Question 1
Jolson Company has the following internal control procedures over cash receipts.
Identify the internal control principle that is applicable to each procedure.
| (a)
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All over-the-counter receipts are entered in cash registers. |
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select the internal control principle |
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| All cashiers are bonded. |
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select the internal control principle |
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| (c)
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Daily cash counts are made by cashier department supervisors. |
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select the internal control principle |
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| (d)
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The duties of receiving cash, recording cash, and having custody of cash are assigned to different individuals. |
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select the internal control principle |
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| (e)
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Only cashiers may operate cash registers. |
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select the internal control principle |
| Question 2Shamrock, Inc.’s bank statement from Main Street Bank at August 31, 2017, gives the following information.Balance, August 1$18,590Bank debit memorandum:August deposits71,190Safety deposit box fee$ 90Checks cleared in August68,613Service charge115Bank credit memorandum:Balance, August 3121,072 Interest earned110A summary of the Cash account in the ledger for August shows the following: balance, August 1, $18,890; receipts $74,190; disbursements $73,505; and balance, August 31, $19,575. Analysis reveals that the only reconciling items on the July 31 bank reconciliation were a deposit in transit for $4,865 and outstanding checks of $4,565. In addition, you determine that there was an error involving a company check drawn in August: A check for $400 to a creditor on account that cleared the bank in August was journalized and posted for $40.
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HYPERLINK “javascript:void(0)” o “Collapse question part” (a)Your answer is correct. Determine deposits in transit.Deposits in transit$Show List of AccountsShow SolutionShow AnswerLink to TextAttempts: 1 of 3 used |
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HYPERLINK “javascript:void(0)” o “Collapse question part” (b)Your answer is correct. Determine outstanding checks. (Hint: You need to correct disbursements for the check error.)Outstanding checks$Show List of AccountsShow SolutionShow AnswerLink to TextAttempts: 1 of 3 used |
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HYPERLINK “javascript:void(0)” o “Collapse question part” (c)Your answer is correct. Prepare a bank reconciliation at August 31. (List items that increase balance as per bank & books first.)SHAMROCK, INC.Bank Reconciliation |
| $Show List of AccountsShow SolutionShow AnswerLink to TextAttempts: 1 of 3 used
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HYPERLINK “javascript:void(0)” o “Collapse question part” (d)Your answer is correct. Journalize the adjusting entries to be made by Shamrock, Inc. at August 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)DateAccount Titles and ExplanationDebitCreditAug. 31(To record Interest earned)Aug. 31(To correct error in recording check)Aug. 31(To record service charge and safety deposit box fee) |
Question 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.
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Weakness |
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Principle Violated |
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Each store manager is responsible for interviewing applicants for cashier jobs. They are hired if they seem honest and trustworthy. |
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select the weakness in internal control |
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select the control principle |
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| 2.
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All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer. |
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select the weakness in internal control |
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select the control principle |
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| 3.
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To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked briefcase in the stock room until it is deposited in the bank. |
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select the weakness in internal control |
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select the control principle |
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| 4.
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At the end of each day, the total receipts are counted by the cashier on duty and reconciled to the cash register total. |
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select the weakness in internal control |
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select the control principle |
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| 5.
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The company accountant makes the bank deposit and then records the day’s receipts. |
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select the weakness in internal control |
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select the control principle |
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