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PROBLEM 7-6A
find others.
1. Documentation procedures. The tickets were unnumbered. By numbering
tickets. See number 3 below.
2. Physical controls and establishment of responsibility. The tickets were left
alone had control over.
3. Documentation procedures. No record was kept of which students took
(Note: This problem could have been largely avoided if the tickets had
4. Documentation procedures. There was no control over unsold tickets.
tickets to the student maintaining control over tickets, and the cash to
5. Establishment of responsibility. Inadequate control over the cash box.
funds when necessary for purchases.
6. Documentation procedures. Instead of receipts, students simply wrote
PROBLEM 7-6A (Continued)
7. Segregation of duties. Jeff Kenney counted the funds, made out the
with someone observing him. Then he could have made out the deposit
8. Documentation procedures. Matt did not receive a receipt from D. J.
paid $100 and that Matt took the rest.
9. Segregation of duties. Sam Cooper was collecting tickets and receiving
cash for additional tickets sold. Instead, there should have been one
person selling tickets at the door and a second person collecting
tickets.
PROBLEM 7-1B
(a)
Principles
Application to Granada Theater
Establishment of responsibility.
Only cashiers are authorized to sell
tickets. Only the manager and cashier
can handle cash.
Segregation of duties.
The duties of receiving cash and admit-
ting customers are assigned to the
cashier and to the usher. The manager
maintains custody of the cash, and the
company accountant records the cash.
Documentation procedures.
Tickets are prenumbered. Cash count
sheets are prepared. Deposit slips are
prepared.
Physical controls.
A safe is used for the storage of cash
and a machine is used to issue tickets.
Independent internal verification.
Cash counts are made by the manager at
the end of each cashier’s shift. Daily
comparisons are made by the company
treasurer.
Human resource controls.
Shifts are rotated among the cashiers.
(1) Instead of tearing the tickets, the usher could return the tickets to
the cashier who could resell them, and the two could divide the cash.
(2) The cashier could issue a lower price ticket than paid for and the
and cashier.
PROBLEM 7-2B
(a) July 1 Petty Cash ................................................ 100.00
15 Freight-Out ............................................... 51.00
Postage Expense ..................................... 20.50
31 Freight-Out ............................................... 43.50
Charitable Contribution Expense ............ 20.00
Aug. 15 Freight-Out ............................................... 40.20
Entertainment Expense ........................... 21.00
Postage Expense ..................................... 16.00
16 Petty Cash ................................................ 50.00
31 Freight-Out ............................................... 74.00
Entertainment Expense ........................... 43.20
(b)
Petty Cash
Date
Explanation
Ref.
Debit
Credit
Balance
July 1
Aug. 16
CP
CP
100
50
100
150
PROBLEM 7-2B (Continued)
(c) The internal control features of a petty cash fund include:
(1) A custodian who is responsible for the fund.
the fund.
(3) The treasurer’s office examines all payments and stamps supporting
documents to indicate they were paid when the fund is replenished.
fund is intact.
PROBLEM 7-3B
(a) DAVANEY GENETICS COMPANY
Bank Reconciliation
May 31, 2015
Cash balance per bank statement ..................... $13,332
Add: Deposit in transit ..................................... $2,600
Add: Collection of note receivable
($4,500 note plus $80 interest
Less: NSF check ................................................. $1,308
Error in May 12 deposit ........................... 100
*$911 – $119
(b) May 31 Cash ................................................................ 4,555
Miscellaneous Expense ................................. 25
31 Accounts Receivable—Peter Reser .............. 1,308
31 Sales Revenue ................................................ 100
31 Accounts Payable—J. Tallgrass .................... 792
31 Miscellaneous Expense ................................. 35
PROBLEM 7-4B
(a) PHILLIPS COMPANY
Bank Reconciliation
November 30, 2015
Cash balance per bank statement ................. $ 9,100
Add: Deposits in transit ............................... 2,541
11,641
Less: Outstanding checks
No. 2451 ............................................ $700
No. 2472 ............................................ 270
Cash balance per books................................. $ 5,958
PROBLEM 7-4B (Continued)
(b) Nov. 30 Cash .......................................................... 2,375
Miscellaneous Expense ........................... 16
30 Miscellaneous Expense ........................... 34
30 Accounts Payable..................................... 90
30 Accounts Receivable ............................... 18
PROBLEM 7-5B
(a) ZHANG COMPANY
Bank Reconciliation
August 31, 2015
Cash balance per bank statement ....................... $16,856
Add: Deposits in transit (1) ................................ $ 5,729
Add: Collection of note receivable by bank
($5,000 note plus $105 interest) ............... $ 5,105
(1) August receipts per books ........................... $50,050
August deposits per bank ............................ $47,521
(2) Disbursements per books in
August...................................... $47,794
Less: Book error ........................ 90
PROBLEM 7-5B (Continued)
(b) Aug. 31 Cash .............................................................. 5,105
31 Cash .............................................................. 90
31 Cash .............................................................. 41
31 Miscellaneous Expense ............................... 20
