Problem 6-5B (Concluded)
Part 3
(1) Some of the checks in the numbered sequence may have cleared the
(2) Some of the checks in the numbered sequence may remain
(3) The issuer of the checks may have voided one or more of the checks
(4) Occasionally, a check will reach the bank but the bank will incorrectly
SERIAL PROBLEM — SP 6
Serial Problem — SP 6, Business Solutions (50 minutes)
Part 1
BUSINESS SOLUTIONS
Bank Reconciliation
March 31, 2016
Bank statement balance …..
$67,566
Book balance …………………….…….
$68,057
Add
Add
Bank error …………………………
Deposits in Transit ……………
500
0
Bank interest …………………..………
33
______
68,066
68,090
Deduct
Deduct
Outstanding Check ………....
128
Safety deposit rental $ 50
______
Charge for checks … 102
152
Adjusted bank balance …….
$67,938
Adjusted book balance ……..……………………
$67,938
Part 2
Miscellaneous Expenses …………………………….……….
677
50
Cash ……………………………………………………....
101
50
To record safety deposit box rental.
Miscellaneous Expenses …………………………….……….
677
102
Cash ……………………………………………………....
101
102
To record charge for printing checks
Cash …………………………………………………………..……….
101
33
Interest Revenue …………………………………..……….
404
33
To record interest earned.
Reporting in Action — BTN 6-1
1.
($ in millions)
Balance
September
28, 2013
Cash and
equivalents
as % of:
Balance
September
29, 2012
Cash and
equivalent
s as % of:
Cash and cash
equivalents ……………
$ 14,259
—
$ 10,746
—
Current assets ………..
73,286
19.5%
57,653
18.6%
Current liabilities …….
43,658
32.7
38,542
27.9
Shareholders’ equity .
123,549
11.5
118,210
9.1
Total assets …………….
207,000
6.9
176,064
6.1
2. Per the statement of cash flows for year ended September 28, 2013
($ millions):
Cash and equivalents, beginning-year …………… $10,746
Cash and equivalents, year-end ……………………… $14,259
Reporting in Action (Concluded)
3. Days’ Sales Uncollected ($ thousands)
Days’ sales uncollected = x 365
The number of days of uncollected sales in accounts receivable has
4. Solution depends on the annual report information obtained.
Accounts receivable
Net sales
Comparative Analysis — BTN 6-2
Days’ sales uncollected = x 365
Apple ($ millions)
Google ($ millions)
Comparative Analysis: Google’s decrease in days’ sales uncollected is
Accounts receivable
Net sales
Ethics Challenge — BTN 6-3
1. In a small business office it is very important that the owner of the
2. Unfortunately, due to collusion of the employees, the bank
3. Despite the collusion, the scheme is not foolproof. For example, some
ways in which the scheme might be uncovered or prevented include the
following:
• A bank employee may become suspicious and call Dr. Conrad and
4. Dr. Conrad should review her salary schedules for employees to make
sure that she is at least offering market pay. She may want to consider
Communicating in Practice — BTN 6-4B
Memorandum
To: “Owner”
From: “Consultant”
Date: __________
Subject: Advice on monitoring purchase discounts
[Instructor’s Note: The response should acknowledge the owner’s concern and
recommend the net method of recording purchases. It should explain how this method
results in the recording of “Discounts Lost,” which will flow through to the income
statement, thus providing the information desired. The memo might look something like
the following.]
Taking It to the Net — BTN 6-5
[Instructor Note: These answers were taken from the ACFE’s 2014 Report to the Nations.]
http://www.acfe.com/rttn/docs/2014-report-to-nations.pdf
1. The median loss caused by the frauds in our study was $145,000.
Additionally, 22% of the cases involved losses of at least $1 million.
2. The typical organization loses 5% of revenues each year to fraud; this
3. The median duration — the amount of time from when the fraud
4. Asset misappropriations are the most common fraud, occurring in 85% of
5. Only 9% of cases involved financial statement fraud, but those cases had
6. Over 40% of all cases were detected by a tip — more than twice the rate of
any other detection method.
7. Owners/executives only accounted for 19% of all cases, but they caused a
8. Approximately 77% of the frauds in our study were committed by
9. The vast majority of occupational fraudsters are first-time offenders; only
5% had been convicted of a fraud-related offense prior to committing the
Teamwork in Action — BTN 6-6
Common internal controls visible in a typical retail store include:
1. Door locks and roll–down screens for after-hours lock-up.
2. Electronic detection devices stationed at entrances or anti-theft
3. Security cameras.
Entrepreneurial Decision — BTN 6-7
1. Seven principles of internal control along with examples are:
a. Establish responsibilities. The clerks at the counter should be
responsible for handling cash. The other employees should be
responsible for preparing the orders and helping customers. There
e. Divide responsibility for related transactions. The employee
responsible for ordering inventory should be separate from the
employee controlling inventory who should also be separate from
the employee who pays for inventory.
2. As the business grows, controls will become more important. The
Hitting the Road — BTN 6-8
No formal solution exists for this activity. It is usually interesting for the
class to exchange their discoveries via class discussion. This is
particularly the case with respect to popular college service/product
centers. Common controls found in college units include:
1. Door locks and roll–down screens for after-hours lock-up.
Global Decision — BTN 6-9
1.
(KRW millions)
Current
year
balance
Cash as
percent
of:
Prior
year
balance
Cash as
percent
of:
Cash (and equivalents) …………
16,284,780
—
18,791,460
—
Current assets …………..………
110,760,271
14.7%
87,269,017
21.5%
Total assets ……………….………
214,075,018
7.6
181,071,570
10.4
Current liabilities ……….………
51,315,409
31.7
46,933,052
40.0
Total equity………………..………
150,016,010
10.9
121,480,206
15.5
Analysis comment: Cash has decreased as a percent of current assets
Global Decision (Concluded)
3. Days’ Sales Uncollected Formula (KRW millions)
Days’ sales uncollected = x 365
Accounts receivable
Net sales