Chapter 06 – Reporting and Analyzing Cash and Internal Controls
Exercise 6-6 (20 minutes)
1.
Sept. 9
Petty Cash ………………………………………………………
350
Cash ……………………………………………………….…
350
To establish a $350 petty cash fund.
2.
Sept. 30
Merchandise Inventory* ………………………………..…
40
Postage Expenses ………………………………………..…
123
Miscellaneous Expenses …………………………………
80
Cash Short and Over …………………………………….…
3
Cash ……………………………………………………….…
246
To reimburse the petty cash fund.
* Transportation–in costs are included in Merchandise
Inventory under a perpetual system.
3.
Oct. 1
Petty Cash ………………………………………………………
50
Cash ……………………………………………………….…
50
To increase the petty cash fund to $400.
Exercise 6-7 (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 6-10 (25 minutes)
DEL GATO CLINIC
Bank Reconciliation
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).
© 2015 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Solutions Manual, Chapter 6
17
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
move to the higher deductible on the property insurance. However, we
Problem 6-2A (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.
Problem 6-4A (30 minutes)
Part 1
BRANCH COMPANY
Bank Reconciliation
July 31, 2013
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.