burden on
Accounting.
(a) Journalize this event.
(b) On April 11th, the petty cash fund has receipts for mail and postage of $32.75, contributions and donations
of $25.25, meals and entertainment of $68.00 and $9.75 in cash. Journalize the replenishment of the fund.
(c) On April 12th, Snappy Sales decides to increase petty cash to $175.00. Journalize this event.
178. Present entries to record the following transactions:
(a)
Established a petty cash fund of $235.00.
(b)
The petty cash fund now has a balance of $42.80. Replenished the fund, based on the following disbursements as indicated by a
summary of the petty cash receipts: office supplies, $74.50; miscellaneous administrative expense, $92.75; and miscellaneous selling
expense, $18.60.
(c)
Increased the petty cash fund to $300.00.
179. On August 3rd, Sonar Sales decides to establish a $275.00 Petty Cash Account to relieve the burden on
Accounting.
(a) Journalize this event.
(b) On August 11th, the petty cash fund has receipts for mail and postage of $124.75, contributions and
donations of $53.25, meals and entertainment of $63.85 and $32.75 in cash. Journalize the replenishment of the
fund.
(c) On August 12th, Sonar Sales decides to increase petty cash to $400.00. Journalize this event.
Cash
275.00
(b) Aug 11
Mail and Postage Expense
124.75
Contributions and Donations Expense
53.25
Meals and Entertainment Expense
63.85
Cash Short and Over
0.40
Cash
125.00
Petty Cash
235.00
Cash
235.00
Office Supplies
74.50
Miscellaneous Administrative Expense
92.75
Cash Short and Over
6.35
Cash
192.20
Petty Cash
65.00
Cash
65.00
180. Groceries R Us, Inc. reported the following date in it’s December 31, 2011 annual report.
Cash and cash equivalents
$2,280,000
Cash flow from operations
(240,000)
(1) What is the company’s “cash burn” per month?
(2) What is the company’s ratio of cash to monthly cash expenses?
(3) Interpret the ratio you computed in part 2. What are the implications for Groceries R Us, Inc.?