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Ex. 7.3 a.
b.
Employee theft is never ethical, even if it is committed to pay for medical bills.
There were several controls lacking at White Electric Supply which made it
possible for the bookkeeper to embezzle nearly $416,000 in less than five years.
Ex. 7.4 a.
b.
c. (1)
(2)
(3)
The fraudulent actions by D. J. Fletcher would not cause the general ledger to be
In the income statement, the Sales Returns and Allowances account would be
restitution.
Cash receipts should be deposited daily in the bank. The $3,000 of currency
The function of handling cash should be separate from the maintenance of
The employee who opens the mail should prepare a list of amounts
Ex 7.5 a. $ 15,200
Add: Undeposited receipts of December 31 ………………………………………..
10,000
$ 25,200
25
775
Accounts Receivable (Jane Jones) …………………………………..
Bank Service Charges ………………………………………………..
b.
Balance per bank statement ……………………………………………………
Ex. 7.6
Ex. 7.7 a.
b.
d. (1)
e.
Fair value accounting benefits users of financial statements by showing
marketable securities at the amount of cash those securities represent under
The highest interest rates are offered by Citizens Trust Bank and Commerce Bank,
both are offering 0.05%. The benefit of investing with Citizens Trust is that there is
Marketable securities are either equity or debt instruments that are readily
cash at quoted market prices.
Cash generates little or no revenue. Marketable securities, on the other hand,
produce revenue in the form of dividends, interest, and perhaps increases in their
The valuation of marketable securities at market value is a departure from
Ex. 7.8 a. 200,000
b. 155,000
155,000
c. 96,000
d.
c.
Adjusting the balance in the Allowance for Doubtful Accounts account based upon
Uncollectible Accounts Expense………………………………. ……..
The reason it takes Goodyear 17 days longer than PPL to collect its receivables is
due, in large part, to industry characteristics of each company. Customers of
Uncollectible Accounts Expense ………………………………………………………………………
Uncollectible Accounts Expense ……………………………………………………
Allowance for Doubtful Accounts…………………………………..
Total Net Operating Non Operating
Transaction Assets Income Cash Flow Cash Flow
a. NE NE NE D*
b. NE NE INE
Ex. 7.10
a.
b.
c.
d.
f.
g.
h.
Cash earmarked for a special purpose is not available to pay current liabilities and,
Compensating balances are included in the amount of cash listed in the balance sheet, and
Ex. 7.11
Cash equivalents normally are not shown separately in financial statements. Rather, they
The difference between the cost and current market value of securities owned is shown in
The accounts receivable turnover rate is equal to net sales divided by average accounts
Realized gains and losses on investments sold during the year are reported in the income
Transfers between cash and cash equivalents are not reported in financial statements. For
Receivables
Gross
Curren
Turnover Net Retained Working
Transaction Profit Ratio Rate Income Earnings Capital
a. U NE UNE NE NE
Ex. 7.12
Ex. 7.13 a.
b.
c. Jan. 4 520,000
Marketable Securities ……………………………………
180,000
d.
The sale of securities on January 4, Year 2, will increase Wharton’s taxable
The amount of unrealized holding gain included in the securities’ current market
As of December 31, Year 1, Wharton Inc. still owns the marketable securities.
investments.
Cash …………………………………………………………
a.
Year 1
Aug. 1
1.
Year 2
Jan. 31
3.
Net
Revenue -Expenses = Income Assets = Equity
NE NE NE NE NE
INE I I I
Ex. 7.14
Notes Receivable ……………………………………………………..
43,200
Accounts Receivable (Dusty Roads) ………………………………
43,200
Cash ………………………………………………………………………….
45,144
Notes Receivable ………………………………………………………….
43,200
2.
NE
b.
Transaction
1.
NE
Liabilities +
b.
d. 88.519 billion
Note to instructor: The notes accompanying the financial statements reveal that the company has an
The company does not report any investments in marketable securities. If Home Depot had
Net sales
25 Minutes, Medium
a.
114,828$
16,000
b.
July 31 4,396
Notes Receivable 4,000
Office Equipment 396
d.
Add: Deposit in transit
General Journal
SOLUTIONS TO PROBLEMS SET A
PROBLEM 7.1A
BANNER, INC.
July 31
Bank Reconciliation
BANNER, INC.
Balance per bank statement, July 31
The balance per the company’s bank statement is often larger for two reasons: (1) There
Cash
45 Minutes, Strong
a. Corrected bank reconciliation for November:
Balance per bank statement, November 30 20,600$
1,245
21,845$
900$
6,255
the following intentional errors in her reconciliation:
Errors leading to a $13,255 overstatement of the
b. Escola attempted to conceal the shortage by making
by the bank to the bank balance
adjusted balance per the bank statement:
Overstating the deposit in transit with a
transposition error
Add: Deposit in transit
Subtotal
Improperly adding the amount of the note collected
PROBLEM 7.2A
OSAGE FARM SUPPLY
November 30
BANK RECONCILIATION
OSAGE FARM SUPPLY
