ACC 107 Week 4 and 5 Assignment Problems (2015)
Controls and Cash Worksheet
Part 1. Internal Controls
List the 5 most widely accepted components of internal control. Then, in your own words, write 1-2 paragraphs describing the purpose of internal controls. Provide examples, as appropriate. Use this week’s content, readings, and your LIRN resources or the Internet, as needed, to support your answer.
Part 2. Dardano Enterprises Bank Reconciliation
The June 30 bank statement for Dardano Enterprises shows a balance of $79,310. Dardano Enterprises, however, shows a cash balance of $67,000. In addition, Dardano’s had the following information:
1. $4,500 in deposits made, but not appearing on the June 30 bank statement.
2. A $15,300 check written but not appearing on the June bank statement.
3. One check written for the purchase of Supplies erroneously recorded for $670 but appears on the bank statement as $760.
4. Monthly service charges listed on the banks statement are $275. Dardano has already recorded the effect of $175 of those charges.
5. A customer payment for a $1,700 receivable was collected by the bank but not yet recorded by Hayley.
a. Prepare the bank reconciliation for Dardano Enterprises as of June 30. Enter your answers in the shaded areas of the bank reconciliation below.
Dardano Enterprises
Bank Reconciliation
June 30
Balance per bank statement
Add: Deposits in transit
Deduct: Outstanding checks
Actual cash balance
Balance per company records
Add: Collection of receivable
Deduct: Error
Service charges
Actual cash balance
?
b. Now prepare the necessary journal entries resulting from the reconciliation. Enter your answers in the shaded areas of the journal below.
General Journal
Date Account Names Debit Credit
June 30 Cash
Accounts Receivable
To record collection of receivable by the bank
June 30 Supplies
Cash
To record correction.
June 30 Service Charge Expense
Cash
To record bank service charge.
Part 3. Bixler Company’s Petty Cash
Bixler Company establishes a petty cash fund for $250 on April 1. On April 30, the fund’s custodian prepares a report showing $165 in cash remaining and receipts of $17 for miscellaneous items, $35 for postage, and $32 for supplies. The custodian then gives the report to the accountant, who replenishes the fund.
Prepare any necessary journal entries for the month of April. Hint: A journal entry is made to record the establishment of the fund. No entries are made as payments are made from the fund, but are made when the fund is replenished. Don’t forget to check for cash over or cash short before making the entries. Enter your answers in the shaded areas of the journal below.
General Journal
Date Account Names Debit Credit
April 1
To record creation of petty cash fund.
April 30
To record expenses and replenishment of petty cash fund.
Part 4. Cash and Cash Equivalents
Indicate, with a yes or no, whether the item listed would be reported as cash and cash equivalents. Enter your answer in the shaded box next to each.
ITEM YES or NO?
Commercial paper, maturing in 120 days
Certificate of deposit, maturing in 45 days
Cash on hand
Undeposited checks from customers
Common stock
Commercial paper, maturing in 60 days
Part 5. Bedford’s Cash and Cash Equivalents
On December 31, 2012, Bedford Company has $25,000 of cash in a checking account. The company invested in the following items during November and December of 2012:
November:
One-month Treasury bills (T-bills) $10,000
Certificate of deposit, maturing 1/15/2014 30,000
Common Stock 55,000
Commercial paper, maturing 1/31/2013 60,000
December:
60-day Treasury bills $15,000
Certificate of deposit, maturing 2/15/2013 20,000
Preferred Stock 40,000
What is the total of cash and cash equivalents that should be reported on the December 31, 2012 balance sheet? Enter the items that should be included in the shaded areas below to determine the total. The first one has been done for you. HINT: Review each item to determine which ones are readily convertible into cash and have an original maturity of three months or less.
Checking Account $25,000
Add:
One-month T-bills $10,000
Total cash equivalents `
Total cash and cash equivalents, December 31, 2012
Week 5
Part 1. Pandot Inc.
On August 25, Maria Gomez purchases $12,500 in products from Pandot Inc. on credit. The terms of the sale are 5/20, net 45. On September 7, Ms. Gomez returns $2,500 of product to Pandot. On September 9, she pays her bill in full.
Prepare the journal entries required to record the sale of merchandise, the return of merchandise, and the collection of the accounts receivable. Enter your answers in the shaded areas of the journal below.
Date Account Names Debit Credit
Aug. 25
To record sales on account.
Sept. 7
To record sales return.
Sept. 9
To record payment.
Part 2. Moray Snax Inc.
Moray Snax Inc. sold 500 pounds of eel food to the District Aquarium on credit on February 7 for $6,000. The terms of the sale were 2/10, net 30. The District Aquarium pays the bill in full on February 21.
a. Prepare the entries to record the sale and the receipt of payment.
Date Account Names Debit Credit
Feb. 7
To record sales on account.
Feb. 21
To record payment.
b. Why didn’t the Aquarium receive a discount?
Part 3. Blizzard Company’s Bad Debt Expense
On December 31, the Blizzard Company has a receivables balance of $55,000. Blizzard accountants have estimated that 5% of this balance will be uncollectible. Prior to any year-end adjustments, the balance in the allowance account is a $1000 debit.
a. Prepare the journal entry to record bad debt expense for the year and show the calculation for bad debt expense in T-Account form. Enter your answers in the shaded areas of the journal and T-account below.
Allowance for Bad Debts
Existing balance
Adjustment required = Bad debt expense
Desired balance (55,000 x 5%)
Date Account Names Debit Credit
Dec. 31
b. On January 17, the Blizzard Company determines that an account receivable of $500 is uncollectible. Prepare the necessary journal entries to write it off the books. Hint: The company will write off the receivable and reduce the balance in the allowance account that was created when the bad debt expense was entered.
Date Account Names Debit Credit
Jan. 17
Part 4. Calculate Interest on Notes Receivable
Read each of the following scenarios.
1. On 10/1, Company A accepts a $15,000, 5%, 6-month note receivable.
2. On 4/1, Company B accepts a $30,000, 10%, 3-month note receivable.
3. On 3/15, Company C accepts a $25,000, 7%, 6-month note receivable.
Assuming a December 31 year end, calculate the current-year interest revenue for each of the scenarios. Hint: Remember, Interest = Principal x Annual Rate of Interest x Time Outstanding. Enter your answers in the shaded areas below.
1. Company A interest revenue =
2. Company B interest revenue =
3. Company C interest revenue =
Part 5. Record Notes Receivable
Dolce Company has a fiscal year end of December 31. On March 1, Dolce accepts $10,000 cash and a six-month, 5%, $40,000 note receivable from Flicker, Inc. for services provided. Flicker paid the principal and interest at maturity.
a. Prepare all journal entries from the acceptance of the note to the maturity date. Enter your answers in the shaded areas below. A couple of account names have been filled in for you.
Date Account Names Debit Credit
Mar. 1 Cash
To record acceptance of the note.
Sept. 1 Cash
To record payment of the note.
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Rating:
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Solution: ACC 107 Week 4 Assignment Problems Solution (2015)