Chapter 7 – Internal Control and Cash
125. The following procedures were recently implemented at the Pampered Pets, Inc. For each procedure, indicate
whether the internal control over cash represents (1) a strength or (2) a weakness. If it is a weakness, please explain why.
(a) At the end of the day, cash register clerks are required to use their own funds to make up any cash shortages
in their registers.
(b) At the end of the day, an accounting clerk compares the duplicate copy of the daily cash deposit slip with the
deposit receipt obtained from the bank.
(c) After necessary approvals have been obtained for the payment of a voucher, the treasurer signs and mails the
check. The treasurer then stamps the voucher and supporting documentation as paid and returns the voucher
and supporting documentation to the accounts payable clerk for filing.
(d) Along with the petty cash receipts for postage, office supplies, etc., several postdated employee
checks are in the petty cash fund.
Chapter 7 – Internal Control and Cash
126. The following selected transactions relate to cash collections for a firm that maintains a $100 change fund at all
times. Present entries to record the transactions for each of the two days of cash receipts from sales.
(a)
Actual cash in cash register, $5,412.36; cash receipts per cash register tally, $5,413.07.
(b)
Actual cash in cash register, $3,712.95; cash receipts per cash register tally, $3,712.16.
Cash
Cash Short and Over
Cash
127. The actual cash received during the week ended June 6 for cash sales was $8,276 and the amount indicated by the
cash register total was $8,262. Journalize the entry to record the cash receipts and cash sales.
Journal
Date
Description
Post. Ref.
Debit
Credit
June 16
Cash
Chapter 7 – Internal Control and Cash
128. The actual cash received during the week ended October 31 for cash sales was $23,447 and the amount indicated by
the cash register total was $23,457. Journalize the entry to record the cash receipts and cash sales.
Journal
Date
Description
Post. Ref.
Debit
Credit
Date
Credit
Oct. 31
Cash
Cash Short and Over
129. Consider the following information from the cash account. Assume cash payments were 84% of collections.
Cash
??
Beg. balance
$245,000
Collections
??
Disbursements
$80,275
End balance
How much was the beginning balance of the cash account?
Chapter 7 – Internal Control and Cash
130. Describe the features of a voucher system and list typical supporting documents for a voucher.
131. The actual cash received during the week ended June 7 for cash sales was $18,632, and the amount indicated by the
cash register total was $18,628. Journalize the entry to record the cash receipts and cash sales.
Journal
Date
Description
Post.
Ref.
Debit
Credit
Chapter 7 – Internal Control and Cash
132. Consider the following journal entry made by Jones Company for one day’s sales of a single cashier. Upon
investigation, what might you find happened to create this amount of Cash Over/Short account difference? Give three
possible reasons for this difference.
Cash
2,235.00
Cash Short and Over
100.00
Sales
2,135.00
133. List the principal advantages of electronic funds transfers.
Chapter 7 – Internal Control and Cash
134. You are trying to explain debit and credit memos that appear on bank statements and whether these will increase or
decrease your company’s bank account balance. Complete the following table to help your new staff understand.
ITEM
Debit
or
Credit
Memo
Increases or Decreases
the Company’s Bank
Account Balance
EFT payment
Bank correction of an error due to posting another
customer’s check to your account
Service charge
Note and interest collected for our company
NSF check
Bank correction of an error recording a $250
deposit as $520
EFT deposit
EFT payment
Bank correction of an error due to posting
Service Charge
Note and interest collected for our company
NSF check
EFT deposit
135. The following items may appear on a bank statement:
1.
NSF check
2.
EFT deposit
3.
Service charge
4.
Bank correction of an error from recording a $300 check as $30.
Chapter 7 – Internal Control and Cash
Indicate whether the item would appear as debit or credit memo on the bank statement and whether the item would
increase or decrease the balance of your account. Use the following format:
Appears on the
Bank Statement as a
Increases (Decreases) the
a Debit or Credit
Balance of the Company’s
Item No.
Memo
Bank Account
Bank Statement as a
136. The following information is from Madison Corporation’s accounting records for May. Check #3269 was returned
as a double payment and voided. Checks that have not cleared the bank include #3252, #3260, and series #3275–3278.
Check #
Amount
Check #
Amount
3247
$ 32.64
3263
$ 24.87
3248
400.00
3264
45.00
3249
309.22
3265
33.78
3250
256.00
3266
756.77
3251
3,212.17
3267
84.34
3252
56.89
3268
789.00
3253
98.02
3269
48.90
3254
47.55
3270
34.41
3255
1,124.77
3271
872.00
3256
250.00
3272
22.00
3257
68.00
3273
562.38
3258
215.56
3274
512.00
3259
38.55
3275
603.50
3260
92.65
3276
67.00
3261
44.61
3277
301.61
3262
72.96
3278
47.88
In addition to the above list of the checks, Madison had check #2264 for $32.98 and check #2655 for $45.99 outstanding
previously that have not cleared.
Chapter 7 – Internal Control and Cash
1. Create an outstanding checks list for Madison at the end of May.
2. What is the total amount of checks that cleared the bank (written in May)?
Chapter 7 – Internal Control and Cash
137. 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
Chapter 7 – Internal Control and Cash
138. Jackson Industries has collected the following information but needs assistance completing the table. The cash
payments were 90% of collections.
Cash
??
Beg. balance
$511,770
Collections
??
Payments
$102,275
End balance
How much was the beginning balance of the cash account?
Cash
Beg. balance
$511,770
Collections
$460,593
Payments
$102,275
End balance
139. Identify each of the following reconciling items as (a) an addition to the cash balance according to the bank
statement, (b) deduction from the cash balance according to the bank statement, (c) an addition to the cash balance
according to the company’s records, or (d) a deduction from the cash balance according to the company’s
records. Assume that none of the transactions reported by bank debit and credit memos have been recorded by the
company. Also, indicate by writing “entry” by those items that will require a journal entry in the company’s accounts.
1.
Deposits in transit.
2.
Bank service charges.
3.
NSF check.
4.
Outstanding checks.
5.
Check for $690 incorrectly recorded by the company as $960.
6.
Check for $420 incorrectly recorded by the company as $240.
Chapter 7 – Internal Control and Cash
140. Using the following information, prepare a bank reconciliation for Miller Co. for August 31:
(a)
The bank statement balance is $4,690
(b)
The cash account balance is $5,080.
(c)
Outstanding checks amounted to $715.
(d)
Deposits in transit are $1,020.
(e)
The bank service charge is $40.
(f)
A check for $72 for supplies was recorded as $27 in the ledger.
Cash balance according to bank statement
Adjustments:
Adjusted balance
Cash balance according to company’s records
Adjustments:
Adjusted balance
Chapter 7 – Internal Control and Cash
141. Using the following information, prepare a bank reconciliation for Candace Co. for May 31:
(a)
The bank statement balance is $2,936.
(b)
The cash account balance is $3,194.
(c)
Outstanding checks amounted to $465.
(d)
Deposits in transit are $655.
(e)
The bank service charge is $50.
(f)
A check for $97 for supplies was recorded as $79 in the ledger.
Cash balance according to bank statement
Adjustments:
Adjusted balance
Cash balance according to company’s records
Adjustments:
Adjusted balance
142. Bank reconciliation information for Kaden Co. for May 31 is as follows:
(a)
The bank statement balance is $2,936.
(b)
The cash account balance is $3,194.
(c)
Outstanding checks amounted to $465.
(d)
Deposits in transit are $655.
(e)
The bank service charge is $50.
(f)
A check for $97 for supplies was recorded as $79 in the ledger.
Record the appropriate journal entry for Kaden Co.
Miscellaneous Expense
Supplies
Chapter 7 – Internal Control and Cash
143. The bank statement for Farmer Co. indicates a balance of $7,735.00 on June 30. After the journal entries for June
had been posted, the cash account had a balance of $4,098.00. Prepare a bank reconciliation on the basis of the following
reconciling items:
(a)
Cash sales of $742 had been erroneously recorded in the cash receipts journal as $724.
(b)
Deposits in transit not recorded by bank, $425.
(c)
Bank debit memo for service charges, $35.
(d)
Bank credit memo for note collected by bank, $2,475 including $75 interest.
(e)
Bank debit memo for $256 NSF (not sufficient funds) check from Janice Smith, a customer.
(f)
Checks outstanding, $1,860.
Cash balance according to bank statement
Adjustments:
Adjusted balance
Cash balance according to company’s records
Adjustments:
Bank service charges
Total adjustments
Adjusted balance
144. Accompanying a bank statement for Marsh Land Properties is a credit memo for payment on a $15,000 1-year note
receivable and $900 of interest collected by the bank. Marsh Land Properties had been notified by the bank at the time of
collection, but had made no entries. Journalize the entry that should be made by Marsh Land to bring the accounting
records up to date.
Chapter 7 – Internal Control and Cash
145. For each of the following, explain whether the issue would require you to prepare a journal entry for your company,
assuming any original entry is correct. If an entry is required, please include it as part of your answer.
(1) The bank recorded your deposit as $91 rather than the actual amount of $191.
(2) Two outstanding checks amounted to $450.
(3) Company check number 538 for postage was recorded incorrectly by the company bookkeeper as $50 instead
of $59.
(4) The bank paid a check for $500 after the company had issued a stop payment and voided the check.
(5) An EFT deposit was made by one of the company’s customers, Atlas Design, for merchandise received. The
sale had previously been recorded when shipped and was equal to the payment amount of $125.
146. 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 reconciliation?
$15,095 ($16,750 + $2,195 – $3,850) or ($16,125 – $80 – $950)
Chapter 7 – Internal Control and Cash
147. 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
(1) What is the adjusted balance on the bank reconciliation?
(2) Journalize any necessary entries for Build-A-Lot based on the bank reconciliation.
Accounts Receivable
Miscellaneous Expense
148. Roper Electronics received its bank statement for the month of August with an ending balance of $11,740. Roper
determined that check #613 for $155 and check #601 for $420 were both outstanding. Also, a $6,900 deposit for August
30 was in transit as of the end of the month. Northern Regional Bank also collected a $5,000 note receivable on August 1
that was issued March 1. Accrued interest is $250. Northern Regional Bank charged a $35 fee for the collection
service. The bank statement reveals a bank service charge of $20. A customer check for $68 was returned with the bank
statement marked “NSF.” The ending balance of the Roper cash account is $12,938.
Prepare a bank/account reconciliation and any necessary journal entries for the reconciliation.