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Chapter 7: Q5RQ (page 411)
What is separation of duties?
To divide duties according to the activities.
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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.
Preparing a bank reconciliation and journal entries
This problem continues the Canyon Canoe Company situation from Chapter 6.
Canyon Canoe Company has decided to open a new checking account at River
Nations Bank during March 2019. Canyon Canoe Company’s March Cash T-account
for the new cash account from its general ledger is as follows:
Cash—River Nations Bank Checking Account
Balance
Deposit
Deposit
Deposit
Deposit
200
4,300
750
1,675
1,500
14,165
Mar. 1
2
13
20
27
Deposit
10,000
2,325
2,750
4,500
31 3,490
Mar. 2
4
9
14
21
Ck#101
Ck#102
Ck#103
Ck#104
Ck#105
175
300
28
30
Ck#106
Ck#107
Balance
Canyon Canoe Company’s bank statement dated March 31, 2019, follows:
Beginning Balance, March 1, 2019
Deposits and other credits:
Mar. 2
14
21
28
29 EFT Sport Shirts(1)
(1) Sport Shirts is a customer making a payment on account.
(2) Bank Checks is a company that prints business checks (considered
a bank expense) for Canyon Canoe Company
\(10,000
2,325
2,750
4,500
500
Checks and other debits:
Mar. 2 EFT to Bank Checks(2)
Ending balance, March 31, 2019
\) 0
31 Interest Revenue 45
3 Ck#101
6 Ck#102
15 Ck#104
16 Ck#103
55
200
4,300
1,675
750
28 EFT to Rivers Energy(3) 270
29 Ck#106 175
31 Bank service charge 70
20,120
(7,495)
$ 12,625
(3) Rivers Energy is a utility provider.
Requirements
1. Prepare the bank reconciliation at March 31, 2019.
2. Journalize any transactions required from the bank reconciliation.
3. Compute the adjusted account balance for the Cash T-account, and denote thebalance as End. Bal. Does the adjusted balance of the Cash T-account match theadjusted book balance on the bank reconciliation?
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.
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).
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.
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