1)The July bank statement for PennyWise, Inc. showed a balance per bank of $3,600.The firm's cash account in its accounting records showed a balance of $1,306 on July 31.Other relevant information includes:

• The bank returned an NSF check for $80 from a customer.
• The firm made and recorded a cash deposit of $840 on July 31, but that amount does not appear on the bank statement.
• The bank had correctly paid a check for $1,640 that PennyWise had sent to one of the firm's suppliers in payment of an account.However, PennyWise had incorrectly recorded the check as $1,460.
• $760 in checks written by PennyWise in June and $1,200 of checks written in July still had not cleared the bank as of July 31.
• The bank statement showed a $1,454 increase to the PennyWise account, representing collection of a customer's note for $1,330 plus accrued interest.
• The bank statement showed that the bank took $20 out of the PennyWise account for service charges in July.

a)Prepare the July bank reconciliation for PennyWise.

b)Needmore Bucks, the CEO of PennyWise, is extremely concerned that employees or outsiders may be trying to rob or defraud the firm, so he has offered to hire you as a consultant to upgrade the firm's internal controls.Before you agree to take the job, what would you tell Mr. Bucks about the requirements and limitations for any system of internal controls?