Accounting Chapter 38 Homework Some of the checks in the numbered sequence may have cleared

Problem 6-5A (Concluded)

Part 3

There are several possible reasons why some prenumbered checks are

missing from the sequence of canceled checks returned with a bank

statement. Reasons include:

(1) Some of the checks in the numbered sequence may have cleared the

(3) The issuer of the checks may have voided one or more of the checks

(4) Occasionally, a check will reach the bank but the bank will incorrectly

PROBLEM SET B

Problem 6-1B (20 minutes)

1. Violates both applying technological control and effective segregation

of duties. It is safe to assume that Latisha Tally has knowledge of

3. Violates segregation of duties. The company needs to have three

4. Violates applying technological controls. The use of the check protector

5. Violates segregation of duties. It is good internal control to separate

duties for cash receipts and cash disbursements. Moreover, an

Problem 6-2B (20 minutes)

Part 1

Jan. 3

Petty Cash …………………………………………………………..

150.00

Cash ………………………………………………………………

150.00

To establish the petty cash fund.

Office Supplies Expense ………………………………………

14.29

Merchandise Inventory* ……………………………………….

19.60

Repairs Expense—Computer ……………………………….

38.57

Miscellaneous Expenses ……………………………………..

12.82

Cash Over and Short ……………………………………………

Cash ………………………………………………………………

87.72

Jan. 15

Petty Cash …………………………………………………………..

50.00

Cash ………………………………………………………………

50.00

Jan. 31

Advertising Expense ……………………………………………

50.00

Postage Expenses ……………………………………………….

48.19

Delivery Expense …………………………………………………

78.00

Cash Over and Short ……………………………………………

Cash ………………………………………………………………

182.65

To reimburse the petty cash fund.**

Jan. 31

Petty Cash …………………………………………………………..

50.00

Cash ………………………………………………………………

50.00

To increase the petty cash fund.**

Part 2

If the January 31 reimbursement is not made and no entry is recorded, then

Problem 6-3B (30 minutes)

Part 1

Petty Cash ……………………………………………………….

Part 2

Blues Music Center

Petty Cash Payments Report (for March)

Delivery expense

Mar. 11

Delivery of customer’s merchandise ……………………..

$ 10.75

Mileage expense

Mar. 30

Reimbursement for mileage …………………………..

Postage expense

Mar. 28

Paid postage ……………………………………………………….

Merchandise inventory (transportation–in)*

Mar. 6

COD charges on purchases …………………………..

Mar. 27

COD charges on purchases …………………………..

Mar. 12

Purchased file folders …………………………………………..

Mar. 14

Reimbursement for office supplies ……………………….

Mar. 18

Purchased paper ………………………………………………….

Part 3

Mar. 31

Delivery Expense …………………………..…………………….

10.75

Mileage Expense ………………………………………………….

56.80

Postage Expense …………………………..…………………….

18.00

Merchandise Inventory ………………………………………..

57.60

46.32

Mar. 31

Petty Cash ……………………………………………………….

50.00

Problem 6-4B (30 minutes)

Part 1

SEVERINO CO.

Bank Reconciliation

December 31, 2016

Bank statement balance ……..

$46,822.40

Book balance …………………………..

$32,878.30

Add

Deduct

Part 2

Dec. 31

Cash …………………………………………………………………….

9.00

Office Supplies ……………………………………………….

9.00

To correct an entry error.

Cash …………………………………………………………………….

Notes Receivable …………………………………………….

Cash ……………………………………………………….

Part 3

Problem 6-5B (50 minutes)

Part 1

SHAMARA SYSTEMS

Bank Reconciliation

May 31, 2016

Bank statement balance ………

$21,762.70

Book balance …………………………..

$15,177.30

Add

Deduct

Part 2

May 31

Cash ……………………………………………………………………

7,350.00

Problem 6-5B (Concluded)

Part 3

There are several possible reasons why some prenumbered checks are

missing from the sequence of canceled checks returned with a bank

statement. Reasons include:

(1) Some of the checks in the numbered sequence may have cleared the

(2) Some of the checks in the numbered sequence may remain

(3) The issuer of the checks may have voided one or more of the checks

(4) Occasionally, a check will reach the bank but the bank will incorrectly

SERIAL PROBLEM — SP 6

Serial Problem — SP 6 (50 minutes)

Part 1

BUSINESS SOLUTIONS

Bank Reconciliation

March 31, 2017

Bank statement balance …..

$67,566

Book balance …………………………..

$68,057

Add

Part 2

Mar. 25

Miscellaneous Expenses ……………………………………..

677

50

Cash ……………………………………………………….

101

50

Miscellaneous Expenses ……………………………………..

677

Cash ……………………………………………………….

101

33

Reporting in Action — BTN 6-1

1.

($ in millions)

Balance

September

27, 2014

Cash and

equivalents

as % of:

Balance

September

28, 2013

Cash and

equivalent

s as % of:

Cash and cash

equivalents ……………

$ 13,844

—

$ 14,259

—

Analysis comment: Cash and cash equivalents have only slightly

2. Per the statement of cash flows for year ended September 27, 2014

($ millions):

Cash and equivalents, beginning-year …………… $14,259

Reporting in Action (Concluded)

3. Days’ Sales Uncollected ($ thousands)

Days’ sales uncollected = x 365

September 27, 2014: $17,460 / $182,795 x 365 = 34.86 days

Accounts receivable

Net sales

Comparative Analysis — BTN 6-2

Days’ sales uncollected = x 365

Apple ($ millions)

Current Year: $17,460 / $182,795 x 365 = 34.86 days

Google ($ millions)

Current Year: $9,383 / $66,001 x 365 = 51.89 days

Comparative Analysis: Google’s decrease in days’ sales uncollected is

Accounts receivable

Net sales

Ethics Challenge — BTN 6-3

1. In a small business office it is very important that the owner of the

2. Unfortunately, due to collusion of the employees, the bank

3. Despite the collusion, the scheme is not foolproof. For example, some

ways in which the scheme might be uncovered or prevented include the

following:

• A bank employee may become suspicious and call Dr. Conrad and

4. Dr. Conrad should review her salary schedules for employees to make

sure that she is at least offering market pay. She may want to consider

Communicating in Practice — BTN 6-4

Memorandum

To: “Owner”

From: “Consultant”

Date: __________

Subject: Advice on monitoring purchase discounts

[Instructor’s Note: The response should acknowledge the owner’s concern and

recommend the net method of recording purchases. It should explain how this method

results in the recording of “Discounts Lost,” which will flow through to the income

statement, thus providing the information desired. The memo might look something like

the following.]

Taking It to the Net — BTN 6-5

[Instructor Note: These answers were taken from the ACFE’s 2014 Report to the Nations.]

http://www.acfe.com/rttn/docs/2014-report-to-nations.pdf

4. Asset misappropriations are the most common fraud, occurring in 85% of

5. Only 9% of cases involved financial statement fraud, but those cases had

7. Owners/executives only accounted for 19% of all cases, but they caused a

9. The vast majority of occupational fraudsters are first-time offenders; only

Teamwork in Action — BTN 6-6

Common internal controls visible in a typical retail store include:

1. Door locks and roll–down screens for after-hours lock-up.

Entrepreneurial Decision — BTN 6-7

1. Seven principles of internal control along with examples are:

a. Establish responsibilities. The clerks at the counter should be

responsible for handling cash. The other employees should be

b. Maintain adequate records. The clerks at the counter should enter

c. Insure assets and bond key employees. The owner should acquire

d. Separate recordkeeping from custody of assets. The employee

e. Divide responsibility for related transactions. The employee

2. As the business grows, controls will become more important. The

Hitting the Road — BTN 6-8

No formal solution exists for this activity. It is usually interesting for the

class to exchange their discoveries via class discussion. This is

particularly the case with respect to popular college service/product

centers. Common controls found in college units include:

1. Door locks and roll–down screens for after-hours lock-up.

Global Decision — BTN 6-9

1.

(KRW millions)

Current

year

balance

Cash as

percent

of:

Prior

year

balance

Cash as

percent

of:

Cash (and equivalents) …………

16,840,766

—

16,284,780

—

Current assets …………………..

Current liabilities ……………….

51,315,409

Global Decision (Concluded)

2. Cash, beginning-year (KRW millions) ………………………………….. 16,284,780

3. Days’ Sales Uncollected Formula (KRW millions)

Days’ sales uncollected = x 365

28,234,485

Accounts receivable

Net sales