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Bank reconciliation and internal control 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 Add outstanding checks: $10,400 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 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 dose family friend, has asked for your help in determining the amount that the former cashier stole. 1. Determine the amount the cashier stole from Parker Company. Show your computations in good form. 2. How did the cashier attempt to conceal the theft? 3. a. Identify two major weaknesses in internal controls that allowed the cashier to steal the undeposited cash receipts. b. Recommend improvements in internal controls so that similar types of thefts of undeposited cash receipts can be prevented.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 8, Problem 8.8CP
Textbook Problem

Bank reconciliation and internal control

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 Add outstanding checks: $10,400
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

Chapter 8, Problem 8.8CP, Bank reconciliation and internal control The records of Parker Company indicate a July 31 cash

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 dose family friend, has asked for your help in determining the amount that the former cashier stole.

  1. 1. Determine the amount the cashier stole from Parker Company. Show your computations in good form.
  2. 2. How did the cashier attempt to conceal the theft?
  3. 3. a.    Identify two major weaknesses in internal controls that allowed the cashier to steal the undeposited cash receipts.

  b.    Recommend improvements in internal controls so that similar types of thefts of undeposited cash receipts can be prevented.

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Chapter 8 Solutions

Accounting
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Ch. 8 - Internal control elements Identify each of the...Ch. 8 - Internal control elements Identify each of the...Ch. 8 - Items on companys bank statement The following...Ch. 8 - Items on companys bank statement The following...Ch. 8 - Bank reconciliation The following data were...Ch. 8 - Bank reconciliation The following data were...Ch. 8 - Petty cash fund Prepare journal entries for each...Ch. 8 - Petty cash fund Prepare journal entries for each...Ch. 8 - Ratio of cash to monthly cash expenses Financial...Ch. 8 - Ratio of cash to monthly cash expenses Financial...Ch. 8 - Sarbanes-Oxley internal control report Using...Ch. 8 - Internal controls Jimmy Pace has recently been...Ch. 8 - Internal controls Ramonas Clod1ing is a retail...Ch. 8 - Internal controls for bank lending Pacific Bank...Ch. 8 - Internal controls One of the largest losses in...Ch. 8 - Internal controls An employee of JHT Holdings,...Ch. 8 - Internal controls All-Around Sound Co. discovered...Ch. 8 - Financial statement fraud A former chairman, CFO,...Ch. 8 - Internal control of cash receipts The procedures...Ch. 8 - Internal control of cash receipts Sergio Flores...Ch. 8 - Internal control of cash receipts The mailroom...Ch. 8 - Entry for cash sales; cash short The actual cash...Ch. 8 - Entry for cash sales; cash over The actual cash...Ch. 8 - Internal control of cash payments Abbe Co. is a...Ch. 8 - Internal control of cash payments Paragon Tech...Ch. 8 - Bank reconciliation Identify each of the following...Ch. 8 - Entries based on bank reconciliation Which of the...Ch. 8 - Bank reconciliation The following data were...Ch. 8 - Entries for bank reconciliation Using the data...Ch. 8 - Entries for note collected by bank Accompanying a...Ch. 8 - Bank reconciliation An accounting clerk for...Ch. 8 - Bank reconciliation The following June 30 bank...Ch. 8 - Using bank reconciliation to determine cash...Ch. 8 - Petty cash fund entries Journalize the entries to...Ch. 8 - Variation in cash flows Mattel, Inc., designs,...Ch. 8 - Cash to monthly cash expenses ratio El Dorado Inc....Ch. 8 - Cash to monthly cash expenses ratio Capstone...Ch. 8 - Cash to monthly cash expenses ratio Amicus...Ch. 8 - Evaluating internal control of cash The following...Ch. 8 - Transactions for petty cash, cash short and over...Ch. 8 - Bank reconciliation and entries The cash account...Ch. 8 - Bank reconciliation and entries The cash account...Ch. 8 - Bank reconciliation and entries Beeler Furniture...Ch. 8 - Evaluating internal control of cash The following...Ch. 8 - Transactions for petty cash, cash short and over...Ch. 8 - Bank reconciliation and entries The cash account...Ch. 8 - Bank reconciliation and entries The cash account...Ch. 8 - Bank reconciliation and entries Sunshine Interiors...Ch. 8 - Ethics in Action Tehra Dactyl is an accountant for...Ch. 8 - Ethics in Action During the preparation of the...Ch. 8 - Communication Wholesome and Happy Foods is a...Ch. 8 - Internal controls The following is an excerpt from...Ch. 8 - Internal controls The following is an excerpt from...Ch. 8 - Bank reconciliation and internal control The...Ch. 8 - Cash to monthly cash expenses ratio TearLab Corp....

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