EXERCISES Exercise 8-1 Analyzing internal control C1 Identify the internal control principle that was violated in each of the following separate situations. a. The recordkeeper left town after the owner discovered a large sum of money had disappeared. An au- dit found that the recordkeeper had written and signed several checks made payable to his fiance and recorded the checks as salaries expense. b. An employee was put in charge of handling cash. That employee later stole cash from the business. The company incurred an uninsured loss of $184.000. c. There is $500 in cash missing from a cash register drawer. Three saleselerks shared the cash register drawer, so the owner cannot determine who is at fault. Exercise 8-3 Determine whether each procedure described below is an internal control strength or weakness; then iden- Internal control streng tify the internal control principle violated or followed for each procedure. and weaknesses 1. The same employee requests, records, and makes payment for purchases of inventory. 2. The company saves money by having employees involved in operations perform the only review of C1 internal controls 3. Time is saved by not updating records for use of supplies. 4. The recordkeeper is not allowed to write checks or initiate EFTs. 5. Each salesclerk is in charge of her own cash drawer. Exercise 8-12 Bank reconciliation P3 Del Gato Clinic's Cash account shows an $11,589 debit balance and its bank statement shows $10,555 on deposit at the close of business on June 30. Prepare its bank reconciliation using the following information. a. Outstanding checks as of June 30 total $1.829. b. The June 30 bank statement lists a $16 bank service charge. c. Check No. 919, listed with the canceled checks, was correctly drawn for $467 in payment of a utility bill on June 15. Del Gato Clinic mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $476. d. The June 30 cash receipts of $2,856 were placed in the bank's night depository after banking hours and were not recorded on the June 30 bank statement Check Reconciled bal 12 EXERCISES Exercise 8-1 Analyzing internal control C1 Identify the internal control principle that was violated in each of the following separate situations. a. The recordkeeper left town after the owner discovered a large sum of money had disappeared. An au- dit found that the recordkeeper had written and signed several checks made payable to his fiance and recorded the checks as salaries expense. b. An employee was put in charge of handling cash. That employee later stole cash from the business. The company incurred an uninsured loss of $184.000. c. There is $500 in cash missing from a cash register drawer. Three saleselerks shared the cash register drawer, so the owner cannot determine who is at fault. Exercise 8-3 Determine whether each procedure described below is an internal control strength or weakness; then iden- Internal control streng tify the internal control principle violated or followed for each procedure. and weaknesses 1. The same employee requests, records, and makes payment for purchases of inventory. 2. The company saves money by having employees involved in operations perform the only review of C1 internal controls 3. Time is saved by not updating records for use of supplies. 4. The recordkeeper is not allowed to write checks or initiate EFTs. 5. Each salesclerk is in charge of her own cash drawer. Exercise 8-12 Bank reconciliation P3 Del Gato Clinic's Cash account shows an $11,589 debit balance and its bank statement shows $10,555 on deposit at the close of business on June 30. Prepare its bank reconciliation using the following information. a. Outstanding checks as of June 30 total $1.829. b. The June 30 bank statement lists a $16 bank service charge. c. Check No. 919, listed with the canceled checks, was correctly drawn for $467 in payment of a utility bill on June 15. Del Gato Clinic mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $476. d. The June 30 cash receipts of $2,856 were placed in the bank's night depository after banking hours and were not recorded on the June 30 bank statement Check Reconciled bal 12