Question 1 - Lynn, the treasurer, or Bob Skabo, the assistant treasurer. Before signing a check, the signer is expected to compare the amount of the check with the amount on the invoice.
After signing a check, the signer stamps the invoice PAID and inserts within the stamp, the date, check number, and amount of the check. The "paid" invoice is then sent to the accounting department for recording.
Blank checks are stored in a safe in the treasurer's office. The combination to the safe is known only by the treasurer and assistant treasurer. Each month, the bank statement is recon¬ciled with the bank balance per books by the assistant chief accountant. All employees who han¬dle or account for cash are bonded.
Instructions - Identify the internal control principles and their application to cash disbursements of Luby Office Supply Company.
Question 2 - Winningham Company maintains a petty cash fund for small expenditures. The follow-ing transactions occurred over a 2-month period.
July 1 - Established petty cash fund by writing a check on Cubs Bank for $200.
July 15 - Replenished the petty cash fund by writing a check for $196.00. On this date the fund consisted of $4.00 in cash and the following petty cash receipts: freight-out $94.00, postage expense $42.40, entertainment expense $46.60, and miscellaneous expense $11.20.
July 31 - Replenished the petty cash fund by writing a check for $192.00. At this date, the fund consisted of $8.00 in cash and the following petty cash receipts: freight-out $82.10, charitable contributions expense $45.00, postage expense $25.50, and miscellaneous expense $39.40.
Aug. 15 - Replenished the petty cash fund by writing a check for $187.00. On this date, the fund consisted of $ 13.00 in cash and the following petty cash receipts: freight-out $75.60, entertainment expense $43.00, postage expense $33.00, and miscellaneous expense $37.00.
Aug. 16 - Increased the amount of the petty cash fund to $300 by writing a check for $100.
Aug. 31 - Replenished petty cash fund by writing a check for $284.00. On this date, the fund con¬sisted of $16 in cash and the following petty cash receipts: postage expense $140.00, travel expense $95.60, and freight-out $47.10.
Instructions
(a) Journalize the petty cash transactions.
(b) Post to the Petty Cash account.
(c) What internal control features exist in a petty cash fund?
Question 3 - On May 31, 2010, James Logan Company had a cash balance per books of $6,781.50. The bank statement from Farmers State Bank on that date showed a balance of $6,404.60. A comparison of the statement with the cash account revealed the following facts.
1. The statement included a debit memo of $40 for the printing of additional company checks.
2. Cash sales of $836.15 on May 12 were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $886.15. The bank credited Logan Company for the correct amount.
3. Outstanding checks at May 31 totaled $576.25. Deposits in transit were $1,916.15.
4. On May 18, the company issued check No. 1181 for $685 to Barry Trest, on account. The check, which cleared the bank in May, was incorrectly journalized and posted by Logan Company for $658.
5. A $2,500 note receivable was collected by the bank for Logan Company on May 31 plus $80 interest. The bank charged a collection fee of $20. No interest has been accrued on the note.
6. Included with the cancelled checks was a check issued by Bridgetown Company to Tom Lujak for $800 that was incorrectly charged to Logan Company by the bank.
7. On May 31, the bank statement showed an NSF charge of $680 for a check issued by Sandy Grifton, a customer, to Logan Company on account.
Instructions
(a) Prepare the bank reconciliation at May 31,2010.
(b) Prepare the necessary adjusting entries for Logan Company at May 31, 2010.