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Chapter 04 - Cash and Internal Controls
Chapter 4
Cash and Internal Controls
EXERCISES
Exercise 4-1
Exercise 4-2
1.
True
1.
True
Chapter 04 - Cash and Internal Controls
Exercise 4-3
1.
False
Exercise 4-4
Exercise 4-5
Currency located at the company
$1,500
900
Chapter 04 - Cash and Internal Controls
Exercise 4-6
Exercise 4-7
The petty cash fund of $10,000 is too large. Employees should not be allowed to both
Exercise 4-8
Exercise 4-9
Requirement 1
Spielberg Company
Bank Reconciliation
July 31, 2018
Bank’s Cash Balance
Company’s Cash Balance
Before reconciliation
$15,100
Before reconciliation
$12,800
Requirement 2
Debit
Credit
Service Fee Expense
100
Exercise 4-10
Requirement 1
The Dean Acting Academy
Bank Reconciliation
August 31, 2018
Bank’s Cash Balance
Company’s Cash Balance
Before reconciliation
$11,275
Before reconciliation
$10,500
Exercise 4-10 (concluded)
Requirement 2
Debit
Credit
Cash
75
Interest Revenue
75
Exercise 4-11
Requirement 1
Damon Company
Bank Reconciliation
October 31, 2018
Bank’s Cash Balance
Company’s Cash Balance
Per bank statement
$11,727
Per general ledger
$ 8,397
Deposits outstanding
+ 3,025
Note received
+5,000
Requirement 2
Debit
Credit
Cash
5,320
Notes Receivable
5,000
Exercise 4-12
September 4
Debit
Credit
Petty Cash
200
September 30
Debit
Credit
Entertainment Expense
120
Exercise 4-13
April 3
Debit
Credit
Petty Cash
200
April 30
Debit
Credit
Utilities Expense
620
Chapter 04 - Cash and Internal Controls
April 30
Debit
Credit
Petty Cash
150
Exercise 4-14
Transaction
Cash
involved?
(yes or no)
If yes, is it
operating, investing,
or financing?
Inflow or
outflow?
a. Pay dividends to stockholders.
Yes
Financing
Outflow
Exercise 4-15
Requirements 1 and 2
Transaction
Cash flow
Operating,
investing, or
financing?
a. Issue common stock for cash, $168,000.
+$168,000
Financing
b. Purchase building and land with cash, $120,000.
−$120,000
Investing
Requirement 3
Exercise 4-16
a. Cash used for purchase of office supplies
−$2,100
Exercise 4-17
c. Cash used for purchase of mining equipment
−$59,400
Exercise 4-18
d. Cash provided from long-term borrowing
+$48,000
Exercise 4-19
Requirement 1
1.
+$70,000
Requirement 2
1.
+$80,000
2.
−$40,000
Requirement 3
Operating activities include cash transactions involving revenue and expense events
Exercise 4-20
Based on the trend in operating cash flows, Sullivan’s operations are more volatile and
therefore riskier. Riskier companies are more likely to incur negative economic shocks
to their operations. As a result, they tend to hold more cash to make sure they are able
