Bronys Bikes maintains two general demand deposit bank accounts and an imprest payroll account. One of the general bank accounts and the payroll account are with Dallas Dollar Bank. The second demand deposit account is with Bank Two, the Chicago bank from which Bronys Bikes obtained the $45 million loan referred to in Module I. As part of the cash audit, Derick has asked you to reperform the reconciliation of all three of the bank accounts for December 20X9, and to do an analysis of inter-bank transfers between Dollar Bank and Bank Two.

Recall that Bronys Bikes has reconciled all bank accounts for each of the 12 months. You will begin, therefore, with the companys documentation of its December 20X9 reconciliations.

Requirements

1. Using the Excel file labeled 20X9 Bank.xlxs. Briefly examine the following documentation in this file:

WP 1.A - Cash on hand and in banks;

WP 1.B - Bank reconciliationDallas Dollar Bank; and

WP 1.C - Inter-bank transfer schedule.

Scroll to WP 1.B, Bank ReconciliationDallas Dollar Bank. Does the Dollar Bank account reconcile for December? What are the possible causes for nonreconciliation?

2. In tracing cash disbursements from the December check register to the bank statement, you learn that check 44264, in the amount of $642,752, was recorded incorrectly as $651,752. Incorporate this misstatement into the appropriate section of the bank reconciliation. Does the account reconcile after you have made this correction? Assuming check 44264 was in payment of accounts payable (refer to Exhibit BB.16) (Link), draft the necessary audit adjustment at the bottom of your document.

3. Scroll to WP 1.B and record the audit adjustment in the audit adjustments column of the lead schedule.

4. The deposit in transit, as well as all but the last two checks outstanding at December 31, cleared with the bank cutoff statement. What specific audit objectives does obtaining a cutoff statement directly from the bank support? If the cutoff bank statement covered the period 1/1/Y0 through 1/21/Y0 and the deposit in transit was credited by the bank on 1/12/Y0, would you be concerned? If so, why? What additional procedures would you apply to allay your concerns? Note on document WP 1.B that Dollar Bank credited the deposit in transit on 1/3/Y0.

Date 12/31/20x8 Audited Balance 12/31/20X9 Per Ledger Audit Adjust ents 12/31/20x9 Audited Reclassifications $10.200,000 1. and 1.C Bank Tvo Demand Deposit Dallas Dollar Bank Denand Dcposit Dallas Dollar Bank Payroll Account Petty Cash S0 $15.741.000 $55.000 $4.000 $10.200.000 $2.100.000 $57.000 S5.000 $2.100.000 1.B $57.000 1.D S5.000 1.E S15.800,000 $12.362.000 S0 S0 S12.362,000 UTB 1 Brony s Bikes Prepared by Date Revicved by Date Bank Reconciliation-Client Prepared Dallas Dollar Bank Decenber 31. 20x9 12/31/X9 Balance per bank statenent 12/31/39 Balance per general ledger- $2.100.132 $3.952.562 C $4.671.958 > dd dcposits in transit unadjustcd Deduct bank charges Audit adjustnent No. 7 $8.624.520 ($132) Deduct outstanding checks 44662 44665 44669 44672 44677 44678 44679 44680 44681 44682 44683 44684 S573.122> $76,987 S864.211> 9111.900 12/31/X9 Adjusted balance 2.100.000 G S237.000 > S290. 000 > $422.300> $1.340.000 > S6.500 > $1.600,000> HP 1 S326, 000 $667.500 $6.515.520 12/31X9 Adjusted balance $2.109.000 Date 12/31/20x8 Audited Balance 12/31/20X9 Per Ledger Audit Adjust ents 12/31/20x9 Audited Reclassifications $10.200,000 1. and 1.C Bank Tvo Demand Deposit Dallas Dollar Bank Denand Dcposit Dallas Dollar Bank Payroll Account Petty Cash S0 $15.741.000 $55.000 $4.000 $10.200.000 $2.100.000 $57.000 S5.000 $2.100.000 1.B $57.000 1.D S5.000 1.E S15.800,000 $12.362.000 S0 S0 S12.362,000 UTB 1 Brony s Bikes Prepared by Date Revicved by Date Bank Reconciliation-Client Prepared Dallas Dollar Bank Decenber 31. 20x9 12/31/X9 Balance per bank statenent 12/31/39 Balance per general ledger- $2.100.132 $3.952.562 C $4.671.958 > dd dcposits in transit unadjustcd Deduct bank charges Audit adjustnent No. 7 $8.624.520 ($132) Deduct outstanding checks 44662 44665 44669 44672 44677 44678 44679 44680 44681 44682 44683 44684 S573.122> $76,987 S864.211> 9111.900 12/31/X9 Adjusted balance 2.100.000 G S237.000 > S290. 000 > $422.300> $1.340.000 > S6.500 > $1.600,000> HP 1 S326, 000 $667.500 $6.515.520 12/31X9 Adjusted balance $2.109.000