Cash Short and Over

The controller has completed the T accounts for the cash and sales accounts as of January 30, but needs to attend an important conference in another city. She has requested that you prepare the T account for the cash short and over account as of January 30 also. You are told that the balance of the account is zero as of the beginning of January, and that all the companys sales are in cash. To simplify, this problem assumes that a company has only one bank account, which is identified in the Ledger as Cash.

Review the following T accounts, and then scroll down to complete the cash short and over T account and answer the associated question that follows it.

Cash

Balance 1/1 5,500 1/2 Establish Petty Cash 500

1/5 2,800

1/12 6,255

1/23 3,270

1/30 4,450

Balance 21,775

Sales

Balance 1/1 0

1/5 2,805

1/12 6,225

1/23 3,300

1/30 4,390

Balance 16,720

Review the preceding T accounts, and then complete the cash short and over T account and associated question that follows it.

Cash Short and Over

Balance 1/1 0 1/12

1/5 5 1/30

1/23

Balance

Petty Cash

Murdstone, Inc. issued a check on January 2 to establish a petty cash fund of $500. On January 31, the amount of cash in the petty cash fund is $437. The company would like to issue a check to replenish the fund, based on the following summary of petty cash receipts:

Account Amount on

Receipt

Office Supplies $32

Miscellaneous Administrative Expense 23

The companys policy is to record any missing funds in the cash short and over account.

The new intern has prepared a proposed journal entry to record the replenishing of the petty cash fund:

Date Description Debit Credit

Jan. 31 Petty Cash 55

Cash 55

Prepare for your discussion with the intern by journalizing the correct entry for the replenishment of the petty cash fund. If an amount box does not require an entry, leave it blank.

Bank Reconciliation

The companys accounting intern has prepared the end-of-January bank reconciliation from the bank statement, and is worried because the adjusted balance amounts do not agree. After reviewing the bank reconciliation, scroll down for the next steps in helping the intern.

Murdstone, Inc.

Bank Reconciliation

January 31, 20Y5

Cash balance according to bank statement $23,557.98

Adjustments:

Add: Deposit in transit on January 31 12,125.25

Deduct: Outstanding Check No. 124 $(62.00)

Outstanding Check No. 125 (42.00)

Outstanding Check No. 129 (1,250.00)

Total deductions (1,354.00)

Adjusted balance $34,329.23

Cash balance according to Murdstone, Inc. $51,596.88

Adjustments:

Add: Note and interest collected by bank 15,250.75

Deduct: Check returned because of insufficient funds $(23,475.40)

Bank service charge (250.00)

Error in recording Check No. 123 (9,000.00)

Total deductions (32,725.40)

Adjusted balance $34,122.23

You assist the intern to check source documents, and find that most of the dollar amounts are correct; however, two dollar amounts are incorrect. After reviewing the following table, scroll down for the next steps in helping the intern.

Item Correct in

Intern's Reconciliation? If "No,"

Corrected Amount

Cash balance according to bank statement Yes

Deposit in transit on January 31 Yes

Outstanding Check No. 124 Yes

Outstanding Check No. 125 No $24.00

Outstanding Check No. 129 Yes

Cash balance according to Murdstone, Inc. Yes

Check returned because of insufficient funds Yes

Note and interest collected by bank Yes

Bank service charge No $25.00

Murdstone error in recording Check No. 123 as $12,435.00 rather than the correct amount of $21,435.00 Yes

After asking the intern to search for other errors by comparing her reconciliation to prior bank reconciliations prepared by the former accountant, you work together to compute the corrected adjusted balance. Round your answer to two decimal places.

Corrected adjusted balance amount: $__________?

Here is more information!

Mastery Problem: Internal Control and Cash

Murdstone, Inc.,

Youve just been hired as an accountant at Murdstone, Inc., a retailer of supplies for arts and crafts. Since the previous accountant left his position suddenly, the controller of Murdstone, Inc. has asked for your assistance in filling in some missing data for the companys January accounting records. Youll also be responsible for training the companys new accounting intern.

Cash Short and Over O1/12 Balance 1/1 5 1/30 1/5 1/23 Balance Jan. 31 Office Supplies Miscellaneous Administrative Expense 31 Cash Short and Over Cash Cash Short and Over O1/12 Balance 1/1 5 1/30 1/5 1/23 Balance Jan. 31 Office Supplies Miscellaneous Administrative Expense 31 Cash Short and Over Cash