EXERCISE 7-10
The outstanding checks are as follows:
No.
Amount
255
260
264
Total
$ 620
890
560
$2,070
EXERCISE 7-11
(a) CRANE VIDEO COMPANY
Bank Reconciliation
July 31
Cash balance per bank statement ……………………………… $7,263
Add: Deposits in transit ………………………………………….. 1,300
(b) July 31 Cash …………………………………………………………. 716
Miscellaneous Expense ……………………………… 20
31 Miscellaneous Expense ……………………………… 28
EXERCISE 7-12
(a) MINTON COMPANY
Bank Reconciliation
September 30
Cash balance per bank statement …………………….. $16,422
Add: Deposits in transit ………………………………….. 5,450
(b) Sept. 30 Cash ………………………………………………. 2,530
Notes Receivable ……………………… 2,500
Interest Revenue ………………………. 30
EXERCISE 7-13
(a) Deposits in transit:
Deposits per books in July ………………………………. $15,750
Less: Deposits per bank in July ………………………. $15,600
EXERCISE 7-13 (Continued)
(b) Outstanding checks:
Checks per books in July …………………………. $17,200
Less: Checks clearing bank in July ………….. $16,400
(c) Deposits in transit:
Deposits per bank statement in
September ……………………………………………. $26,700
Add: Deposits in transit, September 30 …… 2,100
(d) Outstanding checks:
Checks clearing bank in September ………….. $25,000
Add: Outstanding checks, September 30 … 2,100
Total checks to be accounted for ……………… 27,100
Less: Cash disbursements per books ………. 23,700
Outstanding checks, August 31 ………………… $ 3,400
EXERCISE 7-14
Cash in bank ……………………………………………. $42,000
(b) “Cash in plant expansion fund” should be reported as part of long–term
near their maturity that their market value is relatively insensitive to
changes in interest rates.
SOLUTIONS TO PROBLEMS
PROBLEM 7-1A
Principles
Application to Cash Disbursements
Establishment of responsibility.
Only the treasurer and assistant treasurer are
authorized to sign checks.
Invoices must be approved by both the pur–
chasing agent and the receiving department
supervisor. Payment can only be made by the
treasurer or assistant treasurer, and the check
signers do not record the cash disbursement
transactions.
Checks are prenumbered. Following payment,
invoices are stamped PAID.
Physical controls.
Blank checks are kept in a safe in the treasurer’s
office. Only the treasurer and assistant treasurer
have access to the safe. A checkwriting machine
is used in writing checks.
Independent internal
verification.
The check signer compares the check with
the approved invoice prior to issue. Bank and
book balances are reconciled monthly by the
assistant chief accountant.
Human resource controls.
All employees who handle or record cash are
bonded.
PROBLEM 7-2A
(a) July 1 Petty Cash ………………………………………. 200.00
Cash ………………………………………… 200.00
15 Freight-Out ……………………………………… 92.00
Postage Expense …………………………….. 42.40
31 Freight-Out ……………………………………… 82.10
Charitable Contribution Expense ………. 45.00
Aug. 15 Freight-Out ……………………………………… 77.60
Entertainment Expense ……………………. 43.00
16 Petty Cash ………………………………………. 100.00
31 Postage Expense …………………………….. 140.00
(b)
Petty Cash
Date
Explanation
Ref.
Debit
Credit
Balance
July 1
Aug. 16
CP
CP
200
100
200
300
PROBLEM 7-2A (Continued)
(c) The internal control features of a petty cash fund include:
the fund.
(3) The treasurer’s office examines all payments and stamps supporting
fund is intact.
PROBLEM 7-3A
(a) REBER COMPANY
Bank Reconciliation
May 31, 2015
Cash balance per bank statement ………………. $6,404.60
Adjusted cash balance per bank ………………… $9,044.50
Add: Collection of note receivable
Less: NSF check …………………………..………….. $ 680.00
Error in May 12 deposit
($886.15 – $836.15) ………………………. 50.00
Error in recording check No. 1181 ……. 27.00*
*$685 – $658
(b) May 31 Cash …………………………………………………….. 3,060
Miscellaneous Expense …………………………. 20
31 Accounts Receivable—Sue Allison ………… 680
31 Sales Revenue ……………………………………… 50
31 Accounts Payable—Lynda Carsen …………. 27
31 Miscellaneous Expense …………………………. 40
PROBLEM 7-4A
(a) LANGER COMPANY
Bank Reconciliation
December 31, 2015
Cash balance per bank statement ………………… $20,154.30
Less: Outstanding checks
No. 3470 ………………………………………… $ 720.10
No. 3474 ………………………………………… 1,050.00
No. 3478 ………………………………………… 621.30
Add: Note collected by bank
Less: NSF check ………………………………………… $ 572.80
Error in recording check No. 3485 ………. 90.00*
(b) Dec. 31 Cash ……………………………………………. 5,145.00
Miscellaneous Expense ………………… 15.00
31 Accounts Receivable—L. Rees ……….. 572.80
31 Accounts Payable …………………………. 90.00
31 Accounts Receivable…………………….. 9.00
PROBLEM 7-5A
(a) RODRIGUEZ COMPANY
Bank Reconciliation
July 31, 2015
Cash balance per bank statement …………………….. $24,514
Less: Outstanding checks (2) ………………………….. $ 8,460
Cash balance per books…………………………………… $21,850
Add: Collection of note receivable by bank
($4,400 note plus $70 interest) ……………….. $ 4,470
Less: Check printing charge ……………………………. 56
(1) July receipts per books ………………….. $81,400
July deposits per bank …………………… $79,000
Less: Deposits in transit,
(2) Disbursements per books
in July………………………………………… $77,150
Checks clearing bank
Less: June 30
PROBLEM 7-5A (Continued)
(b) July 31 Cash ……………………………………………………… 4,470
31 Cash ……………………………………………………… 90
31 Miscellaneous Expense ………………………….. 56