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Chapter 7: Q7-7TI (page 404)
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?
Answer:
The cash ratio of the company is 0.80.
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What are the five components of internal control? Briefly explain each component.
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.
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
What are two common methods used when accepting deposits for credit card and debit card transactions?
What are some common controls used with a bank account?
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