Excercise 6-4,6-7, problems 6-1,6-4

Problem 6-4 Cash and Liquid Assets on the Balance Sheet The following current assets are listed in a company's general ledger. The accountant wants to place the items in order of liquidity on the balance sheet. Accounts Receivable Certificates of Deposit (six months) Investment in Stock Prepaid Rent Money Market Fund Petty Cash Fund Required Rank the accounts in terms of liquidity. Identify items to be included in the total of cash and cash equivalents and explain why the items not included are not as liquid. Explain how these items should be classified 6-1 Bank Reconciliation probing information is available to assist you in preparing a bank reconeiliation for Calico The comesstance on the May 31 bank statement is $8,432.11. on May 31 ocuded on the bank statement is a $1,250 deposit made by Calico Corners late on May 31 king about internal idelines to "make on between the canceled checks returned with the bank statement and the com- records indicated that the following checks are outstanding at May 31: A No. 123 No. 127 No. 128 No. 130 s 23.40 145.00 210.80 67.32 finternal control. d and recorded. Cash account on the company's books shows a balance of $9,965.34. d. The The bank acts as a collection agency for interest earned on some municipal bonds held by Calico The May bank statement indicates interest of $465.00 earned during the month. of performing s, but with the ark to indicate sks to any of on the checking account and added to Calico Corners' account during May Interest earned $54.60. Miscellaneous bank service charges amounted to $50.00. was A cust omer's NSF check in the amount of $166.00 was returned with the May bank statement. hA comparison between the deposits listed on the bank statement and the company's books revealed that a customer's check in the amount of $123.45 was recorded on the books during May but was never added to the company's account. The bank erroneously added the check to the account of Calico Closet, which has an account at the same bank. Continued) Gise 6-7 Composition of Cash Exercise 6-7 es and N for no, indicate whether each of the following items should be included in ivalents on the balance sheet. If an item should not be included in cash and cash cash alents, indicate where it should appear on the balance sheet. and cash equ Li 1. Checking account at Third County Bank 2. Petty cash fund 3. Coin and currency 4. Postage stamps 5. An IOU from an employee 6. Savings account at Ft. Worth 7. A six-month CD 8. Undeposited customer checks 9. A customer's check returmed by the bank and marked NSF 10. Sixty-day U.S. Treasury bills 11. A cashier's check Savings & Loan PROBLEMS Problem 6-1 Bank Reconciliation The following infor Corners on May 31: mation is available to assist you in preparing a bank reconcilation for ce on the May 31 bank statement is $8,432.11. ed on the bank statement is a $1,250 deposit made by Calico Corners late on May rtween the canceled checks returned with the bank statement and the llowing checks are outstanding at May 31: 23.40 Answer in terms of the adjustment needed to correct l8P tl tiu Exercise 6-4 Working Backward: Bank Reconciliation exter Company's bank reconciliation shows an adjusted cash balance of $3,254.33. ing items also appear on the reconciliation: NSF check Deposit in transit Interest earned Outstanding checks Bank service charges $110.50 332.10 65.42 560.55 30.00 Required 1. Determine the balance on the bank statement prior to adjustment. 2. Determine the balance on the books prior to adjustment. Exercise 6-5 Internal Control The university drama club is planning a raffle. The president overheard you talking about intea control to another accounting student, so she asked you to set up some guidelines to i sure" that all money collected for the raffle is accounted for by the club. Required 1. Describe guidelines that the club should follow to achieve an acceptable level of interna 2. Comment on the president's request that she "be sure" all money is collected and Exercise 6-6 Segregation of Duties The following tasks are performed by three employees, each of whom is capable of pen