Exercise 6-6 (20 minutes)
1.
Jan. 1
Petty Cash ………………………………………………………
200
Cash ……………………………………………………….
200
To establish a petty cash fund.
2.
Jan. 8
Postage Expense ………………………………………….…
74
Merchandise Inventory* ………………………………..…
29
Delivery Expense ………………………………………….…
16
Miscellaneous Expenses …………………………………
43
Cash ……………………………………………………….
162
To reimburse the petty cash fund.
* Transportation–in costs are included in Merchandise
Inventory under a perpetual system.
3.
Jan. 8
Postage Expense ………………………………………….…
74
Merchandise Inventory ……………………………………
29
Delivery Expense ………………………………………….…
16
Miscellaneous Expenses …………………………………
43
Cash ……………………………………………………….
162
To reimburse the petty cash fund.**
Jan. 8
Petty Cash ………………………………………………………
250
Cash ……………………………………………………….
250
To increase the petty cash fund.**
** The two January 8 entries can be combined into one entry.
Exercise 6-7 (10 minutes)
1. The voucher system of control establishes procedures for: (a) Verifying,
2. All expenditures should be overseen by a voucher system of control
3. The voucher is initially prepared by the accounting department when it
incurred.
Exercise 6-8 (20 minutes)
Bank Balance
Book Balance
Not Shown on
Add
Deduct
Add
Deduct
Adjust
Reconciliation
1.
NSF check from customer returned
on Sept. 25 but not recorded by this
company.
x
Cr.
2.
Interest earned on the account.
x
Dr.
3.
Deposit made on September 5 and
processed by bank on September 6.
x
4.
Check written by another depositor
but charged against this company’s
account.
x
5.
Bank service charge.
x
Cr.
6.
Checks outstanding on August 31
that cleared the bank in September.
x
7.
Check written against the company
account and cleared by the bank;
erroneously not recorded by the
company recordkeeper.
x
Cr.
8.
Principal and interest on a note
receivable to this company is
collected by the bank but not yet
recorded by the company.
x
Dr.
9.
Checks written and mailed to payees
on October 2.
x
10.
Checks written by the company and
mailed to payees on September 30.
x
11.
Deposit made on September 30 after
the bank closed.
x
12.
Special bank charge for collection of
note in No. 8 on company‘s behalf.
x
Cr.
Exercise 6-9 (25 minutes)
DEL GATO CLINIC
Bank Reconciliation
Exercise 6-11 (25 minutes)
WRIGHT COMPANY
Bank Reconciliation
Exercise 6-13A (10 minutes)
Exercise 6-14B (25 minutes)
a.
Recording inventory at gross amounts
Oct. 2
Merchandise Inventory …………………………..………..…..
3,000
Accounts Payable …………………………..………….…..
3,000
To record merchandise purchases.
10
Accounts Payable …………………………..……………….…..
500
Merchandise Inventory …………………………..….…..
500
To record credit memo for returns.
17
Merchandise Inventory …………………………..………..…..
5,400
Accounts Payable …………………………..………….…..
5,400
To record merchandise purchases.
27
Accounts Payable …………………………..……………….…..
5,400
Merchandise Inventory* ……………………………..…..
108
Cash ………………………………………………………….…..
5,292
To record payment for merchandise less the
discount. *($5,400 x .02)
31
Accounts Payable …………………………..……………….…..
2,500
Cash ………………………………………………………….…..
2,500
To record payment for merchandise less the returns
($3,000 – $500).
Exercise 6-14B (Concluded)
b.
Recording inventory at net amounts
Oct. 2
Merchandise Inventory …………………………..………..…..
2,940
Accounts Payable …………………………..………….…..
2,940
To record merchandise purchases less
discount [$3,000 – ($3,000 x .02) = $2,940].
10
Accounts Payable …………………………..……………….…..
490
Merchandise Inventory …………………………..…..…..
490
To record credit memo for returns
[$500 – ($500 x .02)].
*13
Discounts Lost ………………………………………………..…..
50
Accounts Payable …………………………..………….…..
50
To record the discount lost [($3,000 – $500) x.02].
17
Merchandise Inventory …………………………..………..…..
5,292
Accounts Payable …………………………..………….…..
5,292
To record merchandise purchases less
discount [$5,400 – ($5,400 x .02) = $5,292].
27
Accounts Payable …………………………..……………….…..
5,292
Cash ………………………………………………………….…..
5,292
To record payment for merchandise.
31
Accounts Payable …………………………..……………….…..
2,500
Cash ………………………………………………………….…..
2,500
To record payment for merchandise less returns
($2,940 – $490 + $50).
PROBLEM SET A
Problem 6-1A (20 minutes)
1. Violates separation of duties. The company should implement a policy
2. Violates the principle of establishing responsibility. Only Julia should
have access to the petty cash fund since she is the custodian. The
3. Violates the proper application of technological controls. While the
daily backup is a very good internal control, the tape needs to be taken
4. Violates regular and independent review. Benedict Shales needs to
5. Violates the insuring of assets and the bonding of key employees. We
do not have enough information to know if the company can afford the
Problem 6-2A (20 minutes)
Part 1
May 1
Petty Cash ……………………………………………………….
300.00
Cash …………………………………………………………..….
300.00
To establish the $300 petty cash fund.
May 15
Janitorial Expenses ………………………………………….….
88.00
Miscellaneous Expenses…………………………..………….
53.68
Postage Expenses ……………………………………………….
53.50
Advertising Expense ………………………………………..….
47.15
Cash Over and Short …………………………………..….
4.48
Cash …………………………………………………………..….
237.85
To reimburse the petty cash fund.
May 16
Petty Cash ……………………………………………………….
200.00
Cash …………………………………………………………..….
200.00
To increase the petty cash fund to $500.
May 31
Postage Expenses ……………………………………………….
147.36
Mileage Expense ………………………………………………….
23.50
Delivery Expense ……………………………………………..….
34.75
Cash Over and Short ………………………………………..….
6.19
Cash …………………………………………………………..….
211.80
To reimburse the petty cash fund.
May 31
Cash ………………………………………………………………..….
100.00
Petty Cash ………………………………………………….….
100.00
To decrease the petty cash fund to $400.
Problem 6-3A (30 minutes)
Part 1
Feb. 2
Petty Cash ……………………………………………………….
400
Cash …………………………………………………….…
400
To establish the $400 petty cash fund.
Part 2
Nakashima Gallery
Petty Cash Payments Report (for February)
Delivery expense
Feb. 23
Delivery of customer’s merchandise ………..…………..
$ 20.00
Mileage expense
Feb. 14
Reimbursement for mileage ……………………..……
68.00
Postage expense
Feb. 12
Express delivery of contract …………………….…….
$ 7.95
Feb. 27
Purchased postage stamps ……………………..……
54.00
61.95
Merchandise inventory (transportation-in)*
Feb. 9
COD charges on purchases ……………………..……
32.50
Feb. 25
COD charges on purchases ……………………..……
13.10
45.60
Office supplies expense
Feb. 5
Purchased paper for copier ……………………..……
14.15
Feb. 20
Purchased stationery……………………………….…………..
67.77
81.92
Total
$277.47
* Transportation-in costs are included in Merchandise Inventory under a perpetual system.
Part 3
Feb. 28
Delivery Expense ……………………………………….………..
20.00
Mileage Expense ………………………………………..………..
68.00
Postage Expense ……………………………………….………..
61.95
Merchandise Inventory …………………………..…..………..
45.60
Office Supplies Expense …………………………….………..
81.92
Cash Over and Short ………………………………….………..
2.11
Cash …………………………………………………….…
279.58
To reimburse the petty cash fund.
Feb. 28
Petty Cash ……………………………………………………….
100.00
Cash …………………………………………………….…
100.00
To increase the petty cash fund to $500.
Note: The two Feb. 28 entries can be combined into one.
Problem 6-4A (30 minutes)
Part 1
BRANCH COMPANY
Bank Reconciliation
July 31, 2015
Bank statement balance ……
$27,233
Book balance ……………………..……
$27,497
Add
Add
Deposit of July 31 ………….
11,514
38,747
Proceeds of note less
collection charge …………..………………
7,955
35,452
Deduct
Deduct
Checks No. 3031 …..$1,482
NSF check……………. $ 805
3065 ….. 382
Service charge ……… 25
3069 ….. 2,281
4,145
Error (Check 3056) .. 20
850
Adjusted bank balance ……..
$34,602
Adjusted book balance …………………………..
$34,602
Part 2
July 31
Cash …………………………..…………………………………..…..
7,955
Collection Expense ……………………………………………..
45
Notes Receivable ……………………………………….…..
8,000
To record note collection less fees.
July 31
Accounts Receivable—E. Shaw ……………………….….
805
Cash …………………………..……………………………..…..
805
To charge account for NSF check plus fees.
July 31
Miscellaneous Expenses …………………………..…….…..
25
Cash …………………………..……………………………..…..
25
To record bank service fee.
July 31
Rent Expense …………………………..……………………..…..
20
Cash …………………………..……………………………..…..
20
To correct an entry error.