Exam 7: Fraud, Internal Control, and Cash

Lyleen Boat Company's bank statement for the month of September showed a balance per bank of $7,000. The company's Cash account in the general ledger had a balance of $5,459 at September 30. Other information is as follows: (1) Cash receipts for September 30 recorded on the company's books were $5,700 but this amount does not appear on the bank statement. (2) The bank statement shows a debit memorandum for $40 for check printing charges. (3) Check No. 119 payable to Mann Company was recorded in the cash payments journal and cleared the bank for $248. A review of the accounts payable subsidiary ledger shows a $36 credit balance in the account of Mann Company and that the payment to them should have been for $284. (4) The total amount of checks still outstanding at September 30 amounted to $5,000. (5) Check No. 138 was correctly written and paid by the bank for $409. The cash payment journal reflects an entry for Check No. 138 as a debit to Accounts Payable and a credit to Cash in Bank for $490. (6) The bank returned an NSF check from a customer for $360. (7) The bank included a credit memorandum for $2,560 which represents collection of a customer's note by the bank for the company; principal amount of the note was $2,500 and interest was $60. Interest has not been accrued. Instructions (a) Prepare a bank reconciliation for Lyleen Boat Company at September 30. (b) Prepare any adjusting entries necessary as a result of the bank reconciliation.

A company stamps checks received in the mail with the words "For Deposit Only". This endorsement is called a(n)

Identify which principle of internal control is being followed in each of the following cases. 1. Warehouse employees do not have access to the accounting records. 2. Pre-numbered shipping documents are prepared for each shipment of goods. 3. The locked warehouse is accessible only by warehouse employees with keys.

Internal control over cash disbursements is more effective when payments are made by ______________, rather than by ______________.

Candy Claws Company gathered the following reconciling information in preparing its August bank reconciliation: The adjusted cash balance per books on August 31 is

The cash records of Mercury Company show the following: 1. The June 30 bank reconciliation indicated that deposits in transit totaled $790. During July the general ledger account Cash shows deposits of $9,800, but the bank statement indicates that only $8,240 in deposits were received during the month. 2. The June 30 bank reconciliation also reported outstanding checks of $1,200. During the month of July, Mercury Company books show that $11,570 of checks were issued, yet the bank statement showed that $11,100 of checks cleared the bank in July. There were no bank debit or credit memoranda and no errors were made by either the bank or Mercury Company. Answer the following questions: (a) What were the deposits in transit at July 31? (b) What were the outstanding checks at July 31?

Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry:

The following information was used to prepare the March 2018, bank reconciliation for Walker Machine Works. Identify the items that require adjustment to the cash balance per books and prepare the appropriate adjusting entries. 1. Included with the bank statement materials was a check from Bob Simpson for $40 stamped "NSF." 2. A personal deposit by Annie Walker to her personal account in the amount of $300 for dividends on her General Electric common stock was credited to the company account. 3. The bank statement included a debit memorandum for $22.00 for two books of blank checks for Walker Machine Works. 4. The bank statement contains a credit memorandum for $24.75 interest on the average checking account balance. 5. The daily deposits of March 30 and March 31, for $3,362 and $3,125 respectively, were not included in the bank statement postings. 6. Two checks totaling $316.86, which were outstanding at the end of February, cleared in March and were returned with the March statement. 7. The bank statement included a credit memorandum dated March 28, 2018, for $45.00 for the monthly interest on a 6-month, $15,000 certificate of deposit that the company owns. 8. Four checks, #8712, #8716, #8718, #8719, totaling $5,369.65, did not clear the bank during March. 9. On March 24, 2018, Walker Machine Works delivered to the bank for collection a $4,500, 3-month note from Don Decker. A credit memorandum dated March 29, 2018, indicated the collection of the note and $90.00 of interest. 10. The bank statement included a debit memorandum for $25.00 for the collection service on the above note and interest.

In preparing a bank reconciliation, outstanding checks are

Cash is defined by IFRS as

A petty cash fund of $100 is replenished when the fund contains $4 in cash and receipts for $93. The entry to replenish the fund would

Blank checks

Reconciling the bank statement monthly is an example of

Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency.

Fitzgerald Company wrote checks totaling $34,160 during October and $37,300 during November. $32,480 of these checks cleared the bank in October, and $36,440 cleared the bank in November. What was the amount of outstanding checks on November 30?

Internal auditors

The custodian of a company asset should

Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them

GAAP's accounting and internal control procedures related to cash and the definition of cash equivalents, as compared to IFRS are: IFRS

On October 1, 2018, Ellington Company establishes an imprest petty cash fund by issuing a check for $200 to Erin Angelo, the custodian of the petty cash fund. On October 31, 2018, Erin Angelo submitted the following paid petty cash receipts for replenishment of the petty cash fund when there is $32 cash in the fund: Instructions Prepare the journal entries required to establish the petty cash fund on October 1 and the replenishment of the fund on October 31.