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Problem-1
Match each situation with the fraud triangle factor (opportunity, financial pressure, or rationalization) that best describes it.
- An employee’s monthly credit card payments are nearly 75% of their monthly earnings.
- An employee earns minimum wage at a firm that has reported record earnings for each of the last five years.
- An employee has an expensive gambling habit.
- An employee has check-writing and -signing responsibilities for a small company, and is also responsible for reconciling the bank account.
Problem-2
The internal control procedures in Dayton Company result in the following provisions. Identify the principles of internal control that are being followed in each case.
- Employees who have physical custody of assets do not have access to the accounting records. select a principle of internal control
- Each month, the assets on hand are compared to the accounting records by an internal auditor. select a principle of internal control
- A prenumbered shipping document is prepared for each shipment of goods to customers.
Problem-3
Jolson Company has the following internal control procedures over cash receipts. Identify the internal control principle that is applicable to each procedure.
- All over-the-counter receipts are entered in cash registers.
- All cashiers are bonded.
- Daily cash counts are made by cashier department supervisors.
- The duties of receiving cash, recording cash, and having custody of cash are assigned to different individuals.
- Only cashiers may operate cash registers.
Problem-4
While examining cash receipts information, the accounting department determined the following information: opening cash balance $201, cash on hand $1,508.49, and cash sales per register tape $1,324.75.
Prepare the required journal entry based upon the cash count sheet.
Problem-5
Tott Company has the following internal control procedures over cash disbursements. Identify the internal control principle that is applicable to each procedure.
- Company checks are prenumbered.
- The bank statement is reconciled monthly by an internal auditor.
- Blank checks are stored in a safe in the treasurer’s office.
- Only the treasurer or assistant treasurer may sign checks.
- Check-signers are not allowed to record cash disbursement transactions.
Problem-6
The following reconciling items are applicable to the bank reconciliation for Forde Co. Indicate how each item should be shown on a bank reconciliation.
- Outstanding checks.
- Bank debit memorandum for service charge.
- Bank credit memorandum for collecting an electronic funds transfer.
- Deposit in transit.
Problem-7
At July 31, Cullumber Company has this bank information: cash balance per bank $7,310, outstanding checks $715, deposits in transit $1,305 and a bank service charge $20. Determine the adjusted cash balance per bank at July 31.
The adjusted cash balance per bank at July 31
Problem-8
In the month of November, Sandhill Co. Inc. wrote checks in the amount of $9,195. In December, checks in the amount of $11,625 were written. In November, $8,395 of these checks were presented to the bank for payment, and $10,585 in December.
What is the amount of outstanding checks at the end of November? At the end of December?
Problem-9
The following information is available for Wildhorse Co. for the month of January: expected cash receipts $59,240; expected cash disbursements $66,900; and cash balance on January 1, $11,700. Management wishes to maintain a minimum cash balance of $8,160.
Prepare a basic cash budget for the month of January.
Problem-10
The following information pertains to Sunland Company.
- Cash balance per bank, July 31, $7,688.
- July bank service charge not recorded by the depositor $47.
- Cash balance per books, July 31, $7,724.
- Deposits in transit, July 31, $3,060.
- $2,376 collected for Sunland Company in July by the bank through electronic funds transfer. The collection has not been recorded by Sunland Company.
- Outstanding checks, July 31, $695.
(a) Prepare bank reconciliation at July 31, 2017.
(b) Journalize the adjusting entries at July 31 on the books of Sunland Company.
Problem-11
- Cash balance per bank, July 31, $8,438.
- July bank service charge not recorded by the depositor $62.
- Cash balance per books, July 31, $8,474.
- Deposits in transit, July 31, $3,810.
- $3,126 collected for Blossom Company in July by the bank through electronic funds transfer. The collection has not been recorded by Blossom Company.
- Outstanding checks, July 31, $710.
(a) Prepare bank reconciliation at July 31, 2017.
(b) Journalize the adjusting entries at July 31 on the books of Sunland Company.
Problem-12
This information relates to the Cash account in the ledger of Carla Vista Company.
Balance September 1—$19,180; Cash deposited—$64,000
Balance September 30—$20,380; Checks written—$62,800
The September bank statement shows a balance of $19,280 at September 30 and the following memoranda.
| Credits | Debits | |||||
| Collection of electronic funds transfer | $2,480 | NSF check: H. Kane | $1,210 | |||
| Interest earned on checking account | 70 | Safety deposit box rent | 85 |
At September 30, deposits in transit were $5,413 and outstanding checks totaled $3,058.
- Prepare the bank reconciliation at September 30, 2017.
- Prepare the adjusting entries at September 30, assuming the NSF check was from a customer on account.
Problem-13
This information relates to the Cash account in the ledger of Blossom Company.
Balance September 1—$16,500; Cash deposited—$64,000
Balance September 30—$17,700; Checks written—$62,800
The September bank statement shows a balance of $16,600 at September 30 and the following memoranda.
| Credits | Debits | |||||
| Collection of electronic funds transfer | $1,930 | NSF check: H. Kane | $660 | |||
| Interest earned on checking account | 50 | Safety deposit box rent | 65 |
At September 30, deposits in transit were $4,843 and outstanding checks totaled $2,488.
- Prepare the bank reconciliation at September 30, 2017.
- Prepare the adjusting entries at September 30, assuming the NSF check was from a customer on account.
Problem-14
The cash records of Oriole Company show the following.
For July:
| 1. | The June 30 bank reconciliation indicated that deposits in transit total $790. During July, the general ledger account Cash shows deposits of $17,390, but the bank statement indicates that only $15,920 in deposits were received during the month. | |
| 2. | The June 30 bank reconciliation also reported outstanding checks of $925. During the month of July, Oriole Company books show that $18,500 of checks were issued, yet the bank statement showed that $16,270 of checks cleared the bank in July. |
For September:
| 3. | In September, deposits per bank statement totaled $24,940, deposits per books were $25,540, and deposits in transit at September 30 were $2,730. | |
| 4. | In September, cash disbursements per books were $23,340, checks clearing the bank were $24,710, and outstanding checks at September 30 were $2,410. |
There were no bank debit or credit memoranda, and no errors were made by either the bank or Oriole Company.
Answer the following questions.
- In situation 1, what were the deposits in transit at July 31? The deposits in transit at July 31 $
- In situation 2, what were the outstanding checks at July 31? The outstanding checks at July 31 $
- In situation 3, what were the deposits in transit at August 31? The deposits in transit at August 31 $
- In situation 4, what were the outstanding checks at August 31? The outstanding checks at August 31
Problem-15
Shamrock, Inc.’s bank statement from Main Street Bank at August 31, 2017, gives the following information.
| Balance, August 1 | $18,550 | Bank debit memorandum: | ||||
| August deposits | 71,150 | Safety deposit box fee | $ 60 | |||
| Checks cleared in August | 68,643 | Service charge | 85 | |||
| Bank credit memorandum: | Balance, August 31 | 20,992 | ||||
| Interest earned | 80 |
A summary of the Cash account in the ledger for August shows the following: balance, August 1, $18,850; receipts $74,150; disbursements $73,535; and balance, August 31, $19,465. Analysis reveals that the only reconciling items on the July 31 bank reconciliation were a deposit in transit for $4,835 and outstanding checks of $4,535. In addition, you determine that there was an error involving a company check drawn in August: A check for $400 to a creditor on account that cleared the bank in August was journalized and posted for $40.
- Determine deposits in transit.
- Determine outstanding checks.
- Prepare a bank reconciliation at August 31.
- Journalize the adjusting entries to be made by Shamrock, Inc. at August 31.