Chapter 06 – Reporting and Analyzing Cash and Internal Controls
Problem 6-4A (Concluded)
Part 3
a. If the company’s Cash account balance of $27,497 is listed on the
bank reconciliation as $27,947 then:
(i) The final balance that results from adjusting the bank statement
Problem 6-5A (50 minutes)
Part 1
CHAVEZ COMPANY
Bank Reconciliation
September 30, 2013
Bank statement balance ……………
$18,453.25
Book balance …………………………..
$17,404.20
Add
Add
Interest earned …… $ 12.50
Deposit of Sept. 30…………………..
1,682.75
20,136.00
Proceeds of note
less $15 fee ……… 1,485.00
1,497.50
18,901.70
Deduct
Deduct
Checks No. 5893 ……. $494.25
NSF check ……………… 600.25
5906 ……… 982.30
Error (Check 5904) .. 30.00
5908 ……. 388.00
1,864.55
630.25
Adjusted bank balance ……………..
$18,271.45
Adjusted book balance ……….
$18,271.45
Part 2
Sept. 30
Cash ……………………………………………………….…………..
12.50
Interest Earned …………………………………..…………..
12.50
To record interest earned.
30
Cash ……………………………………………………….…………..
1,485.00
Collection Expense ………………………………….…………..
15.00
Notes Receivable ……………………………….…………..
1,500.00
To record note collection less fee.
30
Accounts Receivable— S.Nilson …………………………..
600.25
Cash ………………………………………………….……
600.25
To charge account for NSF check plus fee.
30
Computer Equipment ……………………………….…………..
30.00
Cash ………………………………………………….……
30.00
To correct an entry error.
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Financial Accounting, 7th Edition
24
Problem 6-1B (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 6-3B (20 minutes)
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
Repairs Expense—Computer ……………………………....
38.57
Miscellaneous Expenses ……………………………………..
12.82
Cash Over and Short …………………………………………...
2.44
Cash ……………………………………………………………...
87.72
To reimburse the petty cash fund.
* Transportation-in costs are included in Merchandise Inventory
under a perpetual system.
Jan. 15
Petty Cash …………………………………………………………..
50.00
Cash ……………………………………………………………...
50.00
To increase the petty cash fund.
Jan. 31
Advertising Expense …………………………………………...
50.00
Postage Expenses ……………………………………………....
48.19
Delivery Expense ………………………………………………...
78.00
Cash Over and Short …………………………………………...
6.46
Cash ……………………………………………………………...
182.65
To reimburse the petty cash fund.**
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
the expenses would not be recognized and both net income and equity
would be overstated by $182.65 ($50.00 + $48.19 + $78.00 + $6.46). Also,
the petty cash asset and total assets would be overstated by $182.65.
Problem 6-5B (50 minutes)
Part 1
SHAMARA SYSTEMS
Bank Reconciliation
May 31, 2013
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
Checks No. 1780 …… $1,425.90
NSF check ……….. $431.80
1786 …… 353.10
Service charge … 14.00
1789 …… 639.50
2,418.50
Error (Ck 1788) … 10.00
455.80
Adjusted bank balance ………………..
$22,071.50
Adjusted book balance …….…………………….
$22,071.50
Part 2
May 31
Cash ……………………………………………………………………
7,350.00
Collection Expense …………………………………..…………
50.00
Notes Receivable ……………………………………………
7,400.00
To record note collection less fee.
31
Accounts Receivable—W. Sox …………………..………
431.80
Cash ……………………………………………………….
431.80
To charge account for NSF check plus fee.
31
Miscellaneous Expenses …………………………..…………
14.00
Cash ……………………………………………………….
14.00
To record bank service fee.
31
Utilities Expense ……………………………………….…………
10.00
Cash ……………………………………………………….
10.00
To correct an entry error.
Chapter 06 – Reporting and Analyzing Cash and Internal Controls