Chapter 7: Q13RQ (page 411)
What are two common methods used when accepting deposits for credit card and debit card transactions?
The net and gross methods are used to accept the deposits of credit card and debit card transactions.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Computing the cash ratio Smythe Banners reported the following figures in its financial statements:
Cash $ 26,500 Cash Equivalents 5,000 Total Current Liabilities 30,000 Compute the cash ratio for Smythe Banners.
Understanding the Sarbanes-Oxley Act and identifying internal control strengths and weaknesses. The following situations suggest a strength or a weakness in internal control.
a. Top managers delegate all internal control procedures to the accounting department.
b. Accounting department staff (or the bookkeeper) orders merchandise and approves invoices for payment.
c. Cash received over the counter is controlled by the sales clerk, who rings up the sale and places the cash in the register. The sales clerk matches the total recorded by the register to each day’s cash sales.
d. The employee who signs checks need not examine the payment packet because he is confident the amounts are correct.
Requirements
1. Define internalcontrol.
2. The system of internal control must be tested by external auditors. What law or rule requires this testing?
3. Identify each item in the list above as either a strength or a weakness in internal control, and give your reason for each answer.
List some examples of timing differences, and for each difference, determine if it would affect the book side of the reconciliation or the bank side of the reconciliation.
Levon Helm was a kind of one-person mortgage broker. He would drive around Tennessee looking for homes that had second mortgages, and if the criteria were favorable, he would offer to buy the second mortgage for “cash on the barrelhead.” Helm bought low and sold high, making sizable profits. Being a small operation, he employed one person, Cindy Patterson, who did all his bookkeeping. Patterson was an old family friend, and he trusted her so implicitly that he never checked up on the ledgers or the bank reconciliations. At some point, Patterson started “borrowing” from the business and concealing her transactions by booking phony expenses. She intended to pay it back someday, but she got used to the extra cash and couldn’t stop. By the time the scam was discovered, she had drained the company of funds that it owed to many of its creditors. The company went bankrupt, Patterson did some jail time, and Helm lost everything
Requirements
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
What do you think about this solution?
We value your feedback to improve our textbook solutions.
