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Chapter 7: Q10SE (page 414)

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.

Short Answer

Expert verified

The Cash account was debited with $510.

Step by step solution

01

Step-by-Step SolutionStep 1: Definition of accounts receivable

Accounts receivable is the amount that is earned but not received.

02

Journal entries

Date

Particulars

Debit

Credit

December 31

Cash

$510

Accounts Receivable

$510

(Being entry for the accounts receivable collected by the bank)

December 31

Cash

$20

Interest Revenue

$20

(Being entry of interest revenue received on bank balance)

December 31

Bank Expense

$30

Cash

$30

(Being entry for the service charge expense)

The first entry is passed on by recording the amount of the accounts receivable that the bank collects. Hence, the cash account is debited, and the accounts receivable account is credited.

The second entry is passed on by recording the interest revenue earned from the bank balance.

The third entry is passed to the service charge that the bank deducts from the bank account.

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Most popular questions from this chapter

Journalizing petty cash

Prepare the journal entries for the following petty cash transactions of Everly Gaming

Supplies:

March 1 Established a petty cash fund with a \(250 balance.

31 The petty cash fund has \)24 in cash and \(235 in petty cash tickets

that were issued to pay for Office Supplies (\)35) and Entertainment

Expense (\(200). Replenished the fund and recorded the expenditures.

April 15 Increased the balance of the petty cash fund to \)300.

Applying internal control over cash receipts Sandra Kristof sells furniture for McKinney Furniture Company. Kristof has financial problems and takes $650 that she received from a customer. She rang up the sale through the cash register. What will alert Megan McKinney, the controller, that something is wrong?

Controlling petty cash Just Hangin’ Night Club maintains an imprest petty cash fund of \(150, which is under the control of Sandra Morgan. At March 31, the fund holds \)14 cash and petty cash tickets for office supplies, \(128, and delivery expense, \)15.

Requirements

1. Explain how an imprest petty cash system works.

2. Journalize the establishment of the petty cash fund on March 1 and the replenishing of the fund on March 31.

3. Prepare a T-account for Petty Cash and post to the account. What is the balance of the Petty Cash account at all times?

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.

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.
See all solutions

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