Fundamentals of Financial Accounting, 5/e 5-21
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
ANSWERS TO GROUP A PROBLEMS
PA5–1
Req. 1
a. Weakness – By not issuing a receipt for all cash sales, the company does not
adequately document procedures performed. This could allow a cashier to take
cash rather than place it in the cash register.
b. Strength – The cash count sheet is a useful means of documenting the
PA5–2
Req. 1 MARTIN COMPANY
Bank Reconciliation
At May 31
Bank Statement
Company’s Books
Ending balance per bank
statement ……………………
$14,480
Ending balance per Cash
account ……………………..
$19,400
Additions:
Additions:
5/29 Deposit in transit …
6,000
Interest earned …………
120
20,480
19,520
Deductions:
Deductions:
Bank service charges …
$ 60
Outstanding check #305
1,300
NSF check ……………….
280
340
Up–to-date cash balance ..
$19,180
Up–to-date cash balance ..
$19,180
(1) Cash …………………………………………………………………….. 120
(2) Accounts Receivable ………………………………………………… 280
(3) Office Expenses ………………………………………………………. 60
Cash …………………………………………………………….. 60
Bank service charges deducted from bank statement.
PA5–3
Req. 1
Comparison of deposits listed in the Cash account with deposits listed on the bank statement
reveals a $13,000 deposit in transit on December 31.
Req. 2
Comparison of the checks cleared on the bank statement with checks written in December
reveals two outstanding checks at the end of December ($4,500 + $150 = $4,650).
(1) Cash …………………………..…………………………………………….. 50
(2) Office Expenses …………………………………………………………….. 150
(3) Accounts Receivable ………………………………………………………. 300
Cash ………………………………………………………………….. 300
PA5–4
Req. 1
a. Petty Cash …………………………………………………………….. 250
Cash ………………………………………………………….. 250
b. No journal entry. Journal entries are made only when the petty cash fund is
established, replenished, increased, or eliminated.
c. No journal entry.
Fundamentals of Financial Accounting, 5/e 5-25
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
ANSWERS TO GROUP B PROBLEMS
PB5–1
Req. 1
a. Strength – By documenting procedures, the company reduces the risk of failing
to record (or recording twice) sales transactions.
b. Strength – Segregating the duties of depositing cash from recording cash helps
reduce the risk of embezzlement, and it provides an opportunity to ensure that
the cash deposited (debit to Cash) equals the credits to customer accounts
PB5–2
Req. 1 TONY COMPANY
Bank Reconciliation
At February 29
Bank Statement
Company’s Books
Ending balance per bank
statement ……………………
$30,640
Ending balance per Cash
account ………………………
$37,450
Additions:
Additions:
2/28 Deposit in transit …
7,800
Interest earned ………….
150
38,440
37,600
Deductions:
Deductions:
Bank service charges …
$ 40
Outstanding check #106
1,200
NSF check ………………
320
360
Up–to-date cash balance ..
$37,240
Up–to-date cash balance …
$37,240
Req. 2
(1) Cash …………………………………………………………………….. 150
(2) Accounts Receivable ………………………………………………… 320
(3) Office Expenses ………………………………………………………. 40
Cash …………………………………………………………….. 40
PB5–2 (continued)
Req. 3
Balance in Cash account …………………………………………………………. $37,240
Req. 4
PB5–3
Req. 1
Comparison of deposits listed in the Cash account with deposits listed on the bank
statement reveals a $21,000 deposit in transit on September 30.
Req. 2
Comparison of the checks cleared on the bank statement with checks written in
September reveals two outstanding checks at the end of September ($500 + $6,000 =
$6,500).
Req. 3 TERRICK COMPANY
5-28 Solutions Manual
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
PB5–3 (continued)
Req. 4
(1) Cash …………………………………………………………………….. 60
(2) Office Expenses ………………………………………………………. 40
(3) Accounts Receivable ………………………………………………… 500
Cash …………………………………………………………….. 500
PB5–4
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.
($400), and the Treasury bills ($500) that were purchased within 90 days of maturity for
a total of $1,900. The $750 of cash set aside for legal reasons would be excluded from
5-30 Solutions Manual
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
ANSWER TO COMPREHENSIVE PROBLEM
C5–1
Req. 1
1/1 Cash …………………………………………………………….. 2,500
Accounts Receivable ………………………………….. 2,500
1/2 Accounts Payable …………………………..………………. 4,000
Cash ………………………………………………………… 4,000