ACC107 week 4 worksheet

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