Chapter 7: Q18RQ (page 412)
What does the cash ratio help determine, and how is it calculated?
To determine the ability of the company to pay current liabilities.
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Fill in the missing information concerning how companies control cash received by mail.
a. The ________ opens the mail and sends customer checks to the treasurer.
b. The ________ deposits the customer checks in the bank.
c. The ________ uses the remittance advices to record the journal entries for cash receipts.
d. The ________ compares the bank deposit to the journal entry for cash receipts.
Accounting for petty cash transactions
Suppose that on September 1, Cool Gyrations, a disc jockey service, create a petty
cash fund with an imprest balance of \(350. During September, Ruth Mangan, fund
custodian, signs the following petty cash tickets:
Petty Cash
Ticket Number Item Amount
1 Postage for package received \) 25
2 Office party 10
3 Two boxes of stationery 20
4 Printer cartridges 15
5 Business dinner 65
On September 30, prior to replenishment, the fund contains these tickets plus cash of
\(210. The accounts affected by petty cash payments are Office Supplies, Entertainment
Expense, and Postage Expense.
Requirements
1. On September 30, how much cash should this petty cash fund hold before it is
replenished?
2. Journalize all required entries to (a) create the fund and (b) replenish it. Include
explanations.
3. Make the entry on October 1 to increase the fund balance to \)425. Include an
Explanation
Fill in the missing information.
a. The vendor ships the inventory and sends a(n) __________ back to the purchaser.
b. After approving all documents, the purchaser sends a(n) __________ to the vendor.
c. When ordering merchandise inventory, the purchaser sends a(n) __________ to the vendor.
d. The purchaser receives the inventory and prepares a(n) __________.
Conduct an Internet search for information on internal control and the Sarbanes-Oxley Act. Write a report of your findings. In your account, discuss some of the advantages and disadvantages of the Sarbanes-Oxley Act. Present it to your class (if required by your instructor).
Recording transactions from a bank reconciliation Review your results from preparing Guard Dog Security Systems’ bank reconciliation in Short Exercise S7-9. Journalize the company’s transactions that arise from the bank reconciliation. Include an explanation with each entry.
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