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Chapter 7: Q14RQ (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.
In 100 words or fewer, explain why there may be a difference between the bank statement ending cash balance and the ending balance in the Cash account. Give at least two examples of adjustments to the bank balance and the book balance.
: Identifying timing differences related to a bank reconciliation
For each timing difference listed, identify whether the difference would be reported on
the book side of the reconciliation or the bank side. In addition,
identify whether the difference would be an addition or subtraction.
a. Deposit in transit
b. Bank collection
c. Debit memorandum from bank
d. EFT cash receipt
e. Outstanding checks
f. \(1,000 deposit erroneously recorded
by the bank as \)100
g. Service charges
h. Interest revenue
i. \(2,500 cash payment for rent
expense erroneously recorded by
the business as \)250
j. Credit memorandum from bank
The following petty cash transactions of Green Golf Equipment occurred in May:
May 1 Established a petty cash fund with a \(200 balance.
31 The petty cash fund has \)18 in cash and \(180 in petty cash tickets that were issued to pay for Office Supplies(\)81), Delivery Expense (\(36), Postage Expense (\)54), and Miscellaneous Expense ($9).
The petty cash custodianreplenished the fund and recorded the expenses.
Prepare the journal entries.
Identifying internal control weakness in cash receipts
Pendley Productions makes all sales on credit. Cash receipts arrive by mail. Larry
Chipello, the mailroom clerk, opens envelopes and separates the checks from the
accompanying remittance advices. Chipello forwards the checks to another employee,
who makes the daily bank deposit but has no access to the accounting records.
Chipello sends the remittance advices, which show cash received, to the accounting
department for entry in the accounts. Chipello’s only other duty is to grant sales
allowances to customers. (A sales allowancedecreases the customer’s account receivable.)
When Chipello receives a customer check for \(575 less a \)45 allowance, he records the
sales allowance and forwards the document to the accounting department.
Requirements
1. Identify the internal control weakness in this situation.
2. Who should record sales allowances?
3. What is the amount that should be shown in the ledger for cash receipts?
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