Question 1

At August 31, Litke Company has this bank information: cash balance per bank $6,950; outstanding checks $762; deposits in transit $1,700; and a bank service charge $20. Determine the adjusted cash balance per bank at August 31, 2010.

Accepted Answer

The answer of At August 31, Litke Company has this...

Question 2

Identify whether each of the following items would be (a) added to the book balance, or (b) deducted from the book balance in a bank reconciliation.
1. EFT transfer to a supplier
2. Bank service charge
3. Check printing charge
4. Error recording check # 214 which was written for $230 but recorded for $320
5. Collection of note and interest by bank on company's behalf

Accepted Answer

The answer of Identify whether each of the following items...

Question 3

Joe Foss has worked for Dr. Sam Milton for several years. Joe demonstrates a loyalty that is rare among employees. He hasn't taken a vacation in the last three years. One of Joe's primary duties at the medical office is to open the mail and list the checks received. He also takes cash from patients at the cashier window as patients leave. At times it is so hectic that Joe doesn't bother with giving each patient a receipt for the cash paid on their accounts. He assures them he will see to it that they receive the proper credit. When the traffic is slow in the office, Joe offers to help Ann post the payments to the patients' accounts receivable. She is always happy to receive his help, because he is a very conscientious worker.
Instructions
Identify any principles of internal control that may be violated in this medical office situation.

Accepted Answer

The answer of Joe Foss has worked for Dr. Sam...

Question 4

On April 30, the bank reconciliation of Baxter Company shows three outstanding checks: no. 354, $650, no. 355, $820, and no. 357, $615. The May bank statement and the May cash payments journal show the following.  
Instructions
Using step 2 in the reconciliation procedure, list the outstanding checks at May 31.

Accepted Answer

The answer of On April 30, the bank reconciliation of...

Question 5

The following reconciling items are applicable to the bank reconciliation for the Hunsicker Company. Indicate how each item should be shown on a bank reconciliation.
a. Outstanding checks.
b. Bank credit memorandum for collecting a note for the depositor.
c. Bank debit memorandum for service charge.
d. Deposit in transit.

Accepted Answer

The answer of The following reconciling items are applicable to...

Question 6

The petty cash fund of $200 for Vernon Company appeared as follows on December 31, 2010:  
Instructions
1. Briefly describe when the petty cash fund should be replenished. Because there is cash on hand, is there a need to replenish the fund at year end on December 31? Explain.
2. Prepare in general journal form the entry to replenish the fund.
3. On December 31, the office manager gives instructions to increase the petty cash fund by $100. Make the appropriate journal entry.

Accepted Answer

The answer of The petty cash fund of $200 for...

Question 7

Identify whether each of the following items would be (a) added to the book balance, (b) deducted from the book balance in a bank reconciliation, (c) added to the bank balance, or (d) deducted from the bank balance.
1. Deposits in transit
2. Bank service charge
3. Collection of note and interest by bank on company's behalf
4. NSF check
5. Outstanding checks

Accepted Answer

The answer of Identify whether each of the following items...

Question 8

On October 1, Clutter Company's petty cash fund of $120 is replenished. The fund contains cash of $40, and receipts for supplies of $55 and postage of $25. Prepare the journal entry to record the replenishment of the petty cash fund.

Accepted Answer

The answer of On October 1, Clutter Company's petty cash...

Question 9

Listed below are seven errors or problems which might occur in the processing of cash transactions. Also shown is a list of internal control principles. Evaluate each possible error and cite a principle that is listed that would reduce the probability of the error occurring. If none of the principles given will correct the problem, write "None." If you think more than one principle is appropriate, list all principles that apply.
Possible Errors or Problems
1. An employee steals the cash collected from a customer for an account receivable and conceals this theft by issuing a credit memorandum indicating that the customer returned the merchandise.
2. A small fire destroys 3 days of cash receipts.
3. The official designated to sign checks is able to steal blank checks and issue them without fear of detection.
4. A salesclerk in serving customers often rings up a sale for less than the actual amount and then keeps the additional cash collected from the customer.
5. Three cashiers use one cash register drawer and the cash in the drawer is often short of the balance kept on hand.
6. Each cashier counts his own register drawer each day and verbally reports the results to the supervisor.
7. Cashiers with over 5 years' experience are not bonded.

Accepted Answer

The answer of Listed below are seven errors or problems...

Question 10

Establishment of responsibility
B. Segregation of duties
C. Documentation procedures
D. Physical controls
E. Independent internal verification
F. Human resource controls
_____ 1. Involves the review, comparison, and reconciliation of data prepared by other employees.
_____ 2. Provide evidence that transactions and events have occurred.
_____ 3. Includes the authorization and approval of transactions.
_____ 4. Rotating employees' duties and requiring employees to take vacations.
_____ 5. Related activities should be assigned to different individuals.
_____ 6. Using garment sensors to deter theft.

Accepted Answer

The answer of Establishment of responsibility
B. Segregation of duties
C. Documentation...

Question 11

On October 1, 2010, Herman Company establishes an imprest petty cash fund by issuing a check for $200 to Jill Gray, the custodian of the petty cash fund. On October 31, 2010, Jill Gray submitted the following paid petty cash receipts for replenishment of the petty cash fund when there is $55 cash in the fund:  
Instructions
Prepare the journal entries required to establish the petty cash fund on October 1 and the replenishment of the fund on October 31.

Accepted Answer

The answer of On October 1, 2010, Herman Company establishes...

Question 12

Below are descriptions of internal control problems. In the space to the left of each item, enter the code letter of the one best internal control principle that is related to the problem described.
Internal Control Principles
A. Establishment of responsibility
B. Segregation of duties
C. Physical controls
D. Documentation procedures
E. Independent internal verification
F. Human resource controls
1. The same person opens incoming mail and posts the accounts receivable subsidiary ledger.
2. Three people handle cash sales from the same cash register drawer.
3. A clothing store is experiencing a high level of inventory shortages because people try on clothing and walk out of the store without paying for the merchandise.
4. The person who is authorized to sign checks approves purchase orders for payment.
5. Some cash payments are not recorded because checks are not prenumbered.
6. Cash shortages are not discovered because there are no daily cash counts by supervisors.
7. The treasurer of the company has not taken a vacation for over 20 years.

Accepted Answer

The answer of Below are descriptions of internal control problems....

Question 13

Identify which of the following reconciling items would require an adjusting entry to be made by Farrell Company.
1. Deposits in transit totaled $2,000.
2. A check written to the company for $350 by Harder Company was returned NSF.
3. The bank charged the company $46 for printing checks.
4. Outstanding checks totaled $1,667
5. A debit memorandum reported an EFT of $178 to Paco Utilities

Accepted Answer

The answer of Identify which of the following reconciling items...

Question 14

Gordon Company is unable to reconcile the bank balance at January 31. Gordon's reconciliation is as follows.  
Instructions
(a) Prepare a correct bank reconciliation.
(b) Journalize the entries required by the reconciliation.

Accepted Answer

The answer of Gordon Company is unable to reconcile the...

Question 15

Identify the internal control procedures applicable to cash disbursements followed by Downey Company in each of the following cases.
1. Company checks are prenumbered.
2. Only the treasurer is authorized to sign checks.
3. All employees are required to take vacations.
4. Blank checks are stored in a locked safe.
5. The bookkeeper, not the treasurer, records cash disbursements.

Accepted Answer

The answer of Identify the internal control procedures applicable to...

Question 16

Epley Company needs to make adjusting entries for each of the following reconciling items. Identify the account to be debited and the account to be credited in each case.
1. A check for $59 written to the company by J. Neutron was returned NSF.
2. The monthly service charge by the bank was $34.
3. The bank collected a $1,000 note plus interest of $97 on the company's behalf. The company had not accrued the interest.

Accepted Answer

The answer of Epley Company needs to make adjusting entries...

Question 17

Prepare the entry to replenish the $200 petty cash fund of Kruger Company, assuming the fund has receipts for: freight-out $60, postage $105, and miscellaneous expense $20. The fund contains $10 in cash.

Accepted Answer

The answer of Prepare the entry to replenish the $200...

Question 18

Match the internal control principle below with the appropriate cash receipts procedure described.
a. Documentation procedures
b. Establishment of responsibility
c. Independent internal verification
d. Human resource controls
e. Physical controls
f. Segregation of duties
_____ 1. Only designated personnel are authorized to handle cash receipts.
_____ 2. Different individuals receive cash and record cash receipts.
_____ 3. Use remittance advice and cash register tapes.
_____ 4. Store cash in safes and bank vaults.
_____ 5. Treasurer compares total receipts to bank deposits daily.
_____ 6. Bonding of employees that handle cash.
SO: 3, Bloom: C, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Resource Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Solution 174 (5 min.)

Accepted Answer

The answer of Match the internal control principle below with...

Question 19

Hemingway Company uses an imprest petty cash system. The fund was established on March 1 with a balance of $200. During March the following petty cash receipts were found in the petty cash box.  
The fund was replenished on March 15 when the fund contained $6 in cash. On March 20, the amount in the fund was increased to $300.
Instructions
Journalize the entries in March that pertain to the operation of the petty cash fund.

Accepted Answer

The answer of Hemingway Company uses an imprest petty cash...

Question 20

Match the internal control principle below with the appropriate cash disbursements procedure described.
a. Establishment of responsibility
b. Segregation of duties
c. Documentation procedures
d. Physical controls
e. Independent internal verification
f. Human resource controls
_____ 1. Compare checks to invoices.
_____ 2. Different individuals approve and make payments.
_____ 3. Print check amounts by machine with indelible ink.
_____ 4. Only designated personnel are authorized to sign checks.
_____ 5. Each check must have approved invoice.
_____ 6. Requiring employees to take vacations.

Accepted Answer

The answer of Match the internal control principle below with...

Quiz 8: Fraud, Internal Control, and Cash

At August 31, Litke Company has this bank information: cash balance per bank $6,950; outstanding checks $762; deposits in transit $1,700; and a bank service charge $20. Determine the adjusted cash balance per bank at August 31, 2010.

On October 1, Clutter Company's petty cash fund of $120 is replenished. The fund contains cash of $40, and receipts for supplies of $55 and postage of $25. Prepare the journal entry to record the replenishment of the petty cash fund.

Gordon Company is unable to reconcile the bank balance at January 31. Gordon's reconciliation is as follows. Instructions (a) Prepare a correct bank reconciliation. (b) Journalize the entries required by the reconciliation.

Prepare the entry to replenish the $200 petty cash fund of Kruger Company, assuming the fund has receipts for: freight-out $60, postage $105, and miscellaneous expense $20. The fund contains $10 in cash.