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Chapter 7: Q8RQ (page 411)
How do businesses control cash receipts over the counter?
Cash receipts are controlled with the help of a point-of-sale terminal.
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Preparing a bank reconciliation
Hardy Photography’s checkbook lists the following:
Date Check No. Item Check Deposit Balance
Nov. 1 \( 500
4 622 Quick Mailing \) 45 455
9 Service Revenue \( 135 590
13 623 Photo Supplies 85 505
14 624 Utilities 45 460
18 625 Cash 50 410
26 626 Office Supplies 110 300
28 627 Upstate Realty Co. 290 10
30 Service Revenue 1,235 1,245
Hardy’s November bank statement shows the following:
Learning Objective 6
1. Adjusted Balance \)1,137
Balance
Deposits
Checks: No. Amount
622 \( 45
623 85
624 105*
625 50
Other charges:
Printed checks
Service charge
Balance
*This is the correct amount for check number 624.
\) 500
135
(285)
(48)
$ 302
23
25
Requirements
1. Prepare Hardy Photography’s bank reconciliation at November 30, 2018.
2. How much cash does Hardy actually have on November 30, 2018?
3. Journalize any transactions required from the bank reconciliation.
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?
Using Excel for a Bank Reconciliation
Download an Excel template for this problem online in MyAccountingLab or athttp://www.pearsonhighered.com/Horngren.
Lori Anders of Wilderness Associates is getting ready to prepare the October bank reconciliation.
The cash balance on the books of Wilderness Associates on October 31 is \(3,546.
Lori reviews the bank statement, and notes the checking account balance at October 31 is \)2,445. The bank statement also
reveals that the bank collected a note receivable on behalf of Wilderness Associates—the principal was \(1,500 and the interest
was \)15. One customer’s check for \(29 was returned by the bank for insufficient funds. Two additional items on the bank statement
were the monthly EFT for the utilities, \)250, and the bank service fee of \(12. Lori notes that the cash deposit made on
October 31 of \)3,300 does not appear on the statement, and that three checks totaling $975 had not cleared the bank account
when the bank statement was prepared.
Requirements
1. Prepare the bank reconciliation for Wilderness Associates at October 31, 2018. Format appropriate cells with dollar signs and double
underlines. Use Excel formulas to calculate subtotals and totals.
2. Journalize the entries based on the bank reconciliation. For dollar amounts, use cell references on bank reconciliation
Question: How does the Sarbanes-Oxley Act relate to internal controls?
Preparing a bank reconciliation and journal entries
The May cash records of Donald Insurance follow:
Cash Receipts Cash Payments
Date Cash Debit Check No. Cash Credit
May 4 \( 4,230 1416 \) 890
9 520 1417 120
14 530 1418 630
17 1,950 1419 1,090
31 1,840 1420 1,420
1421 900
1422 670
Donald’s Cash account shows a balance of \(17,750 at May 31. On May 31, Donald
Insurance received the following bank statement:
Deposits and other Credits:
May 10
May 1
May 5
May 15
May 18
May 22
Checks and other Debits:
8
11 (check no. 1416)
19
22 (check no. 1417)
29 (check no. 1418)
31 (check no. 1419)
May
May
May
May
May
May
May 31
Ending Balance
Beginning Balance
EFT \) 450
NSF
EFT
BC
\( 18,730
1,700
890
1,100
120
520
4,230
530
1,950
\) 14,400
9,380
375
630
1,900
35 (5,050)
Bank Statement for May
SC
Explanations: BC–bank collection; EFT–electronic funds transfer;
NSF–nonsufficient funds checks; SC–service charge
Additional data for the bank reconciliation follow:
a. The EFT credit was a receipt of rent. The EFT debit was an insurance
payment.
b. The NSF check was received from a customer.
c. The \(1,700 bank collection was for a note receivable.
d. The correct amount of check 1419, for rent expense, is \)1,900. Donald’s controller
mistakenly recorded the check for $1,090.
Requirements
1. Prepare the bank reconciliation of Donald Insurance at May 31, 2018.
2. Journalize any required entries from the bank reconciliation
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