Chapter 7 Demonstration Problems Internal Control and Cash Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-1

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-2 E7-16D Wave Dance Studio created a $500 imprest petty cash fund. During the month, the fund custodian authorized and signed petty cash tickets as follows: Petty Cash Ticket No.ItemAccount DebitedAmount 1Delivery of programs to customersDelivery Expense $30 2Mail packagePostage Expense 20 3NewsletterPrinting Expense 50 4Key to closetMiscellaneous Expense 75 5Copier paperOffice Supplies 100 Requirements 1.Make the general journal entry to create the petty cash fund. Include an explanation. 2.Make the general journal entry to record the petty cash fund replenishment. Cash in the fund totals $150. Include an explanation. 3.Assume that Wave Dance Studio decides to decrease the petty cash fund to $300. Make the general journal entry to record this decrease.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-3 E7-16D—Req. 1 DateAccounts and ExplanationDebitCredit 1. Petty Cash500 Cash 500 To open the petty cash fund. Make the general journal entry to create the petty cash fund.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-4 E7-16D—Req. 2 DateAccounts and ExplanationDebitCredit 2. Delivery Expense 30 Postage Expense 20 Printing Expense50 Miscellaneous Expense75 Office Supplies100 Cash Short & Over75 Cash ﴾$500 − $150﴿ 350 To replenish the petty cash fund. Make the general journal entry to record the petty cash fund replenishment. Cash in the fund totals $150. Include an explanation.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-5 E7-16D—Req. 3 DateAccounts and ExplanationDebitCredit 3. Cash200 Petty Cash 200 To decrease the petty cash fund to $300. Assume that Wave Dance Studio decides to decrease the petty cash fund to $300. Make the general journal entry to record this decrease.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-6 E7-19D DateCheck No.ItemCheckDepositBalance Aug. 1$1, Quick Mailing$ Service Revenue$2,0002, salaries expenses2502, Utilities1502, Cash752, Office Supplies851, Alpha Printers3001,640 30Service Revenue1,5003,140 Peter Publishers' check book lists the following:

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-7 E7-19D Balance $1,000 Deposits2,000 Debit Checks:No.Amount 701 $ * (1,000) Other charges: Printed checks50 Service charge25 (75) Balance $1,925 *This is the correct amount for check number 703. Peter’s August bank statement shows the following: Requirements 1.Prepare Peter Publisher's bank reconciliation at August 31, How much cash does Peter actually have on August 31, 2015? 3.Journalize any transactions required from the bank reconciliation.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-8 E7-19D—Req. 1 Calculation of ending book balance: Aug. 1 Book Balance $1,000 Add: Deposits ($2,000 + $1,500) 3,500 Less: Checks ($500 + $250 + $150 + $75 + $85 + $300) 1,360 Aug. 31 Book Balance $3,140

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-9 E7-19D—Req. 1 PETER PUBLISHERS Bank Reconciliation August 31, 2015 BANKBOOK Balance, August 31, 2015 [Previous slide] $3,140 ADD: 3,140 LESS: Book error check 703$25 Printed checks 50 Service charge 25100

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-10 E7-19D—Req. 1 PETER PUBLISHERS Bank Reconciliation August 31, 2015 BANKBOOK Balance, August 31, 2015 $3,140 ADD: 3,140 LESS: Book error check 703$25 Printed checks 50 Service charge Adjusted book balance, August 31, 2015 $3,040

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-11 E7-19D—Req. 1 PETER PUBLISHERS Bank Reconciliation August 31, 2015 BANKBOOK Balance, August 31, 2015 $1,925Balance, August 31, 2015 $3,140 ADD: Deposit in transit 1,500 3,425 3,140 LESS: Book error check 703$25 Printed checks 50 Service charge Adjusted book balance, August 31, 2015 $3,040

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-12 E7-19D—Req. 1 PETER PUBLISHERS Bank Reconciliation August 31, 2015 BANKBOOK Balance, August 31, 2015 $1,925Balance, August 31, 2015 $3,140 ADD: Deposit in transit 1,500 3,425 3,140 LESS: Outstanding checks Book error check 703$25 Check 707 $85 Printed checks 50 Check Service charge Adjusted book balance, August 31, 2015 $3,040

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-13 E7-19D—Req. 1 PETER PUBLISHERS Bank Reconciliation August 31, 2015 BANKBOOK Balance, August 31, 2015 $1,925Balance, August 31, 2015 $3,140 ADD: Deposit in transit 1,500 3,425 3,140 LESS: Outstanding checks Book error check 703$25 Check 707 $85 Printed checks 50 Check Service charge Adjusted bank balance, August 31, 2015 $3,040 Adjusted book balance, August 31, 2015 $3,040

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-14 E7-19D—Req. 2 PETER PUBLISHERS Bank Reconciliation August 31, 2015 BANKBOOK Balance, August 31, 2015 $1,925Balance, August 31, 2015 $3,140 ADD: Deposit in transit 1,500 3,425 3,140 LESS: Outstanding checks Book error check 703$25 Check 707 $85 Printed checks 50 Check Service charge Adjusted bank balance, August 31, 2015 $3,040 Adjusted book balance, August 31, 2015 $3,040 Peter has $3,040 on August 31, 2015.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-15 E7-19D—Req. 3 DateAccounts and ExplanationDebitCredit Aug. 31 Utilities Expense25 Cash 25 To record check error #703.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-16 E7-19D—Req. 3 DateAccounts and ExplanationDebitCredit Aug. 31 Utilities Expense25 Cash 25 To record check error # Bank Expense50 Cash 50 To record printed check charge incurred.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-17 E7-19D—Req. 3 DateAccounts and ExplanationDebitCredit Aug. 31 Utilities Expense25 Cash 25 To record check error # Bank Expense50 Cash 50 To record printed check charge incurred. 31 Bank Expense25 Cash 25 To record bank service charges incurred.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-18 E7-20D Robin Knight Company operates four bowling alleys. The owner just received the September 30 bank statement from City National Bank, and the statement shows an ending balance of $1,000. Listed on the statement are an EFT rent collection of $300, a service charge of $15, NSF checks totaling $60, and a $25 charge for printed checks. In reviewing his cash records, Knight identified outstanding checks totaling $500 and a deposit in transit of $1,500. During September, he recorded a $250 check by debiting Salaries Expense and crediting Cash for $50. His Cash account shows a September 30 balance of $2,000. Requirements 1.Prepare the bank reconciliation at September Journalize any transactions required from the bank reconciliation.

ROBIN KNIGHT COMPANY Bank Reconciliation September 30 BANKBOOK Balance, September 30$2,000 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-19 E7-20D

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-20 E7-20D ROBIN KNIGHT COMPANY Bank Reconciliation September 30 BANKBOOK Balance, September 30$2,000 ADD: EFT collection on rent300 2,300

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-21 E7-20D ROBIN KNIGHT COMPANY Bank Reconciliation September 30 BANKBOOK Balance, September 30$2,000 ADD: EFT collection on rent300 2,300 LESS: Correction of book error$200 NSF checks60 Printed checks25 Service charge15300

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-22 E7-20D ROBIN KNIGHT COMPANY Bank Reconciliation September 30 BANKBOOK Balance, September 30$2,000 ADD: EFT collection on rent300 2,300 LESS: Correction of book error$200 NSF checks60 Printed checks25 Service charge15300 Adjusted book balance, September 30$2,000

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-23 E7-20D ROBIN KNIGHT COMPANY Bank Reconciliation September 30 BANKBOOK Balance, September 30 $1,000Balance, September 30$2,000 ADD: EFT collection on rent300 2,300 LESS: Correction of book error$200 NSF checks60 Printed checks25 Service charge15300 Adjusted book balance, September 30$2,000

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-24 E7-20D ROBIN KNIGHT COMPANY Bank Reconciliation September 30 BANKBOOK Balance, September 30 $1,000Balance, September 30$2,000 ADD: Deposit in transit 1,500EFT collection on rent300 2,5002,300 LESS: Correction of book error$200 NSF checks60 Printed checks25 Service charge15300 Adjusted book balance, September 30$2,000

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-25 E7-20D ROBIN KNIGHT COMPANY Bank Reconciliation September 30 BANKBOOK Balance, September 30 $1,000Balance, September 30$2,000 ADD: Deposit in transit 1,500EFT collection on rent300 2,5002,300 LESS: Correction of book error$200 NSF checks60 Printed checks25 Outstanding checks500Service charge15300 Adjusted book balance, September 30$2,000

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-26 E7-20D ROBIN KNIGHT COMPANY Bank Reconciliation September 30 BANKBOOK Balance, September 30 $1,000Balance, September 30$2,000 ADD: Deposit in transit 1,500EFT collection on rent300 2,5002,300 LESS: Correction of book error$200 NSF checks60 Printed checks25 Outstanding checks500Service charge15300 Adjusted bank balance, September 30 $2,000 Adjusted book balance, September 30$2,000

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-27 E7-20D—Req. 2 DateAccounts and ExplanationDebitCredit Sept. 30Cash 300 Rent Revenue 300 To record EFT rent collection.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-28 E7-20D—Req. 2 DateAccounts and ExplanationDebitCredit Sept. 30Cash 300 Rent Revenue 300 To record EFT rent collection. 30Salaries Expense 200 Cash 200 To record error on salary check.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-29 E7-20D—Req. 2 DateAccounts and ExplanationDebitCredit Sept. 30Cash 300 Rent Revenue 300 To record EFT rent collection. 30Salaries Expense 200 Cash 200 To record error on salary check. 30Accounts Receivable 60 Cash 60 To record NSF checks.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-30 E7-20D—Req. 2 DateAccounts and ExplanationDebitCredit Sept. 30Cash 300 Rent Revenue 300 To record EFT rent collection. 30Salaries Expense 200 Cash 200 To record error on salary check. 30Accounts Receivable 60 Cash 60 To record NSF checks. 30Bank Expense 25 Cash 25 To record printed check charge incurred.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall7-31 E7-20D—Req. 2 DateAccounts and ExplanationDebitCredit Sept. 30Cash 300 Rent Revenue 300 To record EFT rent collection. 30Salaries Expense 200 Cash 200 To record error on salary check. 30Accounts Receivable 60 Cash 60 To record NSF checks. 30Bank Expense 25 Cash 25 To record printed check charge incurred. 30Bank Expense 15 Cash 15 To record bank service charges incurred.

End of Chapter Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall