130. 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?
131. Consider the cash account below.
Additional Information: cash disbursements were 80% of collections.
Cash
??
Beg. Balance
115,375
Collections
??
Disbursements
80,275
End Balance
How much was the Beginning Balance of the Cash Account?
132. Identify each of the following as relating to (a) the control environment, (b) risk assessment, or (c) control
procedures.
1. Mandatory vacations
2. Personnel policies
3. Report of outside consultants on future market changes
133. Distinguish preventive controls from detective controls and give examples of each as they relate to cash.
134. List the objectives of internal control and give an example of how each is implemented.
Internal control provides reasonable assurance that
assets are safeguarded and used for business purposes
business information is accurate
employees comply with laws and regulations
duties are separated
duties are rotated
135. You began your new job as the accountant at Bolivar Industries during the month of December. During
your first month, you found several interesting issues.
1) While looking through the invoices, you found Invoices 213-242, 245-271, and 275-290. It appears that
invoices 243, 244, 272, 273, and 274 are missing.
2) During the month, Clerk # 3 issued $250 in refunds as compared to Clerks #1, #2, and #4 who issued less
than $50 each.
3) The daily cash receipts and bank deposits reconcile, except on Tuesdays during the month.
4) Business is generally brisk during the holiday season, but two weeks before Christmas there was a sudden
increase in slow payments.
REQUIRED:
Part A: What kind of warning signs could be associated with these issues?
Part B: What control could you put in place regarding cash refunds mentioned in Part A (2)?
136. The following procedures were recently implemented at the Health Station, 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) All mail is opened by the mail clerk, who forwards all cash remittances to the cashier. The cashier prepares a
listing of the cash receipts and forwards a copy of the list to the accounts receivable clerk for recording in the
accounts.
(b) The accounts payable clerk prepares a voucher for each disbursement. The voucher along with the
supporting documentation is forwarded to the treasurer’s office for approval.
(c) At the end of each day, all cash receipts are placed in the bank’s night depository.
(d) The bank reconciliation is prepared by the cashier, who works under the supervision of the treasurer.
137. 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 expense receipts for postage, office supplies, etc., several post-dated employee
checks are in the petty cash fund.
138. 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, $4,512.36; cash receipts per cash register tally, $4,413.07.
(b)
Actual cash in cash register, $3,812.95; cash receipts per cash register tally, $3,712.16.
139. The actual cash received during the week ended January 16 for cash sales was $7,427 and the amount
indicated by the cash register total was $7,413. Journalize the entry to record the cash receipts and cash sales.
Journal
Date
Description
Post Ref.
Debit
Credit
7,413
Cash Short and Over
Cash
4,412.36
Sales
4,413.07
Cash Short and Over
0.79
Sales
3,712.16
140. The actual cash received during the week ended October 31 for cash sales was $23,447.00 and the amount
indicated by the cash register total was $23,457.00. Journalize the entry to record the cash receipts and cash
sales.
Journal
Date
Description
Post Ref.
Debit
Credit
141. Consider the cash account below.
Additional Information: cash disbursements were 80% of collections.
Cash
??
Beg. Balance
115,375
Collections
??
Disbursements
80,275
End Balance
How much was the Beginning Balance of the Cash Account?
Date
Description
Post Ref.
Debit
Credit
Oct. 31
Cash
23,447.00
Cash Short and Over
10.00
Sales
23,457.00
142. Describe the features of a voucher system and list typical supporting documents for a voucher.
143. The actual cash received during the week ended June 7 for cash sales was $18,632.00, and the amount
indicated by the cash register total was $18,628.00. Journalize the entry to record the cash receipts and cash
sales.
Journal
Date
Description
Post Ref
Debit
Credit
Jun 7
Cash
18,632.00
Sales
18,628.00
Cash Short and Over
4.00
144. Consider the following journal entry made by Jones Company. 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
There are many POSSIBILITIES, but the most likely culprits are as follows:
145. List the principal advantage of Electronic Funds Transfers.
146. 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
(disbursement) to your account
Service Charge
Note collected for our company
NSF check
Bank correction of an error recording a $250 deposit as $520
EFT deposit
ITEM
Debit
Increases or Decreases the
EFT payment
Debit
Decrease
Service Charge
Debit
Decrease
Note collected for our company
Credit
Increase
NSF check
Debit
Decrease
Bank correction of an error recording a $250 deposit as $520
Debit
Decrease
EFT deposit
Credit
Increase
147. 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.
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
Appears on the
Bank Statement as a
Increases (Decreases) the
a Debit or Credit
Balance of the Company’s
Item No.
Memo
Bank Account
1.
Debit memo
Decreases
2.
Credit memo
Increases
3.
Debit memo
Decreases
4.
Debit memo
Decreases
148. The following information is from Madison Corporation’s accounting records for May 20XX. 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.
1. Create an outstanding checks list for Madison at the end of May 20XX.
2. What is the total amount of checks that cleared the bank (written in May)?
Madison Company
May 31, 20XX
Outstanding Checks List
Check #
Amount
2264
32.98
2655
45.99
3252
56.89
3260
92.65
3275
603.50
3276
67.00
3277
301.61
3278
47.88
Total
1,248.50
149. 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) 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.
1.
(a) an addition to the cash balance according to the bank statement
2.
(d) a deduction from the cash balance according to the company’s records (entry)
3.
(d) a deduction from the cash balance according to the company’s records (entry)
4.
(b) deduction from the cash balance according to the bank statement
5.
(c) an addition to the cash balance according to the company’s records (entry)
3247
32.64
3248
400.00
3249
309.22
3250
256.00
3251
3,212.17
3253
98.02
3254
47.55
3255
1,124.77
3256
250.00
3257
68.00
3258
215.56
3259
38.55
3261
44.61
3262
72.96
3263
24.87
3264
45.00
3265
33.78
3266
756.77
3267
84.34
3268
789.00
3270
34.41
3271
872.00
3272
22.00
3273
562.38
3274
512.00
150. Using the following information, prepare a bank reconciliation for Young Co. for August 31, 2014:
The bank statement balance is $4,690
The cash account balance is $5,080.
Outstanding checks amounted to $715.
Deposits in transit are $1,020.
The bank service charge is $40.
A check for $72 for supplies was recorded as $27 in the ledger.
151. Using the following information, prepare a bank reconciliation for Cole Co. for May 31, 2011:
The bank statement balance is $2,936.
The cash account balance is $3,194.
Outstanding checks amounted to $465.
Deposits in transit are $655.
The bank service charge is $50.
A check for $97 for supplies was recorded as $79 in the ledger.
Cash balance according to bank statement
$2,936
Add deposits in transit not recorded by bank
655
$3,591
Deduct outstanding checks
465
Adjusted balance
$3,126
Cash balance according to company’s records
$3,194
Deduct: Bank service charge
$ 50
Error in recording
Adjusted balance
$3,126
Cash balance according to bank statement
$4,690
Add deposits in transit not recorded by bank
1,020
$5,710
Deduct outstanding checks
715
Adjusted balance
$4,995
Cash balance according to company’s records
$5,080
Deduct: Bank service charge
$ 40
Error in recording
Adjusted balance
$4,995
152. Bank reconciliation information for Cole Co. for May 31, 2011 is as follows:
The bank statement balance is $2,936.
The cash account balance is $3,194.
Outstanding checks amounted to $465.
Deposits in transit are $655.
The bank service charge is $50.
A check for $97 for supplies was recorded as $79 in the ledger.
153. 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. 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, $425.00.
(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.
Cash balance according to bank statement
$7,735.00
Add deposits in transit not recorded by bank
425.00
$8,160.00
Deduct outstanding checks
1,860.00
Adjusted balance
$6,300.00
Cash balance according to company’s records
$4,098.00
Add: Note collected by bank, including
$75 interest
$2,475.00
Error in recording cash sales of
$742 as $724
18.00
2,493.00
$6,591.00
Deduct: NSF check from Janice Smith
$ 256.00
Bank service charges
35.00
291.00
Adjusted balance
$6,300.00
Miscellaneous Administrative Expense
Supplies
Cash
154. Accompanying a bank statement for Marsh Land Properties is a credit memo for payment on a $15,000
note receivable that had been collected by the bank. The rate of interest on the note is 6%. 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.
155. 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.