The records of Parker Company indicate a July 31 cash balance of $10,400, which includes undeposited receipts for July 30 and 31. The cash balance on the bank statement as of July 31 is $10,575. This balance includes a note of $2,250 plus $150 interest collected by the bank but not recorded in the journal. Checks outstanding on July 31 were as follows: No. 2670, $1,050; No. 3679, $675; No. 3690, $1,650; No. 5148, $225; No. 5149, $750; and No. 5151, $800. On July 25, the cashier resigned, effective at the end of the month. Before leaving on July 31, the cashier prepared the following bank reconciliation: Cash balance per books, July 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,400 Add outstanding checks: No. 5148 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $225 5149 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750 5151 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 1,675 $12,075 Less undeposited receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 Cash balance per bank, July 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,575 Deduct unrecorded note with interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400 True cash, July 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,175 Calculator Tape of Outstanding Checks: 0 225 750 800 1,675 Subsequently, the owner of Parker Company discovered that the cashier had stolen an unknown amount of undeposited receipts, leaving only $1,500 to be deposited on July 31. The owner, a close family friend, has asked for your help in determining the amount that the former cashier stole. Determine the amount the cashier stole from Parker Company. Show your computations in good form. How did the cashier attempt to conceal the theft? a. Identify two major weaknesses in internal controls that allowed the cashier to steal the undeposited cash receipts. Recommend improvements in internal controls so that similar types of thefts of undeposited cash receipts can be prevented.
The records of Parker Company indicate a July 31 cash balance of $10,400, which includes
undeposited receipts for July 30 and 31. The cash balance on the bank statement as of
July 31 is $10,575. This balance includes a note of $2,250 plus $150 interest collected by
the bank but not recorded in the journal. Checks outstanding on July 31 were as follows:
No. 2670, $1,050; No. 3679, $675; No. 3690, $1,650; No. 5148, $225; No. 5149, $750; and
No. 5151, $800.
On July 25, the cashier resigned, effective at the end of the month. Before leaving on
July 31, the cashier prepared the following bank reconciliation:
Cash balance per books, July 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,400
Add outstanding checks:
No. 5148 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $225
5149 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750
5151 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 1,675
$12,075
Less undeposited receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500
Cash balance per bank, July 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,575
Deduct unrecorded note with interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400
True cash, July 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,175
Calculator Tape of Outstanding Checks:
0
225
750
800
1,675
Subsequently, the owner of Parker Company discovered that the cashier had stolen an
unknown amount of undeposited receipts, leaving only $1,500 to be deposited on July 31.
The owner, a close family friend, has asked for your help in determining the amount that
the former cashier stole.
- Determine the amount the cashier stole from Parker Company. Show your computations
in good form.
- How did the cashier attempt to conceal the theft?
- a. Identify two major weaknesses in internal controls that allowed the cashier to steal
the undeposited cash receipts.
- Recommend improvements in internal controls so that similar types of
thefts of undeposited cash receipts can be prevented.
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