E5–3 (continued)
Req. 2
Because the supervisor was responsible for handling the cash, preparing the cash
E5–4
Req. 1
a. Document procedures
b. Segregate duties / Document procedures
E5–4 (continued)
Req. 3
Because receiving reports were not prepared, there was no way to independently verify
that amounts charged by suppliers were for goods that had been delivered to authorized
site.
E5–5
Req. 1
HILLS COMPANY
Bank Reconciliation
June 30
Bank Statement
Company’s Books
Ending balance per bank
statement………………….
$6,070
Ending balance per Cash
account………………………
$6,400
Additions:
Additions:
Deposit in transit…………….
1,000*
None
7,070
6,400
Deductions:
Deductions:
Outstanding checks…………
700
Bank service charge……
30
Up–to-date cash balance….
$6,370
Up–to-date cash balance……
$6,370
*$19,000 – $18,000 = $1,000.
Req. 2
Office Expenses …………………………………………………………….. 30
Cash ……………………………………………………………………. 30
To record bank service charges.
Req. 3
The updated cash balance after the reconciliation entry is ($6,400 – $30) $6,370.
Req. 4
Balance sheet (June 30):
Current assets:
Cash ($6,370 + $300) ………………………………………………… $6,670
E5–6
Req. 1 CADIEUX COMPANY
Bank Reconciliation
September 30
Bank Statement
Company’s Books
Ending balance per bank
statement ……………………
$ 230
Ending balance per Cash
account ……………………..
$2,650
Additions:
Additions:
9/30 Deposit in transit ……
2,500
EFT deposit …………….
150
2,730
2,800
Deductions:
Deductions:
Bank service charges …
$ 20
9/28 Outstanding check #104
50
NSF check ………………
100
120
Up–to-date cash balance ..
$2,680
Up–to-date cash balance ..
$2,680
(1) Cash …………………………………………………………………………. 150
(2) Office Expenses ……………………………………………………….….. 20
(3) Accounts Receivable …………………………………………………….. 100
Cash …………………………………………………………………. 100
E5–7
Balance Sheet (September 30): in millions
Current Assets:
Cash and Cash Equivalents ($410 + $970) …………………………... $1,380
E5–8
Req. 1
Cash and Cash Equivalents:
Cash ………. …………………………………………………………………………….. $10
Petty Cash..………………………………………………………………………………. 5
Cash Equivalents …………………………..………………………………………….. 15
Total Cash and Cash Equivalents …………………………..…………… 30
Req. 2
E5–9
Req. 1
Jan. 1 Petty Cash……………………………………………………….. 100
Cash ………………………………………………………… 100
Req. 2
E5–10
Req. 1
Jan. 1 Petty Cash……………………………………………………….. 200
Cash ………………………………………………………… 200
Req. 2
ANSWERS TO COACHED PROBLEMS
CP5–1
Req. 1
a. Strength – Use of a cash register restricts access to a valuable asset (cash), and
issuance of a receipt helps to document the procedure of collecting cash.
b. Strength – The cash count sheet is a useful means of documenting the
procedure performed (cash count).
c. Strength – Independent verification by the manager helps to ensure the accuracy
CP5–2
Req. 1 KMaxx Company
Bank Reconciliation
At April 30
Bank Statement
Company’s Books
Ending balance per bank
statement ……………………
$5,775
Ending balance per Cash
account ……………………..
$ 6,200
Additions:
Additions:
4/28 Deposit in transit …
500
–0-
6,275
6,200
Deductions:
Deductions:
EFT payment …………..
$200
Bank error * ……………….
100
NSF check ……………….
100
Outstanding check #105
300
Bank service charges …
25
325
Up–to-date cash balance ..
$5,875
Up–to-date cash balance ..
$5,875
* Check number 104 was written and recorded in the accounting records for $1,100 but
was incorrectly cleared by the bank for $1,000. Therefore the bank did not take out
enough funds and a $100 deduction is required on the bank’s side of the bank
reconciliation to allow for the bank’s error.
Req. 2
(1) Accounts Payable …………………………………………………….. 200
(2) Accounts Receivable ………………………………………………… 100
(3) Office Expenses ………………………………………………………. 25
Cash …………………………………………………………….. 25
CP5–3
Req. 1
Comparison of deposits listed in the Cash account with deposits listed on the bank
statement reveals a $5,000 deposit in transit on August 31.
Req. 2
Comparison of the checks cleared on the bank statement with (a) outstanding checks
from July, and (b) checks written in August reveals two outstanding checks at the end of
(1) Cash …………………………………………………………………….. 20
(2) Office Expenses ………………………………………………………. 10
Cash …………………………………………………………….. 10
CP5–4
Req. 1
a. Petty Cash …………………………………………………………….. 300
Cash ………………………………………………………….. 300
b. No journal entry. Journal entries are made only when the petty cash fund is
established, replenished, increased, or eliminated.
c. No journal entry.