acc 220 - CHAPTER 7 ASSIGNMENTS -

Exercise 7-4

The following control procedures are used in Penny’s Boutique Shoppe for cash disbursements.

(a) For each procedure, explain the weakness in internal control and identify the internal control principle that is violated.

Procedure		Weakness	Principle Violated
1.	Each week, 100 company checks are left in an unmarked envelope on a shelf behind the cash register.

2.	The store manager personally approves all payments before she signs and issues checks.

3.	The store purchases used goods for resale from people that bring items to the store. Since that can occur anytime that the store is open, all employees are authorized to purchase goods for resale by issuing cash from the register. The purchase is documented by having the store employee write on a piece of paper a description of the item that was purchased and the amount that was paid. The employee then signs the paper and puts it in the register.



4.	After payment, bills are “filed” in a paid invoice folder.

5.	The company accountant prepares the bank reconciliation and reports any discrepancies to the owner.

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Problem 7-4A

The bank portion of the bank reconciliation for LaRoche Company at October 31, 2014, is shown below.

LAROCHE COMPANY Bank Reconciliation October 31, 2014
Cash balance per bank		$12,504.42
Add: Deposits in transit		1,530.20
Less: Outstanding checks		14,034.62
Check Number	Check Amount
2451	$ 1,260.40
2470	684.20
2471	844.50
2472	435.04
2474	1,050.00	4,274.14
Adjusted cash balance per bank		$9,760.48

The adjusted cash balance per bank agreed with the cash Cash balance per books at October 31. The November bank statement showed the following checks and deposits.

Bank Statement
Checks			Deposits
Date	Number	Amount	Date	Amount
11-1	2470	$ 684.20	11-1	$ 1,530.20
11-2	2471	844.50	11-4	1,211.60
11-5	2474	1,050.00	11-8	990.10
11-4	2475	1,640.70	11-13	2,575.00
11-8	2476	2,830.00	11-18	1,472.70
11-10	2477	600.00	11-21	2,945.00
11-15	2479	1,720.00	11-25	2,567.30
11-18	2480	1,330.00	11-28	1,650.00
11-27	2481	695.40	11-30	1,186.00
11-30	2483	575.50	Total	16,127.90
11-29	2486	940.00
	Total	$12,910.30

The cash records per books for November showed the following.

Cash Payments Journal						Cash Receipts Journal
Date	Number	Amount	Date	Number	Amount	Date	Amount
11-1	2475	$1,640.70	11-20	2483	$ 575.50	11-3	$ 1,211.60
11-2	2476	2,830.00	11-22	2484	821.26	11-7	990.10
11-2	2477	600.00	11-23	2485	974.80	11-12	2,575.00
11-4	2478	538.20	11-24	2486	940.00	11-17	1,472.70
11-8	2479	1,702.00	11-29	2487	398.00	11-20	2,954.00
11-10	2480	1,330.00	11-30	2488	800.00	11-24	2,567.30
11-15	2481	695.40	Total		$14,457.86	11-27	1,650.00
11-18	2482	612.00				11-29	1,186.00
						11-30	1,440.52
						Total	$16,047.22

The bank statement contained two bank memoranda:

1.		A credit of $2,344.65 for the collection of a $2,202.65 note for LaRoche Company plus interest of $157.00 and less a collection fee of $15.00. LaRoche Company has not accrued any interest on the note.
2.		A debit for the printing of additional company checks $93.24.

At November 30, the cash balance per books was $11,349.84 and the cash balance per bank statement was $17,973.43. The bank did not make any errors, butLaRoche Company made two errors.

Using the four steps in the reconciliation procedure, prepare a bank reconciliation at November 30, 2014.

LAROCHE COMPANY
Bank Reconciliation
November 30, 2014

$[removed]

SHOW LIST OF ACCOUNTS

Prepare the adjusting entries based on the reconciliation. (Note: The correction of any errors pertaining to recording checks should be made to Accounts Payable. The correction of any errors relating to recording cash receipts should be made to Accounts Receivable.) (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Nov 30	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
	(To record collection of note receivable by bank)
30	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
	(To record charge for printing company checks)
30	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
	(To correct error in recording check)
30	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
	(To correct error in deposit)

Sally Rice is unable to reconcile the bank balance at January 31. Sally’s reconciliation is shown here.

Cash balance per bank		$4,347.20
Add: NSF check		629.00
Less: Bank service charge		46.28
Adjusted balance per bank		$4,929.92

Cash balance per books		$4,645.20
Less: Deposits in transit		571.72
Add: Outstanding checks		949.00
Adjusted balance per books		$5,022.48

(a) What is the proper adjusted cash balance per bank?

The proper adjusted cash balance per bank

$[removed]

(b) What is the proper adjusted cash balance per books?

The proper adjusted cash balance per books

$[removed]

(c) Prepare the adjusting journal entries necessary to determine the adjusted cash balance per books. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 31	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
	(To record NSF check)
Jan. 31	[removed]	[removed]	[removed]
	[removed]	[removed]	[removed]
	(To record bank service charge)

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