Exercise 4-1 (LO 4-1)
1. False
2. True
3. True
4. False
5. True
6. True
Exercise 4-2 (LO 4-1)
1. True
2. False
3. True
4. True
5. False
6. False
Exercise 4-3 (LO 4-2)
1. True
2. False
3. False
4. True
5. True
6. False
7. True
8. True
9. False
EXERCISES
Exercise 4-4 (LO 4-2)
1. Performance reviews
2. Physical controls
3. Separation of duties
4. Reconciliations
5. None
6. Proper authorization
Exercise 4-5 (LO 4-3)
Currency located at the company $ 1,050
Short-term investments that mature within three months 1,950
Balance in savings account 8,500
Checks received from customers but not yet deposited 650
Coins located at the company 110
Exercise 4-6 (LO 4-4)
Cash should be recorded and deposited more than once per week (on Friday). The
Exercise 4-7 (LO 4-4)
The petty cash fund of $10,000 is too large. Employees should not be allowed to
both place a receipt in the fund and withdraw cash. Employees should obtain
Exercise 4-8 (LO 4-4)
Jim should not deposit the checks and also record them.
Exercise 4-9 (LO 4-5)
Requirement 1
Spielberg Company
Bank Reconciliation
July 31, 2015
Bank’s Cash Balance Company’s Cash Balance
Per bank statement $22,490 Per general ledger $22,970
Deposits outstanding + 1,885 Service fees − 55
Checks outstanding − 1,460
Requirement 2
Debit Credit
Service Fee Expense 55
Exercise 4-10 (LO 4-5)
Requirement 1
The Dean Acting Academy
Bank Reconciliation
August 31, 2015
Bank’s Cash Balance Company’s Cash Balance
Per bank statement $6,042 Per general ledger $7,944
Deposits outstanding + 3,338 Service fees − 35
Requirement 2
Debit Credit
Cash 46
Service Fee Expense 35
Exercise 4-11 (LO 4-5)
Requirement 1
Damon Company
Bank Reconciliation
October 31, 2015
Bank’s Cash Balance Company’s Cash Balance
Per bank statement $11,727 Per general ledger $ 8,397
Deposits outstanding + 3,025 Note received +5,000
Checks outstanding − 1,485 Interest earned + 320
Requirement 2
Debit Credit
Cash 5,320
Notes Receivable 5,000
Service Fee Expense 150
Exercise 4-12 (LO 4-6)
September 4 Debit Credit
Petty Cash 400
September 30 Debit Credit
Entertainment Expense 90
Repairs and Maintenance Expense 120
Postage Expense 75
Delivery Expense 85
September 30 Debit Credit
Petty Cash 370
Exercise 4-13 (LO 4-6)
April 3 Debit Credit
Petty Cash 500
April 30 Debit Credit
Utilities Expense 135
Entertainment Expense 44
Postage Expense 59
Repairs and Maintenance Expense 230
April 30 Debit Credit
Petty Cash 468
Exercise 4-14 (LO 4-7)
Transaction
Cash
involved?
(yes or no)
If yes, is it
operating, investing,
or financing?
Inflow or
outflow?
a. Borrow cash from the bank. Yes Financing Inflow
b. Purchase supplies on account. No N/A N/A
c. Purchase equipment with cash. Yes Investing Outflow
d. Provide services on account. No N/A N/A
e. Pay cash on account for
f. Sell for cash a warehouse no
g. Receive cash on account for
h. Pay cash to workers for salaries. Yes Operating Outflow
Exercise 4-15 (LO 4-7)
Requirements 1 and 2
Transaction
Cash
Flows
Operating,
investing, or
financing?
a. Issue common stock for cash, $60,000. + $60,000 Financing
b. Purchase building and land with cash, $45,000. − $45,000 Investing
c. Provide services to customers on account, $8,000. N/A N/A
d. Pay utilities on building, $1,500. − $1,500 Operating
e. Collect $6,000 on account from customers. + $6,000 Operating
f. Pay employee salaries, $10,000. − $10,000 Operating
g. Pay dividends to stockholders $5,000. − $5,000 Financing
Requirement 3
December 31, 2015: $5,400 + $4,500 = $9,900
Exercise 4-16 (LO 4-7)
a. Cash used for purchase of office supplies − $2,400
b. Cash provide from consulting to customers + $50,600
c. Cash used for purchase of mining equipment (Investing)
d. Cash provided from long-term borrowing (Financing)
e. Cash used for payment of employee salaries − $25,000
f. Cash used for payment of office rent − $13,000
g. Cash provided from sale of equipment purchased in c. above (Investing)
h. Cash used to repay a portion of the long-term borrowing in
Exercise 4-17 (LO 4-7)
c. Cash used for purchase of mining equipment − $83,000
g. Cash provided from sale of equipment purchased in c. above + $23,500
Exercise 4-18 (LO 4-7)
d. Cash provided from long-term borrowing + $70,000
Exercise 4-19 (LO 4-7)
Requirement 1
1. +$70,000
2. −$35,000
3. −$10,000
4. 0
5. −$11,000
Requirement 2
1. +$80,000
2. −$40,000
3. −$10,000
4. −$4,000
Requirement 3
Operating activities include cash transactions involving revenue and expense
income. Exercise 4-20 (LO 4-8)
From year 1 to year 4, Glasco saw net income increase 34% (from $350 to $470),
From year 1 to year 4, Sullivan saw net income increase 32% (from $250 to $330),
The prediction is that Glasco will have a larger increase in net income in year 5 and
Problem 4-1A (LO 4-4)
Requirement 1
Internal controls include:
–Tickets are serially numbered.
–The person issuing the ticket at the box office is physically separated
–Half of the ticket is kept so that the number of tickets issued can be
–A turnstile is used to automatically count those entering the theatre.
–The ticket stubs are stored in a locked box.
Requirement 2
At the end of each day, the ticket manager can match the money received with the
number of tickets issued. In addition, the number of tickets issued can be matched
Requirement 3 and 4
Classroom discussion. Problem 4-2A (LO 4-5)
Requirement 1
Oscar’s Red Carpet Store
Bank Reconciliation
February 28, 2015
Bank’s Cash Balance Company’s Cash Balance
Per bank statement $13,325 Per general ledger $8,100
Deposits outstanding + 1,600 NSF check − 200
EFT for rent −1,100
Interest on account + 200
Note collected +6,000
Interest on note + 250
Service fees − 125
Bank balance per
Company balance per
PROBLEMS: SET A