Chapter 4, Problem 18P O Bookmark Show all steps: ON Bank reconciliation and internal control Following is a bank reconciliation for Zocar Enterprises for June 30, 2018 Cash Account Bank Statement $ 1,918 $3,000 600 (1,507) Balance as of 6/30/2018 Deposit in transit Outstanding checks Note collected by bank Bank service charge NSF check Adjusted cash balance as of 6/30/2018 2,000 (25) (1,800) $ 2,093 $ 2.093 When reviewing the bank reconciliation, Zocar's auditor was unable to locate any reference to the NSF check on the bank statement. Furthermore, the clerk who reconciles the bank account and records the adjusting entries could not find the actual NSF check that should have been included in the bank statement. Finally, there was no specific reference in the accounts receivable supporting records identifying a party who had written a bad check. Required a. Prepare the adjustments that the clerk would have made to record the NSF check. b. Assume that the clerk who prepares the bank reconciliation and records the adjustments also makes bank deposits. Explain how the clerk could use a fictitious NSF check to hide the theft of cash. c. How could Zocar avoid the theft of cash that is concealed by the use of fictitious NSF checks? P4-18 Zocar Enterprises Bank Reconciliation June 30, 2018 Unadjusted bank balance, June 30, 2018 Add: Deposit in transit Less: Outstanding checks Adjusted bank balance, June 30, 2018 Unadjusted book balance, March 31, 2018 Add: Note collected by bank Less: Bank service charge NSF check Adjusted book balance, June 30, 2018 True cash balance, June 30, 2018 Amount stolen