Exercise 4-16 (LO 4-7)
a. Cash used for purchase of office supplies
− $2,400
e. Cash used for payment of employee salaries
− $25,000
f. Cash used for payment of office rent
− $13,000
i. Cash used to pay office utilities
− $5,300
Exercise 4-17 (LO 4-7)
c. Cash used for purchase of mining equipment
− $83,000
g. Cash provided from sale of equipment purchased in c. above
− $70,500
Exercise 4-18 (LO 4-7)
d. Cash provided from long-term borrowing
+ $70,000
h. Cash used to repay a portion of the long-term borrowing in d. above
+ $25,000
Exercise 4-19 (LO 4-7)
Requirement 1
+$70,000
−$35,000
−$10,000
+$16,000
Requirement 2
1. Service Revenue for the year
+$80,000
3. Advertising Expense for the year
4. Supplies Expense for the year
6. Cash collected in advance from customers
Requirement 3
Operating activities include cash transactions involving revenue and expense events
Exercise 4-20 (LO 4-8)
All other things equal, Glasco likely has the higher ratio of cash to noncash assets.
Based on the trend in operating cash flows, Glasco’s operations are more volatile and
Chapter 4 – Cash and Internal Controls
PROBLEMS: SET A
Problem 4-1A (LO 4-4)
Requirement 1
Internal controls include:
– Tickets are serially numbered.
– The person issuing the ticket at the box office is physically separated from the
person taking the ticket for admission.
Requirement 2
At the end of each day, the ticket manager can match the money received with the
number of tickets issued. In addition, the number of tickets issued can be matched
Requirement 3 and 4
Chapter 4 – Cash and Internal Controls
Problem 4-2A (LO 4-5)
Requirement 1
Oscar’s Red Carpet Store
Bank Reconciliation
February 28, 2018
Bank’s Cash Balance
Company’s Cash Balance
Per bank statement
$13,145
Per general ledger
$8,100
Deposits outstanding
reconciliation
reconciliation
Requirement 2
Debit
Credit
Cash
6,270
Notes Receivable
6,000
Accounts Receivable
Rent Expense
Service Fee Expense
Cash
Problem 4-3A (LO 4-5)
Requirement 1
Diaz Entertainment
Bank Reconciliation
May 31, 2018
Bank’s Cash Balance
Company’s Cash Balance
Per bank statement
$6,210
Per general ledger
$5,100
Deposits outstanding
+3,180
NSF check
− 400
Note collected
Requirement 2
Debit
Credit
Cash
1,190
Notes Receivable
1,100
Interest Revenue
Cash
Problem 4-4A (LO 4-7)
Pixar Toy Manufacturing
Statement of Cash Flows
For the month ended August 31, 2018
Cash Flows from Operating Activities
Cash inflows:
From customers
$93,500
Cash outflows:
For salaries
(65,300)
For office rent
(19,000)
For office utilities
(11,800)
For materials to make toys
Cash Flows from Investing Activities
Sale of unused warehouse
Purchase of manufacturing equipment
Bank borrowing
Payment of dividends
Net decrease in cash
Cash at the beginning of the month
Cash at the end of the month
Problem 4-5A (LO 4-7)
Requirement 1
October 2
Debit
Credit
Cash
8,500
Service Revenue
8,500
(Receive membership dues)
October 5
Debit
Credit
Cash
12,000
Common Stock
(Issue common stock)
Cash
Accounts Payable
October 12
Debit
Credit
Advertising Expense
(Pay for current month advertising)
October 19
Debit
Credit
Dividends
Cash
4,400
(Pay dividends)
October 22
Debit
Credit
Prepaid Insurance
Cash
(Pay prepaid insurance)
Chapter 4 – Cash and Internal Controls
Problem 4-5A (continued)
Requirement 1 (concluded)
October 25
Debit
Credit
Cash
5,600
Deferred Revenue
5,600
(Receive membership dues in advance)
October 30
Utilities Expense
5,200
Utilities Payable
5,200
(Receive current month utilities bill)
October 31
Debit
Credit
Salaries Expense
7,300
Cash
7,300
(Pay current month salaries)
Requirement 2
Requirement 3
Cash
Debits
Credits
October 1
16,600
4,800
October 9
October 2
8,500
1,500
October 12
October 5
5,600
6,900
October 22
7,300
October 31
Problem 4-5A (continued)
Requirement 4
Balboa’s Gym
Statement of Cash Flows
For the month ended October 31
Cash Flows from Operating Activities
Cash inflows:
From customers
$14,100
Cash outflows:
For advertising
For insurance
For salaries
Net cash flows from operating activities
Cash Flows from Investing Activities
Purchase of boxing equipment
(4,800)
Net cash flows from investing activities
(4,800)
Cash Flows from Financing Activities
Issuance of common stock
Payment of dividends
Net cash flows from financing activities
Net increase in cash
Cash at the beginning of the month
Cash at the end of the month
Requirement 5
Net cash flows in statement of cash flows = $1,200
Chapter 4 – Cash and Internal Controls
PROBLEMS: SET B
Problem 4-1B (LO 4-4, 4-5)
Requirement 1
Howard Productions
Bank Reconciliation
February 28
Bank’s Cash Balance
Company’s Cash Balance
Per bank statement
$ 735
Per general ledger
$19,225
Deposits outstanding
Checks outstanding
Bank error
reconciliation
reconciliation
Requirement 2
The company has a large amount of NSF checks. This indicates that the company’s
procedures related to acceptance of customers’ checks is not reliable. The company
should tighten controls over the allowance of payment by check.
Problem 4-2B (LO 4-5)
Requirement 1
Blockwood Video
Bank Reconciliation
October 31, 2018
Bank’s Cash Balance
Company’s Cash Balance
Per bank statement
$12,751
Per general ledger
$12,381
Deposits outstanding
+ 835
Company error
+ 27
Bank error
Service fees
Requirement 2
Debit
Credit
Cash
27
Utilities Expense
27
(Record correction of recording error)
Interest Expense
Cash