Brief Exercise 7-4
Jolson Company has the following internal control procedures over cash receipts.
Identify the internal control principle that is applicable to each procedure.
Brief Exercise 7-8
- All over-the-counter receipts are entered in cash registers.Physical Control
- All cashiers are bonded.Human Resource Controls
- Daily cash counts are made by cashier department supervisors.Independent Internal verification
- The duties of receiving cash, recording cash, and having custody of cash are assigned to different individualsSegregation of Duties
- Only cashiers may operate cash registers.Establishment of Responsibilities
- Company checks are prenumbered.Documentation Procedures
- The bank statement is reconciled monthly by an internal auditor.Independent Internal Verification
- Blank checks are stored in a safe in the treasurer’s office.Physical Control
- Only the treasurer or assistant treasurer may sign checks.Establishment of Responsibilities
- Check-signers are not allowed to record cash disbursement transactions. Segregation of Duties
The following reconciling items are applicable to the bank reconciliation for Forde Co.
Indicate how each item should be shown on a bank reconciliation.
Exercise 7-3
The following control procedures are used in Keaton Company for over-the-counter cash receipts.
(a) For each procedure, explain the weakness in internal control and identify the control principle that is violated.
Exercise 7-4
The following control procedures are used in Bunny’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.
Exercise 7-7
At April 30, the bank reconciliation of Cullumber Company shows three outstanding checks: No. 254 $745, No. 255 $910, and No. 257 $450. The May bank statement and the May cash payments journal are given here.
| Date | Check No. | Amount | ||
|---|---|---|---|---|
| 5-4 | 254 | $745 | ||
| 5-2 | 257 | 450 | ||
| 5-17 | 258 | 171 | ||
| 5-12 | 259 | 325 | ||
| 5-20 | 260 | 940 | ||
| 5-29 | 263 | 495 | ||
| 5-30 | 262 | 755 |
| Date | Check No. | Amount | ||
|---|---|---|---|---|
| 5-2 | 258 | $171 | ||
| 5-5 | 259 | 325 | ||
| 5-10 | 260 | 940 | ||
| 5-15 | 261 | 540 | ||
| 5-22 | 262 | 755 | ||
| 5-24 | 263 | 495 | ||
| 5-29 | 264 | 360 |
Using step 2 in the reconciliation procedure, list the outstanding checks at May 31.
Exercise 7-8
The following information pertains to Oriole Company.
| 1. | Cash balance per bank, July 31, $8,088. | |
|---|---|---|
| 2. | July bank service charge not recorded by the depositor $55. | |
| 3. | Cash balance per books, July 31, $8,124. | |
| 4. | Deposits in transit, July 31, $3,460. | |
| 5. | $2,776 collected for Oriole Company in July by the bank through electronic funds transfer. The collection has not been recorded by Oriole Company. | |
| 6. | Outstanding checks, July 31, $703. |
Prepare a bank reconciliation at July 31, 2017. (List items that increase balance as per bank & books first.)
Journalize the adjusting entries at July 31 on the books of Oriole Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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