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PROBLEM NO. 1
PROBLEM NO. 1
COMPUTING THE CORRECT CASH BALANCE
COMPUTING THE CORRECT CASH BALANCE
Your audit of the December 31,
Your audit of the December 31, 2009, financial statements of Daylight Company, reveals the following:2009, financial statements of Daylight Company, reveals the following: C
Cuurrrreennt t aaccccoouunnt t aat t EaEasst t BBaannkk $$ --1155,,000000 C
Cuurrrreennt t aaccccoouunnt t aat t WWeesst t BBaannkk 4433,,220000 T
Trreeaassuurry y bbiillllss, , ((aaccqquuiirreed d 3 3 mmoonntthhs s bbeeffoorre e mmaattuurriittyy)) 115500,,000000 T
Trreeaassuurry y bbiillllss, , ((mmaattuurriitty y ddaatte e iis s 1122//3311//1122)) 22,,550000,,000000 P
Paayyrroollllaaccccoouunntt 117755,,000000 Fo
Forreeiiggn n bbaannk ak accccoouunntt--rreesstrtriicctteed (d (ttrraannssllaatteed d uussiinng tg thhe e 1122/3/311//009 r9 raatete)) 44,,000000,,000000 P
Poossttaaggeessttaammppss 445500 E
Emmppllooyyeeee''s s ppoossttddaatteed d cchheecckk 33,,550000 IIOOU U ffrroom m tthhe e vviiccee--pprreessiiddeenntt 1133,,000000 C
Crreeddiit t mmeemmo o ffrroom m a a ssuupppplliieer r ffoor r a a ppuurrcchhaasse e rreettuurrnn 77,,220000 T
Trraavveelleerr''sscchheecckk 1155,,000000 M
Moonneeyyoorrddeerr 77,,000000 P
Peetttty y ccaassh h ffuunnd d (($$33,,00000 0 iin n ccuurrrreennccy y aannd d eexxppeennsse e rreecceeiipptts s ffoor r $$77,,000000)) 1100,,000000
REQUIRED:
REQUIRED:
What amount would be reported as cash and cash equivalents on the balance sheet What amount would be reported as cash and cash equivalents on the balance sheet on December 31, 2009?
on December 31, 2009? Solution:
Solution: C
Cuurrrreennt t aaccccoouunnt t aat t WWeesst t BBaannkk 4433,,220000 T
Trreeaassuurry y bbiillllss, , ((aaccqquuiirreed d 3 3 mmoonntthhs s bbeeffoorre e mmaattuurriittyy)) 115500,,000000 P
Paayyrroollllaaccccoouunntt 117755,,000000 T
Trraavveelleerr''sscchheecckk 1155,,000000 M
Moonneeyyoorrddeerr 77,,000000 P
Peettttyyccaasshhffuunndd 33,,000000 393,200 393,200
PROBLEM NO. 2
PROBLEM NO. 2
PETTY CASH FUND
PETTY CASH FUND
The auditor of Herald, Inc.,
The auditor of Herald, Inc., examined the petty cash fund immediately after the close of examined the petty cash fund immediately after the close of business,business, July 31, 2009, the end of the company's natural business year.
July 31, 2009, the end of the company's natural business year. The petty cash custodian presentedThe petty cash custodian presented the following during the count:
the following during the count: C
Cuurrrreennccyy $$ 665500
Petty Cash Vouchers: Petty Cash Vouchers:
P
Poossttaaggee 442200
O
Offffiicce e ssuupppplliiees s exxpe peennssee 990000 T
Trraannssppoorrttaattiioon n exxpe peennssee 114400 C
Coommppuutteerrrreeppaaiirrss 440000 Advances to office staff
Advances to office staff 700700 A check drawn b
A check drawn by Herald, Inc., payable to the py Herald, Inc., payable to the petty cash custodianetty cash custodian 3,0503,050 P
Poossttaaggeessttaammppss 330000 An employee's che
An employee's check, returned by bank, marked ck, returned by bank, marked NSFNSF 1,0001,000 An envelope containi
An envelope containing currency of $440 for a gng currency of $440 for a gift for a retiring employeeift for a retiring employee 440440 $
$ 8,,0800000 The general ledger shows an imprest petty cash fund
The general ledger shows an imprest petty cash fund balance of $8,000.balance of $8,000.
CHAPTER
CHAPTER
PROBLEMS
PROBLEMS
REQUIRED:
1. How much is the petty cash shortage or overage?
Currencyandcoins 650
Pettycashvouchers 2,560
Replenishment check 3,050
NSFcheck 1,000
7,260 Petty cash fund (ledger) accountability (8,000)
Shortage (740)
2. What adjusting entry should be made as of July 31, 2009?
a. Postage 420 Office supplies 900 Trasportation 140 Repairs 400 Advances to employees 700 PCF 2,560
b. Unused postage stamps 300
Postageexpense 300
c. Advances to employees 1,000
PCF 1,000
d. Cash shor or over 740
PCF 740
3. What is the adjusted balance of petty cash fund at July 31, 2009?
Currency 650
Replenishment check 3,050
3,700
PROBLEM NO. 3
(assignment)COUNT OF PETTY CASH FUND AND UNDEPOSITED COLLECTIONS
In connection with your audit of the financial statements of Alley Company for the year ended December 31, 2009, you conducted a surprise count of the company's petty cash fund and undeposited collections at 8:20 am on January 3, 2010. Your count disclosed the following:
B ills and coins
Bills Coins $100.00 5 pieces $1.00 205 pieces 50.00 40 pieces 0.50 162 pieces 20.00 35 pieces 0.25 32 pieces 10.00 27 pieces Checks Date Amount
Dec. 30 Cash Custodian $ 1,200
Dec. 30 Alley Company SLV, Inc. 14,000 Dec. 31 Alley Company Marvin Lee, sales manager 1,680 Dec. 31 Alley Company MSU Corp. 17,800 Dec. 31 Alley Company Athens, Inc. 8,300 Dec. 31 Taiwan Corp. (not endorsed) Alley Company 27,000
Unreimbursed vouchers
Date Amount
Dec. 23 Marvin Lee, sales manager Advance trip to Bali 7,000 28 Central Post Office Postage stamps 1,620
29 Messengers Transportation 150
29 Byte, Inc. Computer repair 800
Other items found ins ide the cash box:
1 Unclaimed pay envelope of John McDermont. Indicated on the pay slip is his net salary of $7,500. Your inquiry revealed that John's salary is mingled with the petty cash fund.
2 The sales manager's liquidation report for his Bali Trip:
Cash advance received on December 23 7,000 Less: Hotel accommodation, meals, etc 4,500
Busfarefortwo 400
Cash given to Paul, salesman 300 5,200
Balance 1,800
Accounted for as follows:
Cash returned by Paul to the Sales manager 120 Personal check of the sales manager 1,680
Total 1,800
A dditi onal information:
1 The custodian is not authorized to cash the checks.
2 The last official receipt included in the deposit on December 30 is No. 4351 and the last official receipt issued for the current year is No. 4355. The following official receipts are all dated December 31, 2009.
OR No. Amount Form of Payment 4352 $ 13,600 Cash
4353 17,800 Check
4354 3,600 Cash
4355 8,300 Check
3 The petty cash balance per general ledger is $10,000. The last replenishment of the fund was made on December 22, 2009.
REQUIRED:
1. Prepare a cash count sheet.
Cash Count Sheet January 3, 2010-8:20 AM Biils and coins:
Qty Amount Total
$ 100.00 5 500 50.00 40 2,000 20.00 35 700 10.00 27 270 1.00 205 205 0.50 162 81 0.25 32 8 $ 3,764 Denomin ation Payee Maker
Checks:
Maker Amount Dec. 30 Custodian 1,200 Dec. 30 SLV, Inc. 14,000 Dec. 31 Marvin Lee 1,680 Dec. 31 MSU Corp 17,800
Dec. 31 Athens, Inc 8,300 42,980 Unreimbursed vouchers: Account Amount Dec. 23 Advances 7,000 Dec. 28 Postage 1,620 Dec. 29 Transportation 150 Dec.29 Repairs 800 9,570
TotalCashaccounted 56,314
Less:; Accountabilities
Pettycash 10,000
Collections (per OR) 43,300 Unclaimed salary 7,500 Excess travel advance 1,680
Unreceipted collections from SLV, Inc 14,000 76,480
CashShortage -20,166
2. Prepare the necessary adjusting journal entries on December 31, 2009.
1. Cash 14,000 Accounts receivable 14,000 2. AdvancestoOE 7,000 Postage 1,620 Transportation 150 Repairs 800 PCF 9,570 3. Unusedpostage 365 Postage 365 4. Cash 7,500 Salariespayable 7,500
5. Receivable from custodian 20,166
Cash 20,166
6. Travel expense (4,500+400+300-120) 5,080
PCF 1,680
Advances to OE 6,760
Note: The sales manager's advances will reflect a debit balance of $240 (7,000-6,760)
Cashadvance 7,000
Less: Hotels, meal, etc. 4,500
Busfare 400
Paul (300-120) 180 5,080 Cash to be returned 1,920 Cash actual returned -1,680 Shortage due from sales manager 240
Date
PROBLEM NO. 4
BANK RECONCILIATION-UNADJUSTED TO ADJUSTED BALANCE
Jingle, Inc.'s newly-hired accountant prepared the following cash reconciliation as of June 30, 2009:
Bank Book
Unadjusted balances $ 268,367 $ 79,367
Depositintransit -15,000
Bank service charge 1,000 Check written and recorded on June 30 but was
released on July 4 -12,000
Outstandingchecks 36,000
NSFcheck 17,000
Loan proceeds (company not informed) 200,000
Erroneousbankdebit 15,000
Customer's checks received on June 29 (all dated
July 6), included in deposits in transit 9,000
Certified checks 11,000
Unlocateddifference 345,000
$ 477,367 $ 477,367
REQUIRED:
Prepare a correct cash reconciliation on June 30, 2003.Jingle, Inc. Bank Reconciliation June 30, 2009 Book Bank Unadjusted balances $ 79,367 $ 268,367 Deposit in transit ($15,000-$9,000) 6,000 Bank service charge -1,000
Unreleased check 12,000
Outstanding check ($36000-$11000) -25,000
NSFcheck -17,000
Loanproceeds 200,000
Erroneousbankdebit 15,000
Post-dated check -9,000
Adjusted balances $ 264,367 $ 264,367
PROBLEM NO. 5
COMPUTATION OF RECEIPTS, DISBURSEMENTS, AND CASH BALANCE;
BANK RECONCILIATION-UNADJUSTED TO ADJUSTED
Haggler Company was organized on January 2, 2009. The following items are from the company's trial balance on December 31, 2009: CommonStock $ 1,200,000 Additional-paid-in capital 50,000 Merchandiseinventory 69,000 Land 1,000,000 Building 1,400,000
Furnitureandfixtures 367,000
Accounts receivable 165,400
Accounts payable 389,650
Notespayable-bank 500,000
Sales 6,235,200
Expenses paid (excluding purchases) 605,150
A dditi onal information:
Deposit in transit, December 31 $ 45,167 Service charge for December 2,000 Outstanding checks, December 31 163,666 Bank balance, December 31 520,159 Haggler Company's mark up on sales is 30%
REQUIRED:
1. Compute the following:
a. Collection from sales.
Sales $ 6,235,200
Less: Accounts receivable, 12/31 165,400 Collection from sales $ 6,069,800 b. Payments for purchases.
Cost of sales ($6,325,200 x 70%) $ 4,364,640 Add: Merchandise inventory, 12/31 69,000
Purchases $ 4,433,640
Less: Accounts payable, 12/31 389,650 Payment for purchases $ 4,043,990 c. Cash balance on December 31, 2009.
Cash receipts:
Issue price of common stock ($1,200,000 + $50,000 $ 1,250,000 Notes payable-bank 500,000 Collection 6,069,800 Total 7,819,800 Cash Disbursements: Land $ 1,000,000 Building 1,400,000 Furniture and fixtures 367,000 Expenses paid 605,150
Payment for purchases 4,043,990 7,416,140 Cash balance per books, December 31 $ 403,660 2. Prepare a bank reconciliation as of December 31, 2009.
Haggler Company Bank Reconciliation June 30, 2009 Book Bank Unadjusted balances $ 403,660 $ 520,159 Deposits in Transit 45,167 Service charge -2,000 Outstanding checks -163,666 $ 401,660 $ 401,660
PROBLEM NO. 6
DETERMINING NET ADJUSTMENT TO CASH
Your audit of the cash account of Angel Company disclosed the following information:
Cash balance per books, 12/31/09 $ 35,000 Bank statement balance, 12/31/09 60,000 Loan proceeds (no entry on company books) 300,000
Debitmemoforacheckbook 100
Deposit in transit, 12/31/09 15,200 Transposition error made by bank in recording deposit of
'December 28:
Correctamount $ 45,000
Recordedas 54,000 9,000
Erroneousbankdebit 26,700
Included in the cash count is petty cash fund of $10,000. Your count on December 31, 2009, revealed the following fund items:
Currency and coins $ 3,500
Supplies 2,400
Transportation 100
IOUs 4,000 10,000
Erroneousbankcredit 11,000
REQUIRED:
Determine the net adjustment to the Cash balance per books on December 31, 2009.Bank balance, December 31, 2009 $ 60,000
DepositinTransit 15,200
Transposition error in recording deposit ($54,000-$45,000) -9,000 Erroneous bank debit 26,700 Erroneous bank credit -11,000 Outstanding check ($39,400-$10,000) -29,400 Adjusted bank balance, December 31, 2009 $ 52,500 Book balance, December 31, 2009 35,000 Net adjustment-debit $ 17,500
PROBLEM NO. 7
BANK RECONCILIATION-UNADJUSTED TO ADJUSTED BALANCE
In connection with an audit, you are given the following bank reconciliation. Bank Reconciliation
December 31, 2009
Balance per ledger, 12/31/09 $ 34,349.72 Add: Collections received on the last day of December
and charged to "Cash in Bank" on books but not
deposited 5,324.50
Debit memo for customer's check returned unpaid (check is
on hand but no entry has been made on the books) 4,000.00 Debit memo for bank service charge for December 1,000.00 $ 46,674.22 Deduct: Outstanding checks (see detailed below) $ 18,625
Credit memo for proceeds of a note receivable which has been left at the bank for collection but which has not been
recorded as collected 8,000 Check for an account payable entered on
books as $12,625 but drawn and paid
by bank as $16,225 3,600 32,225.00
Computedbalance $ 14,449.22
Unlocated difference 36,601.00
Balance per bank (checked to confirmation) $ 51,050.22
Li s t of outstanding checks , December 31, 2009
Check No. Amount
14344 $ 5,820 14358 1,295 14367 3,543 14399 2,001 14401 4,892 14407 5,074 $ 18,625
REQUIRED:
1. Prepare a corrected reconciliation. Bank Reconciliation December 31, 2009
Book Bank
Unadjusted balances $ 34,349.72 $ 51,050.22
Depositintransit 5,324.50
Customer's check returned -4,000.00 Bank service charge -1,000.00
Outstanding checks -22,625.00 Credit memo for note collected 8,000.00
Debit to accounts payable-understated -3,600.00
$ 33,749.72 $ 33,749.72 2. Prepare journal entries for items which should be adjusted prior to closing the books. ADJUSTING JOURNAL ENTRIES
a. Accounts receivable $ 4000
Cashinbank $ 4,000
To record check returned to customers
b. Bank service charge 1000
Cashinbank 1,000
To record bank charges.
c. Cashinbank 8000
Notesreceivable 8,000
To record note collected by bank.
d. Accounts payable 3600
Cashinbank 3,600
To record understatement of accounts payable
PROBLEM NO. 8
BANK RECONCILIATION AND CASH SHORTAGE COMPUTATION
In connection with your audit of the Summerville Company at December 31, 2009, you were given a bank reconciliation by a company employee which shows:
Balanceperbank $ 30,534
Depositsintransit 37,856
$ 68,390
Outstandingchecks 42,756
Balanceperbooks $ 25,634
As part of your verification, you obtain the bank statement and cancelled checks from the bank on January 15, 2010. Checks issued from January 1 to January 15, 2010, per books were $22,482. Checks returned by the bank on January 15 amounted to $58,438. Of the checks outstanding December 31, $9,600 were not returned by the bank with the January 15 statement, and of those issued per books in January 2010, $7,200 were not returned.
REQUIRED:
1. Calculate the disbursements per books based on the above data. Outstanding checks, January 15:
From December or before $ 9,600
FromJanuary 7,200 $ 16,800
Add: Disbursement per bank statement 58,438
Total $ 75,238
Less: Outstanding checks, December 31 42,756 Disbursements per book as computed $ 32,482 Disbursements per book as reported 22,482 Difference in disbursements $ 10,000 2. Suggest three possible explanations for the difference between the disbursements
per books as computed and as reported.
a. The bank disbursements ($58,438) may be overstated by $10,000. Another company check for $10,000 may have been charged erroneously by the bank against the client's account. b. The December 31 outstanding checks may be understated by $10,000. Since the bank
reconciliation given in the problem was prepared by a company employee, there is no assurance that it is correct.
c. The client's employee may have failed to record check/s issued in January thus understating the book disbursements ($22,482).
PROBLEM NO. 9
PROOF OF CASH
You have been instructed by your supervisor on an audit to prepare a four-column proof of cash receipts and disbursements for the month of June.
RECONCILIATION May 31, 2009
Bankbalance $ 652,000
Add: Deposit in transit 10,000
Total $ 662,000
Less: Outstanding checks
652 8,000
653 2,000 20,000
Adjusted bank balance $ 642,000
Bookbalance $ 570,800
Add: Proceeds for note receivable collected in
May $ 70,000
Deposit on May 31 not recorded on books
untilJune 2,000 72,000
Total $ 642,800
Less: Bankcharges 800
Adjusted book balance $ 642,000
The J une 2009 bank s tatement is s hown below:
Westlake Bank
Period covered: May 31, 2009 - June 30, 2009
Date Checks Deposits
01-Jun $ 8,000 $ 10,000 08-Jun 2,000 11-Jun 14,000 20,000 13-Jun 1,000 DM 1,000 16-Jun 4,000 21-Jun 12,000 56,000 27-Jun 18,000 29-Jun 1,000 E C 1,000 E C 30-Jun 200 S V 30-Jun 3,000 DM
S V S ervi ce Ch arg e DM Debit Memo E C E rror Corrected C M Credit Memo
The paid checks accompanying this bank statement (all clearing in June) are the following: No. 652 $ 8,000 No. 655 $4,000
No. 653 2,000 No. 657 12,000 No. 654 14,000 No. 658 18,000
The check register reveals that the last check issued in June is No, 659 for $5,000 and that check no. 656 is for $2,600.
Cash received for the period June 22 through June 30 of $70,000 was deposited in the bank on July 1.
the debit memos on June 13 and June 30 represent customers' NSF checks returned by the bank. The June 13 NSF check was immediately redeposited without entry. The June 30 NSF check was redeposited on July 1 without entry.
REQUIRED:
1. Determine the following: a. Bank receipts in June.
Bank receipts in June (arrived at footing the Deposits column
of the bank statement $ 88,000 b. Bank disbursements in June.
Bank disbursements in June (arrived at footing the Checks column
of the bank statement $ 63,200 c. Bank balance on June 30, 2009.
Bank balance, May 31 652,000 Add: Bank receipts, June 88,000
Total $ 740,000
Less: Bank disbursements, June 63,200 Bank balance, June 30 $ 676,800 2. Prepare a proof of cash for June. Use the bank to book format.
PROOF OF CASH June 1-30, 2009
Balance Disburse- Balance
May 31 Receipts ments June 30 Bank balances $652,000 $88,000 $63,200 $676,800 Deposit in transit:
May 31 10,000 -10,000
June30 70,000 70,000
Outstanding checks
May31 -20,000 -20,000
June30 17,600 -17,600
Bank service charge
May31 800 800
June30 -200 200
Bank collection in May -70,000 70,000 May deposit recorded by
the company in June -2,000 2,000 NSF checks:
Already redeposited -1,000 -1,000
Notyetredeposited -3,000 3,000
book error corrected within
thesameday -1,000 -1,000
$570,800 $218,000 $56,400 $732,400
PROBLEM NO. 10
PROOF OF CASH - UNADJUSTED TO ADJUSTED BALANCES
In your audit of Langley Company's cash account as of December 31, 2009, you ascertain the following information:
The bookkeeper's bank reconciliation on November 30, 2009, is as follows:
Balance per bank statement, November 30 $ 24,298
Add: Deposits in transit 3,648
Total 27,946
Less: Outstanding checks
No. 3408 $ 440 No. 3413 300 No.3414 6,820 No. 3416 3,924 No. 3417 800 12,284 Balance $ 15,662
Add: Bank service charge for November 36 * Balance per general ledger, November 30 $ 15,698
*Entered in Check Register in December.
The Cash Receipts Journal shows total receipts for December of $371,766. The Check Register reflects total checks issued in December of $377,632. A collection was recorded on company books on December 31 but was not deposited until January 2, 2010.
The balance per bank statement at December 31, 2009 is $17,516. This statement shows total receipts of $373,502 and checks paid of $380,284.
Your examination reveals the following additional information:
1. Check no. 3413 dated November 24, 2009, was entered in the Check Register as $300. Your examination of the paid checks returned with the December bank statement reveals that the amount of this check is $30.
2. Check no. 3417 was mutilated and returned by the payee. A replacement check (no. 3453) was issued. Both checks were entered in the Check Register but no entry was made to cancel no. 3417.
3. The December bank statement includes an erroneous charge of $480.
4. On January 3, 2010, the bank informed your client that a December bank service charge of $42 was omitted from the statement.
5. Your examination of the bank credit memo accompanying the December bank statement discloses that it represent proceeds from the note receivable collection in December for $4,000. 6. The outstanding checks at December 31, 2009 are as follows:
No. 3408 $ 440
No. 3417 800
No. 3418 2,814
No. 3419 5,788
REQUIRED:
Prepare a proof of cash for December 2009. Use the unadjusted to adjusted balances format.Langley Company
Proof of cash December 1-31, 2009
Balance Disburse- Balance
Nov. 30 Receipts ments Dec. 31 Book Balance $15,698 $371,766 $377,668 $9,796 Bank service charges:
Nov.30 -36 -36 Dec.31 42 42 Overstatement of disbursements (check#3413) 270 270 Mutilatedcheck 800 800
Notecollectedbybank 4,000 4,000
Adjusted book balance 16,732 375,766 377,674 $14,824
Bank balance $24,298 $373,502 $380,284 $17,516 Deposit in Transit
Nov. 30 3,648 -3,648
Dec.31 5,912 5,912
Erroneousbankcharge -480 480
Bankservicecharge 42 -42
Outstanding checks
Nov.30 -11,214 -11,214
Dec.31 9,042 -9,042
Adjusted bank balance $16,732 $375,766 $377,674 $14,824
Note: $377,632 + $36 = $377,668
$15,698 + $371,766 - $377,668 = $9,796
PROBLEM NO. 11
CASH IN BANK - CASH SHORTAGE COMPUTATION
The Hummingbird Company does not have adequate controls over its cash transactions. During your audit, you found the following data concerning its cash position at December 31, 2009.
1. On the company's records, the cash balance was $173,500.
2. A credit of $2,500 for a note collected by the bank does not appear on the company's records. 3. The bank statement balance is $135,000.
4. Outstanding checks are as follows:
Number Amount
1428 $ 5,200
1431 3,600
1445 4,080
1446 3,460
The cas hier made the following reconciliation:
Balance per bank statement $ 135,000 Deduct: Outstanding checks
1431 $ 3,600
1445 4,080
1446 3,460 10,140
$ 124,860 Add: Undeposited collections
(per count) $ 46,140
Collected note 2,500 48,640 Cash per books, December 31, 2009 $ 173,500
REQUIRED:
1. What is the amount of the shortage?
Book Bank
Unadjusted balances $173,500 $135,000 Note collected by the bank 2,500
Outstandingcheck -16,340
Undeposited collection 46,140 Corrected balance $176,000 $164,800
SHORTAGE -11,200
$164,800 $164,800 2. How did the cashier attempt to hide the shortage?
The cashier attempted to conceal the shortage as follows:
Omission of outstanding check #1428 $5,200 Underfooting of outstanding checks in reconciliation
($11,140-$10,140) 1,000
Adding (instead of deducting) the unrecorded note collected
bythebank 5,000