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CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
Ex. 7–28
a. Year 3: $5,304.7 per month ($63,656 ÷ 12)
c. Since Year 1, Allos Therapeutics monthly cash expenses have increased from
$3,570.8 in Year 1 to $5,304.7 in Year 3. The ratio of cash to monthly cash
7-19
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
Prob. 7–1A
Strengths: a, b, e, and f
Weaknesses:
c. Employees should not be allowed to use the petty cash fund to cash personal
PROBLEMS
7-20
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
Prob. 7–2A
1 Petty Cash 800
2014
May
7-21
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
Prob. 7–3A
1.
Cash balance according to bank statement $23,775
Add: Deposit of April 30, not recorded by bank $3,580
2. Cash 3,780
Notes Receivable 3,600
REMEDY MEDICAL CO.
Bank Reconciliation
April 30, 2014
7-22
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
Prob. 7–4A
1.
Cash balance according to bank statement $12,550
2. Cash 2,080
Notes Receivable 2,000
FIT BIKE CO.
Bank Reconciliation
August 31, 2014
7-23
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
Prob. 7–5A
1.
Cash balance according to bank statement $13,624.71
Add deposit of June 30, not recorded
Cash balance according to company’s
records* $10,145.50
Add: Proceeds of note collected by bank:
BEELER FURNITURE COMPANY
Bank Reconciliation
June 30, 20—
7-24
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
Prob. 7–5A (Concluded)
2. Cash 3,800.00
Notes Receivable 3,500.00
Interest Revenue 210.00
4. The error of $540 ($930 – $390) in the canceled check should be added to the
7-25
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
Prob. 7–1B
Weaknesses:
7-26
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
Prob. 7–2B
1 Petty Cash 1,000
Cash 1,000
2014
June
7-27
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
Prob. 7–3B
1.
Cash balance according to bank statement $33,650
Add deposit of July 31, not recorded by bank 9,150
$42,800
2. Cash 6,635
Notes Receivable 5,750
STONE SYSTEMS
Bank Reconciliation
July 31, 2014
7-28
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
Prob. 7–4B
1.
Cash balance according to bank statement $112,675
Add deposit of November 30, not recorded by bank 12,200
*Cash balance, November 1………………………………………
…
$ 81,145
2. Cash 14,225
Notes Receivable 7,000
COLLEGIATE SPORTS CO.
Bank Reconciliation
November 30, 2014
7-29
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
Prob. 7–5B
1.
Cash balance according to bank statement $11,601.41
Cash balance according to company’s records* $ 7,664.00
Add proceeds of note collected by bank:
…
SUNSHINE INTERIORS
Bank Reconciliation
July 31, 20—
7-30
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
Prob. 7–5B (Concluded)
2. Cash 4,241.00
Sales 18.00
Cash 411.00
4. The error of $1,620 ($1,800 – $180) in the canceled check should be added to the
7-31
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
CP 7–1
CP 7–2
Several control procedures could be implemented to prevent or detect the theft of
cash from fictitious returns.
One procedure would be to establish a policy of “no cash refunds.” That is, returns
CP 7–3
Several possible procedures for preventing or detecting the theft of grocery items by
failing to scan their prices include the following:
a. Most scanning systems are designed so that an audible beep is heard each time
CASES & PROJECTS
7-32
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
CP 7–3 (Concluded)
c. Although this detection procedure would probably not be used in a grocery
CP 7–4
Jo is clearly behaving in an unprofessional manner in intentionally shortchanging
her customers.
At this point, Doris is in a difficult position. She is apparently adhering to Fuller’s
Organic Markets’ policy of making up shortages out of her own pocket, but she is
CP 7–5
1. There are several methods that could be used to determine how much the
cashier has stolen. The method described below is based on preparing a
Balance according to bank statement $10,575
Add undeposited cash receipts on hand 1,500
Balance according to company’s records $10,400
Add note collected by bank, with interest 2,400
Note to Instructors: The amount stolen by the cashier could also be computed directly
from the cashier-prepared bank reconciliation as follows:
Outstanding checks omitted from the bank
reconciliation prepared by the cashier:
No. 2670…………………………………………………………
…
$1,050
*Note: The cashier has altered the adding machine tape so that the total is not correct.
PARKER COMPANY
Bank Reconciliation
July 31, 20—
7-34
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
CP 7–5 (Concluded)
2. The cashier attempted to conceal the theft by preparing an incorrect bank
3. a. Two major weaknesses in internal controls, which allowed the cashier to
steal the undeposited cash receipts, are as follows:
●First, large amounts of undeposited cash receipts were kept on hand
during the month. For example, cash receipts for July 30 and 31 had
b. Two recommendations that would improve internal controls so that similar
types of thefts of undeposited cash receipts could be prevented are as
follows:
7-35
CHAPTER 7 Sarbanes-Oxley, Internal Control, and Cash
CP 7–6
Note to Instructors: The purpose of this activity is to familiarize students with the
internal controls used by specific businesses. For example, when you order food
at a McDonald’s drive-through lane, your order is processed as follows:
1. The order is taken at a remote location by speaking with the cashier who rings
CP 7–7
1. Year 3: $378.3 per month ($4,540 ÷ 12)
2. Year 3: 7.2 months ($2,726 ÷ $378.3)
3. At the end of Year 1, TearLab had less than four (3.3) months of cash remaining.
During Year 2, the monthly cash expenses decreased from $786.3 to $341.5.
However, by the end of Year 2 less than a month (0.3) of cash remained. In Year 3,
7-36
