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Chapter 6: Q5QS_b (page 305)

For each of the following items a through g, indicate whether its amount (1) affects the bank or book side of a bank reconciliation, (2) represents an addition or a subtraction in a bank reconciliation, and (3) requires an adjusting journal entry.

Bank or Book Side Add or Subtract Adj. Entry or Not

b. Bank service charges . . . . . . . . . . . . . . . . . .

Short Answer

Expert verified

Answer

  1. Book side will be affected

  2. Represents subtraction is a bank reconciliation statement

  3. Adjustment is required in journal entry

Step by step solution

01

Step-by-Step SolutionStep 1: Meaning of Bank Service Charges

A bank service charge refers to the charge that an individual needs to pay to the bank to enjoy their services.

02

Effect of transaction


Bank or Book

Add or subtract

Adj. Entry or Not

Bank service charges

Book

Subtract

Adjustment required

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Most popular questions from this chapter

For each of these five separate cases, identify the principle(s) of internal control that is violated. Recommend what the business should do to ensure adherence to principles of internal control.

3. Sutton Company has two employees handling acquisitions of inventory. One employee places purchase orders and pays vendors. The second employee receives the merchandise.

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6 Paid \)12.50 COD shipping charges on merchandise purchased for resale, terms FOB shipping point. Blues uses the perpetual system to account for merchandise inventory.

11 Paid \(10.75 in delivery expense on merchandise sold to a customer, terms FOB destination.

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14 Reimbursed Bob Geldof, the manager, \(11.65 for office supplies purchased and used.

18 Purchased office printer paper for \)20.54 that is immediately used.

27 Paid \(45.10 COD shipping charges on merchandise purchased for resale, terms FOB shipping point.

28 Paid postage expense of \)18.

30 Reimbursed Geldof \(56.80 for mileage expense.

31 Cash of \)61.53 remained in the fund. Sorted the petty cash receipts by accounts affected and

exchanged them for a check to reimburse the fund for expenditures.

31 The petty cash fund amount is increased by \(50 to a total of \)300.

Required

1. Prepare the journal entry to establish the petty cash fund.

For each of these five separate cases, identify the principle(s) of internal control that is violated. Recommend what the business should do to ensure adherence to principles of internal control.

4. Ben Shales prides himself on hiring quality workers who require little supervision. As office manager, Ben gives his employees full discretion over their tasks and for years has seen no reason to perform independent reviews of their work.

For each of these five separate cases, identify the principle(s) of internal control that is violated. Recommend what the business should do to ensure adherence to principles of internal control.

2. At Tico Company, Julia and Trevor alternate lunch hours. Julia is the petty cash custodian, but if someone needs petty cash when she is at lunch, Trevor fills in as custodian.

BTN 6-3 Harriet Knox, Ralph Patton, and Marcia Diamond work for a family physician, Dr. Gwen Conrad, who is in private practice. Dr. Conrad is knowledgeable about office management practices and has segregated the cash receipt duties as follows. Knox opens the mail and prepares a triplicate list of money received. She sends one copy of the list to Patton, the cashier, who deposits the receipts daily in the bank. Diamond, the recordkeeper, receives a copy of the list and posts payments to patients’ accounts. About once a month the office clerks have an expensive lunch they pay for as follows. First, Patton endorses a patient’s check in Dr Conrad’s name and cashes it at the bank. Knox then destroys the remittance advice accompanying the check. Finally, Diamond posts payment to the customer’s account as a miscellaneous credit. The three justify their actions by their relatively low pay and knowledge that Dr. Conrad will likely never miss the money.

Required

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