358 7 Fraud, Internal Control, and Cash

Prepare a bank reconciliation P7-4A On July 31, 2019, Keeds Company had a cash balance per books of $6,140. The
and adjusting entries. statement from Dakota State Bank on that date showed a balance of $7,690.80. A compar-
(LO 3) ison of the bank statement with the Cash account revealed the following facts.
1. The bank service charge for July was $25.
2. The bank collected $1,520 for Keeds Company through electronic funds transfer.
3. The July 31 receipts of $1,193.30 were not included in the bank deposits for July. These
receipts were deposited by the company in a night deposit vault on July 31.
4. Company check No. 2480 issued to L. Taylor, a creditor, for $384 that cleared the bank
in July was incorrectly entered as a cash payment on July 10 for $348.
5. Checks outstanding on July 31 totaled $1,860.10.
6. On July 31, the bank statement showed an NSF charge of $575 for a check received by
the company from W. Krueger, a customer, on account.

Instructions
(a) Adjusted cash bal. (a) Prepare the bank reconciliation as of July 31.
$7,024.00 (b) Prepare the necessary adjusting entries at July 31.
Prepare a bank reconciliation P7-5A The bank portion of the bank reconciliation for Bogalusa Company at October 31,
and adjusting entries from 2019, is shown below.
detailed data.
(LO 3)
BOGALUSA COMPANY
Bank Reconciliation
October 31, 2019
Cash balance per bank $12,367.90
Add: Deposits in transit 1,530.20
13,898.10
Less: Outstanding checks
Check Number Check Amount
2451 $1,260.40
2470 684.20
2471 844.50
2472 426.80
2474 1,050.00 4,265.90
Adjusted cash balance per bank $ 9,632.20

The adjusted cash balance per bank agreed with the cash balance per books at October 31.
The November bank statement showed the following checks and deposits.

Bank Statement
Checks and Debits Deposits and Credits
Date Number Amount Date Amount
11-1 2470 $ 684.20 11-1 $ 1,530.20
11-2 2471 844.50 11-4 1,211.60
11-5 2474 1,050.00 11-8 990.10
11-4 2475 1,640.70 11-13 2,575.00
11-8 2476 2,830.00 11-18 1,472.70
11-10 2477 600.00 11-19 EFT 2,242.00
11-15 2479 1,750.00 11-21 2,945.00
11-18 2480 1,330.00 11-25 2,567.30
11-27 2481 695.40 11-28 1,650.00
11-28 SC 85.00 11-30 1,186.00
11-30 2483 575.50 Total $18,369.90
11-29 2486 940.00
Total $13,025.30
 Problems: Set A 359

The cash records per books for November showed the following.

Cash Payments Cash Receipts

Date Number Amount Date Number Amount Date Amount
11-1 2475 $1,640.70 11-20 2483 $ 575.50 11-3 $ 1,211.60
11-2 2476 2,830.00 11-22 2484 829.50 11-7 990.10
11-2 2477 600.00 11-23 2485 974.80 11-12 2,575.00
11-4 2478 538.20 11-24 2486 940.00 11-17 1,472.70
11-8 2479 1,705.00 11-29 2487 398.00 11-20 2,954.00
11-10 2480 1,330.00 11-30 2488 800.00 11-24 2,567.30
11-15 2481 695.40 Total $14,469.10 11-27 1,650.00
11-18 2482 612.00 11-29 1,186.00
11-30 1,304.00
Total $15,910.70

The bank statement contained two bank memoranda:

1. A credit of $2,242 for the collection for Bogalusa Company of an electronic funds transfer.
2. A debit for the printing of additional company checks $85.
At November 30, the cash balance per books was $11,073.80 and the cash balance per
bank statement was $17,712.50. The bank did not make any errors, but Bogalusa Com-
pany made two errors.

Instructions
(a) Using the steps in the reconciliation procedure described on pages 339–340, prepare a (a) Adjusted cash bal.
bank reconciliation at November 30, 2019. $13,176.80
(b) Prepare the adjusting entries based on the reconciliation. (Note: The correction of any
errors pertaining to recording checks should be made to Accounts Payable. The
correction of any errors relating to recording cash receipts should be made to Accounts
Receivable.)

P7-6A Timmins Company of Emporia, Kansas, spreads herbicides and applies liquid fer- Prepare a bank reconciliation
tilizer for local farmers. On May 31, 2019, the company’s Cash account per its general and adjusting entries.
ledger showed a balance of $6,738.90. (LO 3)
The bank statement from Emporia State Bank on that date showed the following
balance.

EMPORIA STATE BANK

Checks and Debits Deposits and Credits Daily Balance
XXX XXX 5-31 6,968.00

A comparison of the details on the bank statement with the details in 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 $883.15 on May 12 were deposited in the bank. The cash receipts entry
and the deposit slip were incorrectly made for $933.15. The bank credited Timmins
Company for the correct amount.
3. Outstanding checks at May 31 totaled $276.25, and deposits in transit were $1,880.15.
4. On May 18, the company issued check No. 1181 for $685 to H. Moses, on account.
The check, which cleared the bank in May, was incorrectly journalized and posted by
Timmins Company for $658.
5. $2,690 was collected by the bank for Timmins Company on May 31 through electronic
funds transfer.
6. Included with the canceled checks was a check issued by Tomins Company to
C. Pernod for $360 that was incorrectly charged to Timmins Company by the bank.
7. On May 31, the bank statement showed an NSF charge of $380 for a check issued by
Sara Ballard, a customer, to Timmins Company on account.