Accounting principals

Acc111 - Chapter 8 Questions Name:______________________________ Answer each of the following questions in your own words. (Do not plagiarize from the textbook or any other source.) I want to see what you have learned in Chapter 8. Question 1: Fraud experts often say that there are three primary factors that contribute to employee fraud. Identify these three factors and explain what is meant by each. Question 2. \"Internal control is concerned only with enhancing the accuracy of the accounting records.\" Do you agree? Explain fully. Question 3. At the corner grocery store, all sales clerks make change out of one cash register drawer. Is this an internal control violation for cash receipts? Why, or why not? Explain fully. Questions 4. McCloud Fertilizer Co. owns the following assets at the balance sheet date: Cash in bank savings account Cash on hand $ 8,000 850 Cash refund due from the IRS ...... 1,000 Checking account balance Postdated checks 12,000 50 What amount should McCloud report as \"Cash\" on the balance sheet? (Show your computation.) Questions 5. Lori Flagg is confused about the lack of agreement between the cash balance in her company's general ledger account and the cash balance according to the bank statement. Explain the causes for the lack of agreement to Lori, and give an example of each cause. On January 1, the Needcash Company establishes an imprest petty cash fund by issuing a check for $400. On January 31, the custodian of the petty cash fund submitted the following paid petty cash receipts for replenishment of the petty cash fund when there is $40 cash in the fund. Freight-Out $ 117 Gas & Oil 185 Postage 29 Owner's IOU for lunch 25 (the owner, Dan Donahue, never pays petty cash back) Required: Prepare the general journal entries to: A. Establish the fund on January 1. B. Replenish the fund on January 31. C. Increase the petty cash fund to $500 on February 1. General Journal Date Debit Credit On September 30, the Lemon Company has a cash balance per books of $10,608. The bank statement from the Valley Bank on that date showed a balance of $17,004. A comparison of the statement with the cash account revealed the following facts: 1. The statement included a debit memo of $60 for the printing of additional company checks. 2. Cash sales of $845 on September 12, were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $854. The bank credited Lemon Company for the correct amount. 3. Outstanding checks at September 30 totaled $6,225, and deposits in transit were $1,225. 4. On September 18, the company issued check No. 1023 for $550 to M. Barker, on account. The check, which cleared the bank in September, was incorrectly journalized and posted to Lemon Company for $505. 5. A $1,450 note receivable was collected by the bank for Lemon Company on September 29 plus $75 interest. The bank charges a collection fee of $15 for this collection service. No entries have been made yet in Lemon's records to show the note as collected or accrue the interest. REQUIRED: 1. Using the bank reconciliation form below, reconcile the bank statement of Lemon Company. 2. When you have completed the reconciliation, journalize the adjusting entries needed to correct Lemon's cash account in the general journal below. Lemon Company Bank Reconciliation September 30 Balance Per Bank Statement, September 30 Add: $ $ Subtotal: $ Adjusted Balance Per Bank, September 30 $ Balance Per Books, September 30 $ Less: Add: $ Subtotal: $ Less: $ Adjusted Balance Per Books, September 30 $ General Journal Date Debit Credit Acc111 - Chapter 8 Questions Name:______________________________ Answer each of the following questions in your own words. (Do not plagiarize from the textbook or any other source.) I want to see what you have learned in Chapter 8. Question 1: Fraud experts often say that there are three primary factors that contribute to employee fraud. Identify these three factors and explain what is meant by each. Answer: There are three main factors which contribute to the employee fraud, these includes opportunity, financial pressure and rationalization. Opportunity can be said when the employee takes the advantage of the system as it lacks control. Financial pressure is when an employee is in need of money and need more money which is not being covered by his current salary. Rationalization is when the employees feel that they are underpaid and claims that to be the reason of fraud. Question 2. \"Internal control is concerned only with enhancing the accuracy of the accounting records.\" Do you agree? Explain fully. Answer: Internal control is not only concerned with enhancing the accuracy but also concerned with the safeguarding of the company's assets from threat, robbery and unauthorized use. Thus I do not agree with the statement. Question 3. At the corner grocery store, all sales clerks make change out of one cash register drawer. Is this an internal control violation for cash receipts? Why, or why not? Explain fully. Answer: This case is considered as the volation of internal control as per the principle of establishing responsibility. It is important to have effective internal control for cash management, to ensure this, the company should give all the sales clerks individual cash register drawer. Questions 4. McCloud Fertilizer Co. owns the following assets at the balance sheet date: Cash in bank savings account Cash on hand $ 8,000 850 Cash refund due from the IRS ...... 1,000 Checking account balance Postdated checks 12,000 50 What amount should McCloud report as \"Cash\" on the balance sheet? (Show your computation.) Answer: Cash = 8000 + 850+12000 = 20850 Questions 5. Lori Flagg is confused about the lack of agreement between the cash balance in her company's general ledger account and the cash balance according to the bank statement. Explain the causes for the lack of agreement to Lori, and give an example of each cause. Answer: The lack of agreement between the bank balance and the cash balance occurs because of the time lag- example a check written in march but cleared in april, error - Error in writing the check amount like 265 written as 256, direct debits or credits by bank like bank service expenses and charges, On January 1, the Needcash Company establishes an imprest petty cash fund by issuing a check for $400. On January 31, the custodian of the petty cash fund submitted the following paid petty cash receipts for Frreplenishment of the petty cash fund when there is $40 cash in the fund. Freight-Out $ 117 Gas & Oil 185 Postage 29 Owner's IOU for lunch 25 (the owner, Dan Donahue, never pays petty cash back) Required: Prepare the general journal entries to: A. Establish the fund on January 1. B. Replenish the fund on January 31. C. Increase the petty cash fund to $500 on February 1. General Journal Date A Debit Petty Cash 400 Cash B 400 Freight out 117 Gas and oil 185 Postage 29 Lunch 25 Cash C Credit Petty Cash Cash 356 456 456 On September 30, the Lemon Company has a cash balance per books of $10,608. The bank statement from the Valley Bank on that date showed a balance of $17,004. A comparison of the statement with the cash account revealed the following facts: 1. The statement included a debit memo of $60 for the printing of additional company checks. 2. Cash sales of $845 on September 12, were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $854. The bank credited Lemon Company for the correct amount. 3. Outstanding checks at September 30 totaled $6,225, and deposits in transit were $1,225. 4. On September 18, the company issued check No. 1023 for $550 to M. Barker, on account. The check, which cleared the bank in September, was incorrectly journalized and posted to Lemon Company for $505. 5. A $1,450 note receivable was collected by the bank for Lemon Company on September 29 plus $75 interest. The bank charges a collection fee of $15 for this collection service. No entries have been made yet in Lemon's records to show the note as collected or accrue the interest. REQUIRED: 1. Using the bank reconciliation form below, reconcile the bank statement of Lemon Company. 2. When you have completed the reconciliation, journalize the adjusting entries needed to correct Lemon's cash account in the general journal below. Lemon Company Bank Reconciliation September 30 Balance Per Bank Statement, September 30 Add: Deposit in transit Bank error Subtotal: Less: Outstanding check 17004 1225 45 18274 6225 Adjusted Balance Per Bank, September 30 12049 Balance Per Books, September 30 Add: Notes receivable Subtotal: Less: Cheque printing charges Book error (854-845) Bank charges 10608 Adjusted Balance Per Books, September 30 1525 12133 60 9 15 84 12049 General Journal Date Cash Debit Credit 1525 Notes receivable 1450 Interest received 75 Cheque printing charges 60 Cash Accounts receivable 60 9 Cash Bank charges Cash 9 15 15 Acc111 - Chapter 8 Questions Name:______________________________ Answer each of the following questions in your own words. (Do not plagiarize from the textbook or any other source.) I want to see what you have learned in Chapter 8. Question 1: Fraud experts often say that there are three primary factors that contribute to employee fraud. Identify these three factors and explain what is meant by each. Answer: There are three main factors which contribute to the employee fraud, these includes opportunity, financial pressure and rationalization. Opportunity can be said when the employee takes the advantage of the system as it lacks control. Financial pressure is when an employee is in need of money and need more money which is not being covered by his current salary. Rationalization is when the employees feel that they are underpaid and claims that to be the reason of fraud. Question 2. \"Internal control is concerned only with enhancing the accuracy of the accounting records.\" Do you agree? Explain fully. Answer: Internal control is not only concerned with enhancing the accuracy but also concerned with the safeguarding of the company's assets from threat, robbery and unauthorized use. Thus I do not agree with the statement. Question 3. At the corner grocery store, all sales clerks make change out of one cash register drawer. Is this an internal control violation for cash receipts? Why, or why not? Explain fully. Answer: This case is considered as the volation of internal control as per the principle of establishing responsibility. It is important to have effective internal control for cash management, to ensure this, the company should give all the sales clerks individual cash register drawer. Questions 4. McCloud Fertilizer Co. owns the following assets at the balance sheet date: Cash in bank savings account Cash on hand $ 8,000 850 Cash refund due from the IRS ...... 1,000 Checking account balance Postdated checks 12,000 50 What amount should McCloud report as \"Cash\" on the balance sheet? (Show your computation.) Answer: Cash = 8000 + 850+12000 = 20850 Questions 5. Lori Flagg is confused about the lack of agreement between the cash balance in her company's general ledger account and the cash balance according to the bank statement. Explain the causes for the lack of agreement to Lori, and give an example of each cause. Answer: The lack of agreement between the bank balance and the cash balance occurs because of the time lag- example a check written in march but cleared in april, error - Error in writing the check amount like 265 written as 256, direct debits or credits by bank like bank service expenses and charges, On January 1, the Needcash Company establishes an imprest petty cash fund by issuing a check for $400. On January 31, the custodian of the petty cash fund submitted the following paid petty cash receipts for Frreplenishment of the petty cash fund when there is $40 cash in the fund. Freight-Out $ 117 Gas & Oil 185 Postage 29 Owner's IOU for lunch 25 (the owner, Dan Donahue, never pays petty cash back) Required: Prepare the general journal entries to: A. Establish the fund on January 1. B. Replenish the fund on January 31. C. Increase the petty cash fund to $500 on February 1. General Journal Date Jan 1 Debit Petty Cash 400 Cash Jan 31 400 Freight out 117 Gas and oil 185 Postage 29 Lunch 25 Cash Feb 1 Credit Petty Cash Cash 356 456 456 On September 30, the Lemon Company has a cash balance per books of $10,608. The bank statement from the Valley Bank on that date showed a balance of $17,004. A comparison of the statement with the cash account revealed the following facts: 1. The statement included a debit memo of $60 for the printing of additional company checks. 2. Cash sales of $845 on September 12, were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $854. The bank credited Lemon Company for the correct amount. 3. Outstanding checks at September 30 totaled $6,225, and deposits in transit were $1,225. 4. On September 18, the company issued check No. 1023 for $550 to M. Barker, on account. The check, which cleared the bank in September, was incorrectly journalized and posted to Lemon Company for $505. 5. A $1,450 note receivable was collected by the bank for Lemon Company on September 29 plus $75 interest. The bank charges a collection fee of $15 for this collection service. No entries have been made yet in Lemon's records to show the note as collected or accrue the interest. REQUIRED: 1. Using the bank reconciliation form below, reconcile the bank statement of Lemon Company. 2. When you have completed the reconciliation, journalize the adjusting entries needed to correct Lemon's cash account in the general journal below. Lemon Company Bank Reconciliation September 30 Balance Per Bank Statement, September 30 Add: Deposit in transit Bank error Subtotal: Less: Outstanding check 17004 1225 45 18274 6225 Adjusted Balance Per Bank, September 30 12049 Balance Per Books, September 30 Add: Notes receivable Subtotal: Less: Cheque printing charges Book error (854-845) Bank charges 10608 Adjusted Balance Per Books, September 30 1525 12133 60 9 15 84 12049 General Journal Date 30 Sep Debit Cash Credit 1525 Notes receivable Interest received 30 Sep 1450 75 Cheque printing charges 60 Cash 30 Sep Accounts receivable 60 9 Cash 30 Sep Bank charges Cash 9 15 15 Acc111 - Chapter 8 Questions Name:______________________________ Answer each of the following questions in your own words. (Do not plagiarize from the textbook or any other source.) I want to see what you have learned in Chapter 8. Question 1: Fraud experts often say that there are three primary factors that contribute to employee fraud. Identify these three factors and explain what is meant by each. Answer: There are three main factors which contribute to the employee fraud, these includes opportunity, financial pressure and rationalization. Opportunity can be said when the employee takes the advantage of the system as it lacks control. Financial pressure is when an employee is in need of money and need more money which is not being covered by his current salary. Rationalization is when the employees feel that they are underpaid and claims that to be the reason of fraud. Question 2. \"Internal control is concerned only with enhancing the accuracy of the accounting records.\" Do you agree? Explain fully. Answer: Internal control is not only concerned with enhancing the accuracy but also concerned with the safeguarding of the company's assets from threat, robbery and unauthorized use. Thus I do not agree with the statement. Question 3. At the corner grocery store, all sales clerks make change out of one cash register drawer. Is this an internal control violation for cash receipts? Why, or why not? Explain fully. Answer: This case is considered as the volation of internal control as per the principle of establishing responsibility. It is important to have effective internal control for cash management, to ensure this, the company should give all the sales clerks individual cash register drawer. Questions 4. McCloud Fertilizer Co. owns the following assets at the balance sheet date: Cash in bank savings account Cash on hand $ 8,000 850 Cash refund due from the IRS ...... 1,000 Checking account balance Postdated checks 12,000 50 What amount should McCloud report as \"Cash\" on the balance sheet? (Show your computation.) Answer: Cash = 8000 + 850+12000 = 20850 Questions 5. Lori Flagg is confused about the lack of agreement between the cash balance in her company's general ledger account and the cash balance according to the bank statement. Explain the causes for the lack of agreement to Lori, and give an example of each cause. Answer: The lack of agreement between the bank balance and the cash balance occurs because of the time lag- example a check written in march but cleared in april, error - Error in writing the check amount like 265 written as 256, direct debits or credits by bank like bank service expenses and charges, On January 1, the Needcash Company establishes an imprest petty cash fund by issuing a check for $400. On January 31, the custodian of the petty cash fund submitted the following paid petty cash receipts for Frreplenishment of the petty cash fund when there is $40 cash in the fund. Freight-Out $ 117 Gas & Oil 185 Postage 29 Owner's IOU for lunch 25 (the owner, Dan Donahue, never pays petty cash back) Required: Prepare the general journal entries to: A. Establish the fund on January 1. B. Replenish the fund on January 31. C. Increase the petty cash fund to $500 on February 1. General Journal Date Debit Credit On January 1, the Needcash Company establishes an imprest petty cash fund by issuing a check for $400. On January 31, the custodian of the petty cash fund submitted the following paid petty cash receipts for replenishment of the petty cash fund when there is $40 cash in the fund. Freight-Out $ 117 Gas & Oil 185 Postage 29 Owner's IOU for lunch 25 (the owner, Dan Donahue, never pays petty cash back) Required: Prepare the general journal entries to: A. Establish the fund on January 1. B. Replenish the fund on January 31. C. Increase the petty cash fund to $500 on February 1. General Journal Date A Petty Cash Cash Debit 400 Credit 400 B Freight out 117 Gas and oil EXPENSE 185 Postage EXPENSE 29 Lunch D. DONAHUE, DRAWING 25 CASH OVER AND SHORT 4 Cash C Petty Cash Cash 356 360 456 100 456 100 On September 30, the Lemon Company has a cash balance per books of $10,608. The bank statement from the Valley Bank on that date showed a balance of $17,004. A comparison of the statement with the cash account revealed the following facts: 1. The statement included a debit memo of $60 for the printing of additional company checks. 2. Cash sales of $845 on September 12, were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $854. The bank credited Lemon Company for the correct amount. 3. Outstanding checks at September 30 totaled $6,225, and deposits in transit were $1,225. 4. On September 18, the company issued check No. 1023 for $550 to M. Barker, on account. The check, which cleared the bank in September, was incorrectly journalized and posted to Lemon Company for $505. 5. A $1,450 note receivable was collected by the bank for Lemon Company on September 29 plus $75 interest. The bank charges a collection fee of $15 for this collection service. No entries have been made yet in Lemon's records to show the note as collected or accrue the interest. REQUIRED: 1. Using the bank reconciliation form below, reconcile the bank statement of Lemon Company. 2. When you have completed the reconciliation, journalize the adjusting entries needed to correct Lemon's cash account in the general journal below. Lemon Company Bank Reconciliation September 30 Balance Per Bank Statement, September 30 Add: Deposit in transit Bank error 17004 1225 45 18274 18229 6225 Subtotal: Less: Outstanding check 12049 12004 Adjusted Balance Per Bank, September 30 Balance Per Books, September 30 Add: Notes receivable Subtotal: 10608 1525 12133 Less: Cheque printing charges Book error (854-845) Bank charges ERROR IN RECORDING PAYAMENT TO BARKER 60 9 15 45 84 129 12049 12004 Adjusted Balance Per Books, September 30 General Journal Date Cash Notes receivable Interest received INTEREST REVENUE Cheque printing charges EXPENSE Cash Accounts receivable SALES Cash Debit 1525 Credit 1450 75 60 60 9 9 Bank charges EXPENSE Cash 15 ACCOUNTS PAYABLE CASH 45 15 45 Acc111 - Chapter 8 Questions Name:______________________________ Answer each of the following questions in your own words. (Do not plagiarize from the textbook or any other source.) I want to see what you have learned in Chapter 8. Question 1: Fraud experts often say that there are three primary factors that contribute to employee fraud. Identify these three factors and explain what is meant by each. Answer: There are three main factors which contribute to the employee fraud, these includes opportunity, financial pressure and rationalization. Opportunity can be said when the employee takes the advantage of the system as it lacks control. Financial pressure is when an employee is in need of money and need more money which is not being covered by his current salary. Rationalization is when the employees feel that they are underpaid and claims that to be the reason of fraud. Question 2. \"Internal control is concerned only with enhancing the accuracy of the accounting records.\" Do you agree? Explain fully. Answer: Internal control is not only concerned with enhancing the accuracy but also concerned with the safeguarding of the company's assets from threat, robbery and unauthorized use. Thus I do not agree with the statement. Question 3. At the corner grocery store, all sales clerks make change out of one cash register drawer. Is this an internal control violation for cash receipts? Why, or why not? Explain fully. Answer: This case is considered as the volation of internal control as per the principle of establishing responsibility. It is important to have effective internal control for cash management, to ensure this, the company should give all the sales clerks individual cash register drawer. Questions 4. McCloud Fertilizer Co. owns the following assets at the balance sheet date: Cash in bank savings account Cash on hand $ 8,000 850 Cash refund due from the IRS ...... 1,000 Checking account balance Postdated checks 12,000 50 What amount should McCloud report as \"Cash\" on the balance sheet? (Show your computation.) Answer: Cash = 8000 + 850+12000 = 20850 Questions 5. Lori Flagg is confused about the lack of agreement between the cash balance in her company's general ledger account and the cash balance according to the bank statement. Explain the causes for the lack of agreement to Lori, and give an example of each cause. Answer: The lack of agreement between the bank balance and the cash balance occurs because of the time lag- example a check written in march but cleared in april, error - Error in writing the check amount like 265 written as 256, direct debits or credits by bank like bank service expenses and charges, On January 1, the Needcash Company establishes an imprest petty cash fund by issuing a check for $400. On January 31, the custodian of the petty cash fund submitted the following paid petty cash receipts for Frreplenishment of the petty cash fund when there is $40 cash in the fund. Freight-Out $ 117 Gas & Oil 185 Postage 29 Owner's IOU for lunch 25 (the owner, Dan Donahue, never pays petty cash back) Required: Prepare the general journal entries to: A. Establish the fund on January 1. B. Replenish the fund on January 31. C. Increase the petty cash fund to $500 on February 1. General Journal Date A Debit Petty Cash 400 Cash B 400 Freight out 117 Gas and oil 185 Postage 29 Lunch 25 Cash C Credit Petty Cash Cash 356 456 456 On September 30, the Lemon Company has a cash balance per books of $10,608. The bank statement from the Valley Bank on that date showed a balance of $17,004. A comparison of the statement with the cash account revealed the following facts: 1. The statement included a debit memo of $60 for the printing of additional company checks. 2. Cash sales of $845 on September 12, were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $854. The bank credited Lemon Company for the correct amount. 3. Outstanding checks at September 30 totaled $6,225, and deposits in transit were $1,225. 4. On September 18, the company issued check No. 1023 for $550 to M. Barker, on account. The check, which cleared the bank in September, was incorrectly journalized and posted to Lemon Company for $505. 5. A $1,450 note receivable was collected by the bank for Lemon Company on September 29 plus $75 interest. The bank charges a collection fee of $15 for this collection service. No entries have been made yet in Lemon's records to show the note as collected or accrue the interest. REQUIRED: 1. Using the bank reconciliation form below, reconcile the bank statement of Lemon Company. 2. When you have completed the reconciliation, journalize the adjusting entries needed to correct Lemon's cash account in the general journal below. Lemon Company Bank Reconciliation September 30 Balance Per Bank Statement, September 30 Add: Deposit in transit Bank error Subtotal: Less: Outstanding check 17004 1225 45 18274 6225 Adjusted Balance Per Bank, September 30 12049 Balance Per Books, September 30 Add: Notes receivable Subtotal: Less: Cheque printing charges Book error (854-845) Bank charges 10608 Adjusted Balance Per Books, September 30 1525 12133 60 9 15 84 12049 General Journal Date Cash Debit Credit 1525 Notes receivable 1450 Interest received 75 Cheque printing charges 60 Cash Accounts receivable 60 9 Cash Bank charges Cash 9 15 15 Acc111 - Chapter 8 Questions Name:______________________________ Answer each of the following questions in your own words. (Do not plagiarize from the textbook or any other source.) I want to see what you have learned in Chapter 8. Question 1: Fraud experts often say that there are three primary factors that contribute to employee fraud. Identify these three factors and explain what is meant by each. Answer: There are three main factors which contribute to the employee fraud, these includes opportunity, financial pressure and rationalization. Opportunity can be said when the employee takes the advantage of the system as it lacks control. Financial pressure is when an employee is in need of money and need more money which is not being covered by his current salary. Rationalization is when the employees feel that they are underpaid and claims that to be the reason of fraud. Question 2. \"Internal control is concerned only with enhancing the accuracy of the accounting records.\" Do you agree? Explain fully. Answer: Internal control is not only concerned with enhancing the accuracy but also concerned with the safeguarding of the company's assets from threat, robbery and unauthorized use. Thus I do not agree with the statement. Question 3. At the corner grocery store, all sales clerks make change out of one cash register drawer. Is this an internal control violation for cash receipts? Why, or why not? Explain fully. Answer: This case is considered as the volation of internal control as per the principle of establishing responsibility. It is important to have effective internal control for cash management, to ensure this, the company should give all the sales clerks individual cash register drawer. Questions 4. McCloud Fertilizer Co. owns the following assets at the balance sheet date: Cash in bank savings account Cash on hand $ 8,000 850 Cash refund due from the IRS ...... 1,000 Checking account balance Postdated checks 12,000 50 What amount should McCloud report as \"Cash\" on the balance sheet? (Show your computation.) Answer: Cash = 8000 + 850+12000 = 20850 Questions 5. Lori Flagg is confused about the lack of agreement between the cash balance in her company's general ledger account and the cash balance according to the bank statement. Explain the causes for the lack of agreement to Lori, and give an example of each cause. Answer: The lack of agreement between the bank balance and the cash balance occurs because of the time lag- example a check written in march but cleared in april, error - Error in writing the check amount like 265 written as 256, direct debits or credits by bank like bank service expenses and charges, On January 1, the Needcash Company establishes an imprest petty cash fund by issuing a check for $400. On January 31, the custodian of the petty cash fund submitted the following paid petty cash receipts for Frreplenishment of the petty cash fund when there is $40 cash in the fund. Freight-Out $ 117 Gas & Oil 185 Postage 29 Owner's IOU for lunch 25 (the owner, Dan Donahue, never pays petty cash back) Required: Prepare the general journal entries to: A. Establish the fund on January 1. B. Replenish the fund on January 31. C. Increase the petty cash fund to $500 on February 1. General Journal Date Jan 1 Debit Petty Cash 400 Cash Jan 31 400 Freight out 117 Gas and oil 185 Postage 29 Lunch 25 Cash Feb 1 Credit Petty Cash Cash 356 456 456 On September 30, the Lemon Company has a cash balance per books of $10,608. The bank statement from the Valley Bank on that date showed a balance of $17,004. A comparison of the statement with the cash account revealed the following facts: 1. The statement included a debit memo of $60 for the printing of additional company checks. 2. Cash sales of $845 on September 12, were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $854. The bank credited Lemon Company for the correct amount. 3. Outstanding checks at September 30 totaled $6,225, and deposits in transit were $1,225. 4. On September 18, the company issued check No. 1023 for $550 to M. Barker, on account. The check, which cleared the bank in September, was incorrectly journalized and posted to Lemon Company for $505. 5. A $1,450 note receivable was collected by the bank for Lemon Company on September 29 plus $75 interest. The bank charges a collection fee of $15 for this collection service. No entries have been made yet in Lemon's records to show the note as collected or accrue the interest. REQUIRED: 1. Using the bank reconciliation form below, reconcile the bank statement of Lemon Company. 2. When you have completed the reconciliation, journalize the adjusting entries needed to correct Lemon's cash account in the general journal below. Lemon Company Bank Reconciliation September 30 Balance Per Bank Statement, September 30 Add: Deposit in transit Bank error Subtotal: Less: Outstanding check 17004 1225 45 18274 6225 Adjusted Balance Per Bank, September 30 12049 Balance Per Books, September 30 Add: Notes receivable Subtotal: Less: Cheque printing charges Book error (854-845) Bank charges 10608 Adjusted Balance Per Books, September 30 1525 12133 60 9 15 84 12049 General Journal Date 30 Sep Debit Cash Credit 1525 Notes receivable Interest received 30 Sep 1450 75 Cheque printing charges 60 Cash 30 Sep Accounts receivable 60 9 Cash 30 Sep Bank charges Cash 9 15 15 Acc111 - Chapter 8 Questions Name:______________________________ Answer each of the following questions in your own words. (Do not plagiarize from the textbook or any other source.) I want to see what you have learned in Chapter 8. Question 1: Fraud experts often say that there are three primary factors that contribute to employee fraud. Identify these three factors and explain what is meant by each. Answer: There are three main factors which contribute to the employee fraud, these includes opportunity, financial pressure and rationalization. Opportunity can be said when the employee takes the advantage of the system as it lacks control. Financial pressure is when an employee is in need of money and need more money which is not being covered by his current salary. Rationalization is when the employees feel that they are underpaid and claims that to be the reason of fraud. Question 2. \"Internal control is concerned only with enhancing the accuracy of the accounting records.\" Do you agree? Explain fully. Answer: Internal control is not only concerned with enhancing the accuracy but also concerned with the safeguarding of the company's assets from threat, robbery and unauthorized use. Thus I do not agree with the statement. Question 3. At the corner grocery store, all sales clerks make change out of one cash register drawer. Is this an internal control violation for cash receipts? Why, or why not? Explain fully. Answer: This case is considered as the volation of internal control as per the principle of establishing responsibility. It is important to have effective internal control for cash management, to ensure this, the company should give all the sales clerks individual cash register drawer. Questions 4. McCloud Fertilizer Co. owns the following assets at the balance sheet date: Cash in bank savings account Cash on hand $ 8,000 850 Cash refund due from the IRS ...... 1,000 Checking account balance Postdated checks 12,000 50 What amount should McCloud report as \"Cash\" on the balance sheet? (Show your computation.) Answer: Cash = 8000 + 850+12000 = 20850 Questions 5. Lori Flagg is confused about the lack of agreement between the cash balance in her company's general ledger account and the cash balance according to the bank statement. Explain the causes for the lack of agreement to Lori, and give an example of each cause. Answer: The lack of agreement between the bank balance and the cash balance occurs because of the time lag- example a check written in march but cleared in april, error - Error in writing the check amount like 265 written as 256, direct debits or credits by bank like bank service expenses and charges, On January 1, the Needcash Company establishes an imprest petty cash fund by issuing a check for $400. On January 31, the custodian of the petty cash fund submitted the following paid petty cash receipts for Frreplenishment of the petty cash fund when there is $40 cash in the fund. Freight-Out $ 117 Gas & Oil 185 Postage 29 Owner's IOU for lunch 25 (the owner, Dan Donahue, never pays petty cash back) Required: Prepare the general journal entries to: A. Establish the fund on January 1. B. Replenish the fund on January 31. C. Increase the petty cash fund to $500 on February 1. General Journal Date Debit Credit On January 1, the Needcash Company establishes an imprest petty cash fund by issuing a check for $400. On January 31, the custodian of the petty cash fund submitted the following paid petty cash receipts for replenishment of the petty cash fund when there is $40 cash in the fund. Freight-Out $ 117 Gas & Oil 185 Postage 29 Owner's IOU for lunch 25 (the owner, Dan Donahue, never pays petty cash back) Required: Prepare the general journal entries to: A. Establish the fund on January 1. B. Replenish the fund on January 31. C. Increase the petty cash fund to $500 on February 1. General Journal Date A Petty Cash Cash Debit 400 Credit 400 B Freight out 117 Gas and oil EXPENSE 185 Postage EXPENSE 29 Lunch D. DONAHUE, DRAWING 25 CASH OVER AND SHORT 4 Cash C Petty Cash Cash 356 360 456 100 456 100 On September 30, the Lemon Company has a cash balance per books of $10,608. The bank statement from the Valley Bank on that date showed a balance of $17,004. A comparison of the statement with the cash account revealed the following facts: 1. The statement included a debit memo of $60 for the printing of additional company checks. 2. Cash sales of $845 on September 12, were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $854. The bank credited Lemon Company for the correct amount. 3. Outstanding checks at September 30 totaled $6,225, and deposits in transit were $1,225. 4. On September 18, the company issued check No. 1023 for $550 to M. Barker, on account. The check, which cleared the bank in September, was incorrectly journalized and posted to Lemon Company for $505. 5. A $1,450 note receivable was collected by the bank for Lemon Company on September 29 plus $75 interest. The bank charges a collection fee of $15 for this collection service. No entries have been made yet in Lemon's records to show the note as collected or accrue the interest. REQUIRED: 1. Using the bank reconciliation form below, reconcile the bank statement of Lemon Company. 2. When you have completed the reconciliation, journalize the adjusting entries needed to correct Lemon's cash account in the general journal below. Lemon Company Bank Reconciliation September 30 Balance Per Bank Statement, September 30 Add: Deposit in transit Bank error 17004 1225 45 18274 18229 6225 Subtotal: Less: Outstanding check 12049 12004 Adjusted Balance Per Bank, September 30 Balance Per Books, September 30 Add: Notes receivable Subtotal: 10608 1525 12133 Less: Cheque printing charges Book error (854-845) Bank charges ERROR IN RECORDING PAYAMENT TO BARKER 60 9 15 45 84 129 12049 12004 Adjusted Balance Per Books, September 30 General Journal Date Cash Notes receivable Interest received INTEREST REVENUE Cheque printing charges EXPENSE Cash Accounts receivable SALES Cash Debit 1525 Credit 1450 75 60 60 9 9 Bank charges EXPENSE Cash 15 ACCOUNTS PAYABLE CASH 45 15 45