Elite Service Company is a very profitable small business. It has not, however, given much consideration to internal control. For example, in an attempt to keep clerical and office expenses to a minimum, the company has combined the jobs of cashier and bookkeeper. As a result, Steve Evans handles all cash receipts, keeps the accounting records, and prepares the monthly bank reconciliations. The balance per the bank statement on March 31, 2014, was $5,931.51. Outstanding checks were: No. 206 for $358.53, No. 441 for $292, No. 590 for $283.00, No. 781 for $286.00, No. 782 for $319.47, and No. 783 for $303.14. Included with the statement was a credit memorandum of $175 indicating the collection of a note receivable for Elite Service Company by the bank on March 21. This memorandum has not been recorded by Elite Service. The company's ledger showed one cash account with a balance of $6,889.53. The balance included undeposited cash on hand. Because of the lack of internal controls, Steve took for personal use all of the undeposited receipts in excess of $1,591.63. He then prepared the following bank reconciliation in an effort to conceal his theft of cash. Cash balance per books, March 31 Add: Outstanding checks No. 781 $6,889.53 $286.00 No. 782 319.47 No. 783 303.14 808.61 7,698.14 1,591.63 Less: Undeposited receipts Unadjusted balance per bank, March 31 Less: Bank credit memorandum 6,106.51 175.00 Cash balance per bank statement, March 31 $5,931.51 Instructions Prepare a correct bank reconciliation. (Hint: Deduct the amount of the theft from the adjusted balance per books.)

Question

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Elite Service Company is a very profitable small business. It has not, however, given much
consideration to internal control. For example, in an attempt to keep clerical and office
expenses to a minimum, the company has combined the jobs of cashier and bookkeeper. As a
result, Steve Evans handles all cash receipts, keeps the accounting records, and prepares the
monthly bank reconciliations.
The balance per the bank statement on March 31, 2014, was $5,931.51. Outstanding checks
were: No. 206 for $358.53, No. 441 for $292, No. 590 for $283.00, No. 781 for $286.00, No.
782 for $319.47, and No. 783 for $303.14. Included with the statement was a credit
memorandum of $175 indicating the collection of a note receivable for Elite Service Company
by the bank on March 21. This memorandum has not been recorded by Elite Service.
The company's ledger showed one cash account with a balance of $6,889.53. The balance
included undeposited cash on hand. Because of the lack of internal controls, Steve took for
personal use all of the undeposited receipts in excess of $1,591.63. He then prepared the
following bank reconciliation in an effort to conceal his theft of cash.
Cash balance per books, March 31
Add: Outstanding checks
No. 781
$6,889.53
$286.00
No. 782
319.47
No. 783
303.14
808.61
7,698.14
1,591.63
Less: Undeposited receipts
Unadjusted balance per bank, March 31
Less: Bank credit memorandum
6,106.51
175.00
Cash balance per bank statement, March 31
$5,931.51
Instructions
Prepare a correct bank reconciliation. (Hint: Deduct the amount of the theft from the
adjusted balance per books.)

Image Transcription

Elite Service Company is a very profitable small business. It has not, however, given much consideration to internal control. For example, in an attempt to keep clerical and office expenses to a minimum, the company has combined the jobs of cashier and bookkeeper. As a result, Steve Evans handles all cash receipts, keeps the accounting records, and prepares the monthly bank reconciliations. The balance per the bank statement on March 31, 2014, was $5,931.51. Outstanding checks were: No. 206 for $358.53, No. 441 for $292, No. 590 for $283.00, No. 781 for $286.00, No. 782 for $319.47, and No. 783 for $303.14. Included with the statement was a credit memorandum of $175 indicating the collection of a note receivable for Elite Service Company by the bank on March 21. This memorandum has not been recorded by Elite Service. The company's ledger showed one cash account with a balance of $6,889.53. The balance included undeposited cash on hand. Because of the lack of internal controls, Steve took for personal use all of the undeposited receipts in excess of $1,591.63. He then prepared the following bank reconciliation in an effort to conceal his theft of cash. Cash balance per books, March 31 Add: Outstanding checks No. 781 $6,889.53 $286.00 No. 782 319.47 No. 783 303.14 808.61 7,698.14 1,591.63 Less: Undeposited receipts Unadjusted balance per bank, March 31 Less: Bank credit memorandum 6,106.51 175.00 Cash balance per bank statement, March 31 $5,931.51 Instructions Prepare a correct bank reconciliation. (Hint: Deduct the amount of the theft from the adjusted balance per books.)

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