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Chapter 08 - Cash and Internal Controls
Problem 8-4A (Concluded)
Part 3
a. If the company's Cash account balance of $27,497 is listed on the
bank reconciliation as $27,947 then:
b. The bank's collection of the $8,000 note less the $45 collection fee
should have been added to the book balance of cash. Instead, it was
added to the bank statement balance. As a result:
will be understated by $7,955.
Problem 8-5A (50 minutes)
Part 1
CHAVEZ COMPANY
Bank Reconciliation
September 30, 2015
Bank statement balance....... $18,453.25 Book balance.......................................................................................$17,404.20
30.00
5908.... 388.00 1,864.55
630.25
Adjusted bank balance......... $18,271.45
Adjusted book balance.... $18,271.45
8-503
30 Cash...............................................................................1,485.00
Collection Expense......................................................15.00
Notes Receivable.................................................... 1,500.00
To record note collection less fee.
To correct an entry error.
Problem 8-5A (Concluded)
Part 3
There are several possible reasons why some prenumbered checks are
missing from the sequence of canceled checks returned with a bank
statement. Reasons include:
(3) The issuer of the checks may have voided one or more of the checks
in the numbered sequence, perhaps because of making an error in
writing the checks.
8-504
Chapter 08 - Cash and Internal Controls
PROBLEM SET B
Problem 8-1B (20 minutes)
1. Violates both applying technological control and effective segregation
of duties. It is safe to assume that Latisha Tally has knowledge of
employee passwords since she implemented the system of password
2. Violates applying technological controls. The theater’s system needs to
3. Violates segregation of duties. The company needs to have three
4. Violates applying technological controls. The use of the check protector
5. Violates segregation of duties. It is good internal control to separate
duties for cash receipts and cash disbursements. Moreover, an
Problem 8-2B (20 minutes)
8-505
Chapter 08 - Cash and Internal Controls
Part 1
Jan. 3 Petty Cash.....................................................................150.00
Cash......................................................................... 150.00
To establish the petty cash fund.
Jan. 14 Office Supplies Expense............................................. 14.29
Merchandise Inventory*............................................... 19.60
Jan. 15 Petty Cash..................................................................... 50.00
Cash......................................................................... 50.00
To increase the petty cash fund.
Jan. 31 Advertising Expense.................................................... 50.00
Jan. 31 Petty Cash..................................................................... 50.00
Cash......................................................................... 50.00
To increase the petty cash fund.**
**The Jan. 31 entries can be combined into one entry.
Part 2
If the January 31 reimbursement is not made and no entry is recorded, then
8-506
Chapter 08 - Cash and Internal Controls
Problem 8-3B (30 minutes)
Part 1
Part 2
Blues Music Center
Petty Cash Payments Report (for March)
Delivery expense
Mar. 11 Delivery of customer's merchandise.......................... $ 10.75
Mileage expense
Mar. 30 Reimbursement for mileage........................................ 56.80
Postage expense
* Transportation-in costs are included in Merchandise Inventory under a perpetual
system.
Part 3
Mar. 31 Delivery Expense..........................................................10.75
Mileage Expense..........................................................56.80
To increase the petty cash fund to $300.
8-507
8-508
Chapter 08 - Cash and Internal Controls
Problem 8-4B (30 minutes)
Part 1
SEVERINO CO.
Bank Reconciliation
December 31, 2015
Bank statement balance........ $46,822.40 Book balance........................................................................................$32,878.30
Add Add
Deposit of Dec. 31............... 9,583.10
Error (Ck 1267).. $ 9.00
56,405.50 Proceeds of note
Part 2
Dec. 31 Cash...............................................................................9.00
Office Supplies....................................................... 9.00
To correct an entry error.
31 Cash...............................................................................18,980.00
Collection Expense......................................................20.00
Notes Receivable.................................................... 19,000.00
To record note collection less fees.
To record check printing charge.
Part 3
In a banking context, a debit memo is notification from the bank that it has
debited the depositor's account. Since the depositor's account is a liability of the
8-509
Chapter 08 - Cash and Internal Controls
Problem 8-5B (50 minutes)
Part 1
SHAMARA SYSTEMS
Bank Reconciliation
May 31, 2015
Bank statement balance......... $21,762.70 Book balance ......................................................................................$15,177.30
Add Add
Deposit of May 31................ 2,727.30
24,490.00
Proceeds of note less
$50 fee............................................................................................. 7,350.00
22,527.30
Deduct Deduct
