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Chapter 7: Q3SE (page 412)
Applying internal control over cash receipts by mail. Review the internal controls over cash receipts by mail presented in the chapter. Exactly what is accomplished by the final step in the process, performed by the controller?
The debit of the cash is equal to the amount deposited in the bank.
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Accounting for petty cash transactions
On September 1, Party Salad Dressings creates a little cash fund with an imprest
balance of \(600. During September, Michael Martell, the fund custodian, signs the
following petty cash tickets:
Petty Cash
Ticket Number Item Amount
101 Office supplies \) 60
102 Cab fare for executive 25
103 Delivery of package across town 45
104 Business dinner 55
105 Merchandise inventory 75
On September 30, prior to replenishment, the fund contains these tickets plus cash
of \(355. The accounts affected by petty cash payments are Office Supplies, Travel
Expense, Delivery Expense, Entertainment Expense, and Merchandise Inventory.
Requirements
1. Explain the characteristics and the internal control features of an imprest fund.
2. On September 30, how much cash should the petty cash fund hold before it isreplenished?
3. Journalize all required entries to create the fund and replenish it. Include explanations.
4. Make the October 1 entry to increase the fund balance to \)800. Include an explanationand briefly describe what the custodian does.
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
Preparing a bank reconciliation
Jim Root Corporation operates four bowling alleys. The business just received the
On October 31, 2018, bank statement from City National Bank, and the statement shows
an ending balance of \(910. Listed on the statement are an EFT rent collection of
\)440, a service charge of \(7, NSF checks totaling \)50, and a \(23 charge for printed
checks. In reviewing the cash records, the business identified outstanding checks totaling
\)440 and a deposit in transit of \(1,800. During October, the business recorded a
\)260 check by debiting Salaries Expense and crediting Cash for \(26. The business’s
Cash account shows an October 31 balance of \)2,144.
Requirements
1. Prepare the bank reconciliation at October 31.
2. Journalize any transactions required from the bank reconciliation.
What are the steps taken to ensure control over purchases and payments by check?
The Scott Sun & Shade Company had the following financial data at December 31, 2018:
Cash and cash equivalents $ 60,000
Total current liabilities 75,000
What is the cash ratio as of December 31, 2018, for Scott Sun & Shade?
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