EXERCISE 8-10
The outstanding checks are as follows:
No.
Amount
255
$ 620
EXERCISE 8-11
(a) CRANE VIDEO COMPANY
Bank Reconciliation
July 31
Cash balance per bank statement ……………………………… $7,263
Add: Deposits in transit ………………………………………….. 1,300
8,563
8,000
Less: Bank service charge ……………………………………….. 28
(b) July 31 Cash …………………………………………………………. 716
EXERCISE 8-12
(a) MINTON COMPANY
Bank Reconciliation
September 30
Cash balance per bank statement …………………….. $16,422
Add: Deposits in transit ………………………………….. 5,450
21,872
Adjusted cash balance per books …………………….. $19,489
(b) Sept. 30 Cash ………………………………………………. 2,530
Notes Receivable ……………………… 2,500
Interest Revenue ………………………. 30
EXERCISE 8-13
(a) Deposits in transit:
Deposits per books in July ………………………………. $15,750
EXERCISE 8-13 (Continued)
(b) Outstanding checks:
Checks per books in July …………………………. $17,200
(c) Deposits in transit:
Deposits per bank statement in
September ……………………………………………. $26,700
(d) Outstanding checks:
Checks clearing bank in September ………….. $25,000
Add: Outstanding checks, September 30 … 2,100
EXERCISE 8-14
(a) Cash and cash equivalents should be reported at $88,500.
Cash in bank ……………………………………………. $42,000
Cash on hand ………………………………………….. 12,000
(b) “Cash in plant expansion fund” should be reported as part of long–term
investments (a noncurrent asset). “Receivables from customers” should be
SOLUTIONS TO PROBLEMS
PROBLEM 8-1A
Principles
Application to Cash Disbursements
Establishment of responsibility.
Only the treasurer and assistant treasurer are
authorized to sign checks.
Documentation procedures.
Checks are prenumbered. Following payment,
invoices are stamped PAID.
Physical controls.
Blank checks are kept in a safe in the treasurer’s
office. Only the treasurer and assistant treasurer
have access to the safe. Checks are imprinted by
a machine in indelible ink.
book balances are reconciled monthly by the
assistant chief accountant.
Human resource controls.
All employees who handle or record cash are
bonded.
(a) July 1 Petty Cash ………………………………………. 200.00
Cash ………………………………………… 200.00
15 Freight-Out ……………………………………… 92.00
Postage Expense …………………………….. 42.40
Entertainment Expense ……………………. 46.60
Miscellaneous Expense ……………………. 11.20
Cash Over and Short ……………………….. 3.80
Cash ………………………………………… 196.00
Aug. 15 Freight-Out ……………………………………… 77.60
Entertainment Expense ……………………. 43.00
Postage Expense …………………………….. 33.00
Miscellaneous Expense ……………………. 37.00
Cash Over and Short …………………. 3.60
Cash ………………………………………… 187.00
(b)
Petty Cash
Date
Explanation
Ref.
Debit
Credit
Balance
July 1
Aug. 16
CP
CP
200
100
200
300
PROBLEM 8-2A (Continued)
(c) The internal control features of a petty cash fund include:
(1) A custodian is responsible for the fund.
(a) REBER COMPANY
Bank Reconciliation
May 31, 2017
Cash balance per bank statement ………………. $6,404.60
Add: Deposit in transit …………………………….. $2,416.15
Bank error—Stiner check …………………. 800.00 3,216.15
9,620.75
Less: Outstanding checks ………………………… 576.25
Adjusted cash balance per bank ………………… $9,044.50
(b) May 31 Cash …………………………………………………….. 3,060
Miscellaneous Expense …………………………. 20
Notes Receivable …………………………... 3,000
Interest Revenue ……………………………. 80
31 Accounts Receivable—Sue Allison ………… 680
Cash ……………………………………………… 680
31 Sales Revenue ……………………………………… 50
Cash ……………………………………………… 50
PROBLEM 8-4A
(a) LANGER COMPANY
Bank Reconciliation
December 31, 2017
Cash balance per bank statement ………………… $20,154.30
Add: Deposits in transit …………………………..… 1,690.40
21,844.70
Less: Outstanding checks
No. 3470 ………………………………………… $ 720.10
No. 3474 ………………………………………… 1,050.00
Cash balance per books ………………………………. $12,485.20
Add: Note collected by bank
($5,000 note plus $160 interest
Less: NSF check ………………………………………… $ 572.80
Error in recording check No. 3485 ………. 90.00*
Error in 12-21 deposit
(b) Dec. 31 Cash ……………………………………………. 5,145.00
Miscellaneous Expense ………………… 15.00
31 Accounts Receivable—L. Rees ……….. 572.80
Cash …………………………..………… 572.80
(a) RODRIGUEZ COMPANY
Bank Reconciliation
July 31, 2017
Cash balance per bank statement …………………….. $24,514
Add: Deposits in transit (1) …………………………….. 10,400
34,914
Less: Outstanding checks (2) ………………………….. $ 8,460
Bank error ($255 – $155) ………………………… 100 8,560
Adjusted cash balance per bank ………………………. $26,354
(1) July receipts per books ………………….. $81,400
July deposits per bank …………………… $79,000
Less: Deposits in transit,
(2) Disbursements per books
in July………………………………………… $77,150
Less: Book error …………………………... 90
Total disbursements to
PROBLEM 8-5A (Continued)
(b) July 31 Cash ……………………………………………………… 4,470
Notes Receivable …………………………….. 4,400
Interest Revenue …………………………….. 70
Matt has created a situation that leaves many opportunities for undetected
theft. Here is a list of some of the deficiencies in internal control. You may
find others.
1. Documentation procedures. The tickets were unnumbered. By numbering
the tickets, the students could have been held more accountable for the
tickets. See number 3 below.
2. Physical controls and establishment of responsibility. The tickets were left
in an unlocked box on his desk. Instead, Matt should have assigned
control of the tickets to one individual, in a locked box which that student
alone had control over.
4. Documentation procedures. There was no control over unsold tickets.
This deficiency made it possible for students to sell the tickets, keep
the cash, and tell Matt that they had disposed of the unsold tickets.
Instead, students should have been required to return the unsold
tickets to the student maintaining control over tickets, and the cash to
Matt. In each case, the students should have been issued a receipt for
the cash they turned in and the tickets they returned.
PROBLEM 8-6A (Continued)
7. Segregation of duties. Jeff Kenney counted the funds, made out the
deposit slip, and took the funds to the bank. This made it possible for
Jeff Kenney to take some of the money and deposit the rest since there
was no external check on his work. Matt should have counted the funds,
with someone observing him. Then he could have made out the deposit
slip and had Jeff Kenney deposit the funds.
COMPREHENSIVE PROBLEM SOLUTION
(a)
Dec. 7
Cash …………………………………………………….
Accounts Receivable ……………………..
3,600
3,600
12
Inventory ………………………………………………
Accounts Payable ………………………….
12,000
12,000
19
Salaries and Wages Expense …………………
Cash ……………………………………………..
2,200
2,200
22
Accounts Payable …………………………………
Cash ($12,000 X .99) ……………………….
Inventory ……………………………………….
12,000
11,880
120
Cash …………………………………………………….
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(b) & (e) General Ledger
Cash
12/31 2,200
12/31 Bal. 27,620
12/31 Bal. 6,100
12/1 Bal. 18,200
12/7 3,600
12/26 15,680
12/19 2,200
12/22 11,880
12/31 680
Notes Receivable
12/1 Bal. 2,200
12/31 2,200
12/31 Bal. – 0 –
Accounts Receivable
12/31 Bal. 1,880
12/26 320
12/31 Bal. 320
12/1 Bal. 7,500
12/7 3,600
Inventory
12/1 Bal. 16,000
12/12 12,000
12/17 10,000
12/22 120
12/31 Bal. 17,880
Prepaid Insurance
12/1 Bal. 1,600
12/31 400
12/31 Bal. 1,200
12/19 2,200
12/31 Bal. 2,200
Accumulated Depreciation—
Equipment
12/1 Bal. 3,000
Accounts Payable
12/22 12,000
12/1 Bal. 6,100
12/12 12,000
12/1 Bal. 64,400
Sales Revenue
12/17 16,000
12/31 Bal. 16,000
Cost of Goods Sold
12/17 10,000
12/31 Bal. 10,000
Depreciation Expense
12/31 200
12/31 Bal. 200
Insurance Expense
12/31 400
12/31 Bal. 400
12/31 Bal. 3,200
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(c) FULLERTON COMPANY
Bank Reconciliation
December 31, 2017
Cash balance per bank statement …………………….. $26,130
Add: Deposits in transit …………………………………… 2,700
28,830
Less: Outstanding checks ……………………………….. 1,210
Adjusted cash balance per bank ………………………. $27,620
(d) Dec. 31 Cash …………………………..…………………….. 2,200
Notes Receivable …………………………. 2,200
31 Accounts Receivable—L. Bryan ………….. 680
Cash ……………………………………………. 680