Chapter 7: Q10RQ (page 411)
What are the steps taken to ensure control over purchases and payments by check?
Control over purchases and payments by checks includes three different steps.
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What are the controls needed to secure the petty cash fund?
Question: What is the difference between an internal auditor and an external auditor?
Accounting for petty cash Jackie’s Dance Studio created a \(220 imprest petty cash fund. During the month, the fund custodian authorized and signed petty cash tickets as follows: Petty Cash Ticket No. Item Account Debited Amount
1 Delivery of programs to customers Delivery Expense \) 20 2 Mail package Postage Expense 10 3 Newsletter Printing Expense 25 4 Key to closet Miscellaneous Expense 40 5 Copier paper Office Supplies 70
Requirements
1. Make the general journal entry to create the petty cash fund. Include an explanation.
2. Make the general journal entry to record the petty cash fund replenishment. Cash in the fund totals \(40. Include an explanation.
3. Assume that Jackie’s Dance Studio decides to decrease the petty cash fund to \)120. Make the general journal entry to record this decrease.
Using Excel for a Bank Reconciliation
Download an Excel template for this problem online in MyAccountingLab or athttp://www.pearsonhighered.com/Horngren.
Lori Anders of Wilderness Associates is getting ready to prepare the October bank reconciliation.
The cash balance on the books of Wilderness Associates on October 31 is \(3,546.
Lori reviews the bank statement, and notes the checking account balance at October 31 is \)2,445. The bank statement also
reveals that the bank collected a note receivable on behalf of Wilderness Associates—the principal was \(1,500 and the interest
was \)15. One customer’s check for \(29 was returned by the bank for insufficient funds. Two additional items on the bank statement
were the monthly EFT for the utilities, \)250, and the bank service fee of \(12. Lori notes that the cash deposit made on
October 31 of \)3,300 does not appear on the statement, and that three checks totaling $975 had not cleared the bank account
when the bank statement was prepared.
Requirements
1. Prepare the bank reconciliation for Wilderness Associates at October 31, 2018. Format appropriate cells with dollar signs and double
underlines. Use Excel formulas to calculate subtotals and totals.
2. Journalize the entries based on the bank reconciliation. For dollar amounts, use cell references on bank reconciliation
Accounting for petty cash transactions
On September 1, Party Salad Dressings creates a little cash fund with an imprest
balance of \(600. During September, Michael Martell, the fund custodian, signs the
following petty cash tickets:
Petty Cash
Ticket Number Item Amount
101 Office supplies \) 60
102 Cab fare for executive 25
103 Delivery of package across town 45
104 Business dinner 55
105 Merchandise inventory 75
On September 30, prior to replenishment, the fund contains these tickets plus cash
of \(355. The accounts affected by petty cash payments are Office Supplies, Travel
Expense, Delivery Expense, Entertainment Expense, and Merchandise Inventory.
Requirements
1. Explain the characteristics and the internal control features of an imprest fund.
2. On September 30, how much cash should the petty cash fund hold before it isreplenished?
3. Journalize all required entries to create the fund and replenish it. Include explanations.
4. Make the October 1 entry to increase the fund balance to \)800. Include an explanationand briefly describe what the custodian does.
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