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Chapter 7: Q14PGA (page 411)
What are some common controls used with a bank account?
Some common controls are signature card, check, and deposit ticket.
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Journalizing credit card sales 2018
Sep. 1 Recorded National Express credit card sales for \(96,000, net of processor fee of 1%. Ignore Cost of Goods Sold.
15 Recorded ValueMax credit card sales of \)80,000. Processor charges a 1.5% fee. ValueMax charges the fee at the end of the month, therefore Marathon uses the gross method for these credit card sales. Ignore Cost of Goods Sold.
30 ValueMax collected the fees for the month of September. Assume the
September 15 transaction is the only ValueMax credit card sale. Journalize all entries required for Marathon Running Shoes.
Preparing a bank reconciliation and journal entries
The October 31 bank statement of Wyndham’s Healthcare has just arrived from State
Bank. To prepare the bank reconciliation, you gather the following data:
a. The October 31 bank balance is \(6,290.
b. The bank statement includes two charges for NSF checks from customers. One is
for \)370 (#1), and the other is for \(180 (#2).
c. The following Wyndham’s checks are outstanding at October 31:
Check No. Amount
237 \) 120
288 140
291 570
294 570
295 30
296 110
d. Wyndham’s collects from a few customers by EFT. The October bank statement
lists a \(2,200 EFT deposit for a collection on account.
e. The bank statement includes two special deposits that Wyndham’s hasn’t recorded
yet: \)900 for dividend revenue and \(100 for the interest revenue Wyndham’s
earned on its bank balance during October.
f. The bank statement lists a \)80 subtraction for the bank service charge.
g. On October 31, the Wyndham’s treasurer deposited \(270, but this deposit does
does not appear on the bank statement.
h. The bank statement includes a \)750 deduction for a check drawn by Multi-State
Freight Company. Wyndham’s notified the bank of this bank error.
i. Wyndham’s Cash account shows a balance of $3,200 on October 31.
Requirements
1. Prepare the bank reconciliation for Wyndham’s Healthcare at October 31, 2018.
2. Journalize any required entries from the bank reconciliation. Include an explanation for each entry.
Accounting for petty cash transactions
On June 1, Fab Salad Dressings creates a petty cash fund with an imprest balance of
\(300. During June, Al Franklin, the fund custodian, signs the following petty cash tickets:
Petty Cash
Ticket Number Item Amount
101 Office supplies \) 30
102 Cab fare for executive 20
103 Delivery of package across town 50
104 Business dinner 40
105 Merchandise inventory 90
On June 30, before replenishment, the fund contains these tickets plus cash of \(90.
The accounts affected by petty cash payments are Office Supplies, Travel Expense,
Delivery Expense, Entertainment Expense, and Merchandise Inventory.
Requirements
1. Explain the characteristics and the internal control features of an imprest fund.
2. On June 30, how much cash should the petty cash fund hold before it isreplenished?
3. Journalize all required entries to create the fund and replenish it. Includeexplanations.
4. Make the July 1 entry to increase the fund balance to \)375. Include an explanationand briefly describe what the custodian does.
Applying internal control over cash payments by check
A purchasing agent for Franklin Office Supplies receives the goods that he purchases
and also approves payment for the goods.
Requirements
1. How could this purchasing agent cheat his company?
2. How could Franklin avoid this internal control weakness?
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.
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