Problem 1 Supreme Companys bookkeeper prepared the bank reconciliation for May 31, 2010 The bookkeeper had the following responsibilities All bookkeeping, the handling of cash receipts, the preparation of the monthly bank reconciliation and the deposit at the bank Assume that the bookkeeper prepared all of the checks which were signed by the owner The owner, on a daily basis verified and signed all checks that were written, counted all cash and verified the debit to cash in the cash receipts journal and the credit to cash in the cash payments journal Assume that the office manager performed all other duties May 31 Bank Statement Balance of previous bank statement on 4 30 $ 12,760 Six deposits and other credits totaling 7,596 Eleven checks and other debts totaling 4,977 Current balance as of this statement $ 15, 379 Date Amount Transition Type 5 1 $ 915 Deposit See Duplicate Deposit Slips Page 2 5 2 $ 1,000 Deposit 5 5 $ 737 Deposit 5 14 $ 850 Deposit 5 21 $ 729 Deposit 5 28 $ 815 Deposit 5 28 $ (581) NSF Check 5 31 $ (11) Service Charge 5 31 $ 2,550 Bank Collection (Collection on note, principal $2,500) Date Check Amount 5 1 391 $ 125 See Carbon Copy of Checks Issued Pages 3 5 5 1 3 92 $ 112 5 2 393 $ 500 5 3 394 $ 215 5 4 395 $ 100 5 13 398 $ 750 5 17 399 $ 1,000 5 27 400 $ 543 5 28 401 $ 450 5 29 402 $ 175 5 31 403 $ 415 Duplicate Deposit Slips Deposit Slip Cash Currency Coins 00 00 Date List of Checks 4 30 10 Gilly 915 00 Total 915 00 Deposit Slip Cash Currency Coins 750 00 Date List of Checks 5 1 10 Jones 250 00 Total 1000 00 Deposit Slip Cash Currency Coins 156 00 Date List of Checks 5 4 10 Slade 581 00 Total 737 00 Deposit Slip Cash Currency Coins 500 00 Date List of Checks 5 13 10 Luce 350 00 Total 850 00 Deposit Slip Cash Currency Coins 600 00 Date List of Checks 5 20 10 Pyle 129 00 Total 729 00 Deposit Slip Cash Currency Coins 445 00 Date List of Checks 5 27 10 Dudley 370 00 Total 815 00 Deposit Slip Cash Currency Coins 0 00 Date List of Checks 5 31 10 Gilly 915 00 Total 915 00 Copies of Written Checks Supreme Company Date 4 17 10 391 Pay to the Order of Jones Company $ 125 00 NBT Bank One Hundred Twenty Five and no cents Memo Supplies Jill Supreme Supreme Company Date 4 15 10 392 Pay to the Order of Jordon $ 112 00 NBT Bank One Hundred twelve and no cents Memo Invoice 2324 Jill Supreme Supreme Company Date 4 21 10 393 Pay to the Order of Jones Company $ 500 00 NBT Bank Five Hundred and no cents Memo Invoice 5132 Jill Supreme Supreme Company Date 4 24 10 394 Pay to the Order of King and Company $ 215 00 NBT Bank Two Hundred fifteen and no cents Memo Invoice 700 Jill Supreme Supreme Company Date 4 28 10 395 Pay to the Order of Jones Company $ 100 00 NBT Bank One Hundred and no cents Memo Invoice 2360 Jill Supreme Supreme Company Date 4 30 10 396 Pay to the Order of Al Kazam Leisure Man $ 514 00 NBT Bank Five Hundred fourteen and no cents Memo Invoice 010 Jill Supreme Supreme Company Date 4 30 10 397 Pay to the Order of Jones International $ 771 00 NBT Bank Seven Hundred seventy one and no cents Memo Invoice 010 Jill Supreme Supreme Company Date 5 01 10 398 Pay to the Order of Carr Office Supplies $ 750 00 NBT Bank Seven Hundred fifty and no cents Memo Invoice 870 Jill Supreme Supreme Company Date 5 12 10 399 Pay to the Order of Jill Supreme $ 1,000 00 NBT Bank One Thousand and no cents Memo Withdrawal Jill Supreme Supreme Company Date 5 20 10 400 Pay to the Order of Hooyah $ 543 00 NBT Bank Five Hundred forty three and no cents Memo Invoice 571 Jill Supreme Supreme Company Date 5 22 10 401 Pay to the Order of King Company $ 450 00 NBT Bank Four Hundred fifty and no cents Memo Invoice 556 Jill Supreme Supreme Company Date 5 24 10 402 Pay to the Order of Utility Company $ 175 00 NBT Bank One Hundred seventy five and no cents Memo May Electric Bill Jill Supreme Supreme Company Date 5 27 10 403 Pay to the Order of Ollyoop $ 415 00 NBT Bank Four Hundred fifteen and no cents Memo Invoice 5002 Jill Supreme Supreme Company Date 5 28 10 404 Pay to the Order of Gardiner Company $ 300 00 NBT Bank Three Hundred and no cents Memo Invoice 444 Jill Supreme Supreme Company Date 5 30 10 405 Pay to the Order of Father Sons $ 160 00 NBT Bank One Hundred sixty and no cents Memo Invoice 123 Jill Supreme Supreme Company Date 5 31 10 406 Pay to the Order of Thomson Learning $ 514 00 NBT Bank Five Hundred fourteen and no cents Memo Books Jill Supreme Supreme Company Date 5 21 10 407 Pay to the Order of Ollyoop $ 800 00 NBT Bank Eight Hundred and no cents Memo Invoice 5020 Jill Supreme SUPREME COMPANYS BOOKS Cash Receipts Recorded in Cash Receipts Journal Date Cash Debit 5 1 $ 1,000 JS 5 4 $ 737 JS 5 9 $ 1,285 JS 5 13 $ 850 JS 5 20 $ 729 JS 5 27 $ 815 JS 5 31 $ 915 JS Total $ 6,331 Cash Payments Recorded In Cash Payments Journal Check No Cash Credit 398 $ 750 399 $ 1,000 400 $ 345 401 $ 450 402 $ 175 403 $ 415 404 $ 300 405 $ 160 406 $ 514 407 $ 800 Total $ 4,909 See duplicate deposit slips on page 2 See duplicate carbon copies of checks on pages 3 5 Assume that all cash receipts were counted by owner Jill Supreme, and she verified the debit in the cash receipts journal and the bookkeeper deposited in bank on the same day Assume that all deposits cleared the bank the day after they were recorded in the cash receipts journal and deposited (i e 5 4 deposit cleared on 5 5 see page 1) Assume that any cash receipt that did not clear the bank by the next day was never deposited in the bank Cash General Ledger Date Explanation Debit Credit Balance 4 30 Balance 11,338 5 31 Cash Receipts 6,331 5 31 Cash Payments 4,909 12,760 Check No 400 was issued for $543 to Hooyah in payment of an accounts payable The NSF check returned with the bank statement was received from customer, Pat Slade in payment of his Accounts Receivable The NSF check has not been recorded in the general ledger The following is the bank reconciliation prepared by the bookkeeper for April 30, 2010 SUPREME COMPANY BANK RECONCILIATION April 30, 2010 Cash balance according to bank statement $12,760 Add Deposits in Transit 4 30 $ 915 $ 915 $ 13,675 Less Outstanding Checks 391 $ 125 392 $ 112 393 $ 500 394 $ 215 395 $ 100 396 $ 514 397 $ 771 $ 2,337 Adjusted Balance $ 11,338 Cash balance according to the ledger $ 9,200 Add Additions to bank account not recorded on books proceeds from collection of note Principal $ 2,500 Interest $ 50 Error in recording check 389 $ 180 $ 2,730 $ 11,930 Deductions by bank not recorded on books Check Returned NSF $ 581 Bank Service Charge $ 11 $ 592 Adjusted Balance $ 11,338 SUPREME COMPANY BANK RECONCILIATION May 31, 2010 Cash balance according to bank statement $ 15,379 Add Deposits in Transit 5 31 $ 915 $ 915 $ 16,294 Less Outstanding Checks 404 $ 300 405 $ 160 406 $ 514 407 $ 800 $ 1,774 Adjusted Balance $ 14,520 Cash balance according to the ledger $ 12,760 Add Additions to bank account not recorded on books proceeds from collection of note Principal $ 2,500 Interest $ 50 $ 2,550 $ 15,310 Deductions by bank not recorded on books Check Returned NSF $ 581 Bank Service Charge $ 11 Error in recording check 400 $ 198 $ 790 Adjusted Balance $ 14,520 Required Review the Bank Reconciliation prepared by your employee on May 31 above and prepare a corrected bank reconciliation (Prepare on the Project 3 Excel Spreadsheet Problem 1 parts 1 4 tab ) Explain why you think your corrected bank reconciliation does not balance How did the employee conceal the embezzlement (Prepare on the Project 3 Excel Spreadsheet Problem 1 parts 2 3 tab ) Recommend any improvements to internal controls to prevent this embezzlement from occurring again Assume that the only parties who will be working in this business will be Jill Supreme (owner), the new bookkeeper and the office manager Include in your discussion the following Who should receive the cash receipts and make the deposit at the bank when the owner is out of the office Include the rationale for your answer Who should prepare the monthly bank reconciliation Include the rationale for your answer Who should sign the checks Include the rationale for your answer Who should do the bookkeeping Include the rationale for your answer (Prepare Part 3 on the Project 3 Excel Spreadsheet Problem 1 parts 2 3 tab ) Record all required journal entries for May 31, 2010 related to the bank reconciliation including a journal entry for the embezzlement Assume the embezzlement was never recovered (Record the journal entries on the Project 3 Excel Spreadsheet Problem 1 1 4 tab ) Requirement 4 Record the journal entries including a journal entry for the embezzlement Supreme Company Corrected Bank Reconciliation Journal E Date 31, 2010 Accounts Debit Credit Bank Month End Cash Balance per bank statement, May 31 Add May 31, 2010 Deposits in transit Journal En Outstanding checks Date Accounts Debit May 31, 2010 ournal En Date May 31, 2010 Debit Credit Adjusted bank bank balance, May 31 Month End Cash Balance According to ledger Balance, May 31 Add Journal En Date Debit May 31, 2010 Journal En Date Accounts Debit Adjusted book balance, May 31 May 31, 2010 Requirement 4 Record the journal entries including a journal entry for the embezzlement Supreme Company Corrected Bank Reconciliation Journal E Date 31, 2010 Accounts Debit Credit Bank Month End Cash Balance per bank statement, May 31 Add May 31, 2010 Deposits in transit Journal En Outstanding checks Date Accounts Debit May 31, 2010 ournal En Date May 31, 2010 Debit Credit Adjusted bank bank balance, May 31 Month End Cash Balance According to ledger Balance, May 31 Add Journal En Date Debit May 31, 2010 Journal En Date Accounts Debit Adjusted book balance, May 31 May 31, 2010

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Problem 1 Supreme Companys bookkeeper prepared the bank reconciliation for May 31, 2010. The bookkeeper had the following responsibilities: All bookkeeping, the handling of cash

Problem 1

Supreme Companys bookkeeper prepared the bank reconciliation for May 31, 2010. The bookkeeper had the following responsibilities: All bookkeeping, the handling of cash receipts, the preparation of the monthly bank reconciliation and the deposit at the bank. Assume that the bookkeeper prepared all of the checks which were signed by the owner. The owner, on a daily basis verified and signed all checks that were written, counted all cash and verified the debit to cash in the cash receipts journal and the credit to cash in the cash payments journal. Assume that the office manager performed all other duties.

May 31 Bank Statement
Balance of previous bank statement on 4/30	$ 12,760
Six deposits and other credits totaling	7,596
Eleven checks and other debts totaling	4,977
Current balance as of this statement	$ 15, 379

Date	Amount	Transition Type
5/1	$ 915	Deposit	See Duplicate Deposit Slips Page 2
5/2	$ 1,000	Deposit
5/5	$ 737	Deposit
5/14	$ 850	Deposit
5/21	$ 729	Deposit
5/28	$ 815	Deposit
5/28	$ (581)	NSF Check
5/31	$ (11)	Service Charge
5/31	$ 2,550	Bank Collection	(Collection on note, principal $2,500)

Date	Check #	Amount
5/1	391	$ 125	See Carbon Copy of Checks Issued Pages 3 - 5
5/1	392	$ 112
5/2	393	$ 500
5/3	394	$ 215
5/4	395	$ 100
5/13	398	$ 750
5/17	399	$ 1,000
5/27	400	$ 543
5/28	401	$ 450
5/29	402	$ 175
5/31	403	$ 415

Duplicate Deposit Slips

Deposit Slip	Cash	Currency Coins	00	00
Date	List of Checks
4/30/10	Gilly		915	00
		Total	915	00

Deposit Slip	Cash	Currency Coins	750	00
Date	List of Checks
5/1/10	Jones		250	00
		Total	1000	00

Deposit Slip	Cash	Currency Coins	156	00
Date	List of Checks
5/4/10	Slade		581	00
		Total	737	00

Deposit Slip	Cash	Currency Coins	500	00
Date	List of Checks
5/13/10	Luce		350	00
		Total	850	00

Deposit Slip	Cash	Currency Coins	600	00
Date	List of Checks
5/20/10	Pyle		129	00
		Total	729	00

Deposit Slip	Cash	Currency Coins	445	00
Date	List of Checks
5/27/10	Dudley		370	00
		Total	815	00

Deposit Slip	Cash	Currency Coins	0	00
Date	List of Checks
5/31/10	Gilly		915	00
		Total	915	00

Copies of Written Checks

Supreme Company	Date: 4/17/10	391

Pay to the Order of Jones & Company		$ 125.00

NBT Bank	One Hundred Twenty-Five and no cents

Memo: Supplies	Jill Supreme

Supreme Company	Date: 4/15/10	392

Pay to the Order of Jordon		$ 112.00

NBT Bank	One Hundred twelve and no cents

Memo: Invoice 2324	Jill Supreme

Supreme Company	Date: 4/21/10	393

Pay to the Order of Jones & Company		$ 500.00

NBT Bank	Five Hundred and no cents

Memo: Invoice 5132	Jill Supreme

Supreme Company	Date: 4/24/10	394

Pay to the Order of King and Company		$ 215.00

NBT Bank	Two Hundred fifteen and no cents

Memo: Invoice 700	Jill Supreme

Supreme Company	Date: 4/28/10	395

Pay to the Order of Jones & Company		$ 100.00

NBT Bank	One Hundred and no cents

Memo: Invoice 2360	Jill Supreme

Supreme Company	Date: 4/30/10	396

Pay to the Order of Al Kazam Leisure Man		$ 514.00

NBT Bank	Five Hundred fourteen and no cents

Memo: Invoice 010	Jill Supreme

Supreme Company	Date: 4/30/10	397

Pay to the Order of Jones International		$ 771.00

NBT Bank	Seven Hundred seventy one and no cents

Memo: Invoice 010	Jill Supreme

Supreme Company	Date: 5/01/10	398

Pay to the Order of Carr Office Supplies		$ 750.00

NBT Bank	Seven Hundred fifty and no cents

Memo: Invoice 870	Jill Supreme

Supreme Company	Date: 5/12/10	399

Pay to the Order of Jill Supreme		$ 1,000.00

NBT Bank	One Thousand and no cents

Memo: Withdrawal	Jill Supreme

Supreme Company	Date: 5/20/10	400

Pay to the Order of Hooyah		$ 543.00

NBT Bank	Five Hundred forty three and no cents

Memo: Invoice 571	Jill Supreme

Supreme Company	Date: 5/22/10	401

Pay to the Order of King & Company		$ 450.00

NBT Bank	Four Hundred fifty and no cents

Memo: Invoice 556	Jill Supreme

Supreme Company	Date: 5/24/10	402

Pay to the Order of Utility Company		$ 175.00

NBT Bank	One Hundred seventy-five and no cents

Memo: May Electric Bill	Jill Supreme

Supreme Company	Date: 5/27/10	403

Pay to the Order of Ollyoop		$ 415.00

NBT Bank	Four Hundred fifteen and no cents

Memo: Invoice 5002	Jill Supreme

Supreme Company	Date: 5/28/10	404

Pay to the Order of Gardiner Company		$ 300.00

NBT Bank	Three Hundred and no cents

Memo: Invoice 444	Jill Supreme

Supreme Company	Date: 5/30/10	405

Pay to the Order of Father & Sons		$ 160.00

NBT Bank	One Hundred sixty and no cents

Memo: Invoice 123	Jill Supreme

Supreme Company	Date: 5/31/10	406

Pay to the Order of Thomson Learning		$ 514.00

NBT Bank	Five Hundred fourteen and no cents

Memo: Books	Jill Supreme

Supreme Company	Date: 5/21/10	407

Pay to the Order of Ollyoop		$ 800.00

NBT Bank	Eight Hundred and no cents

Memo: Invoice 5020	Jill Supreme

SUPREME COMPANYS BOOKS

Cash Receipts Recorded in Cash Receipts Journal
Date	Cash Debit
5/1	$ 1,000	*JS
5/4	$ 737	*JS
5/9	$ 1,285	*JS
5/13	$ 850	*JS
5/20	$ 729	*JS
5/27	$ 815	*JS
5/31	$ 915	*JS
Total=	$ 6,331

Cash Payments Recorded In Cash Payments Journal
Check No.	Cash Credit
398	$ 750
399	$ 1,000
400	$ 345
401	$ 450
402	$ 175
403	$ 415
404	$ 300
405	$ 160
406	$ 514
407	$ 800
Total=	$ 4,909

See duplicate deposit slips on page 2. See duplicate carbon copies of checks on pages 3 - 5.

Assume that all cash receipts were counted by owner-Jill Supreme, and she verified the debit in the cash receipts journal and the bookkeeper deposited in bank on the same day.

Assume that all deposits cleared the bank the day after they were recorded in the cash receipts journal and deposited. (i.e. 5/4 deposit cleared on 5/5 see page 1). Assume that any cash receipt that did not clear the bank by the next day was never deposited in the bank.

Cash General Ledger
Date	Explanation	Debit	Credit	Balance
4/30	Balance			11,338
5/31	Cash Receipts	6,331
5/31	Cash Payments		4,909	12,760

Check No. 400 was issued for $543 to Hooyah in payment of an accounts payable. The NSF check returned with the bank statement was received from customer, Pat Slade in payment of his Accounts

Receivable. The NSF check has not been recorded in the general ledger.

The following is the bank reconciliation prepared by the bookkeeper for April 30, 2010.

SUPREME COMPANY

BANK RECONCILIATION

April 30, 2010

Cash balance according to bank statement		$12,760
Add: Deposits in Transit 4/30	$ 915
		$ 915
		$ 13,675
Less:
Outstanding Checks:
391	$ 125
392	$ 112
393	$ 500
394	$ 215
395	$ 100
396	$ 514
397	$ 771
		$ 2,337
Adjusted Balance		$ 11,338

Cash balance according to the ledger		$ 9,200
Add:
Additions to bank account not recorded on books proceeds from collection of note
Principal	$ 2,500
Interest	$ 50
Error in recording check 389	$ 180
		$ 2,730
		$ 11,930
Deductions by bank not recorded on books:
Check Returned NSF	$ 581
Bank Service Charge	$ 11
		$ 592
Adjusted Balance		$ 11,338

SUPREME COMPANY

BANK RECONCILIATION

May 31, 2010

Cash balance according to bank statement		$ 15,379
Add: Deposits in Transit 5/31	$ 915
		$ 915
		$ 16,294
Less:
Outstanding Checks:
404	$ 300
405	$ 160
406	$ 514
407	$ 800
		$ 1,774
Adjusted Balance		$ 14,520

Cash balance according to the ledger		$ 12,760
Add:
Additions to bank account not recorded on books proceeds from collection of note
Principal	$ 2,500
Interest	$ 50
		$ 2,550
		$ 15,310
Deductions by bank not recorded on books:
Check Returned NSF	$ 581
Bank Service Charge	$ 11
Error in recording check 400	$ 198
		$ 790
Adjusted Balance		$ 14,520

Required:

Review the Bank Reconciliation prepared by your employee on May 31 above and prepare a corrected bank reconciliation. (Prepare on the Project 3 Excel Spreadsheet Problem 1 parts 1 & 4 tab).

Explain why you think your corrected bank reconciliation does not balance. How did the employee conceal the embezzlement? (Prepare on the Project 3 Excel Spreadsheet Problem 1 parts 2 & 3 tab)

Recommend any improvements to internal controls to prevent this embezzlement from occurring again. Assume that the only parties who will be working in this business will be Jill Supreme (owner), the new bookkeeper and the office manager.

Include in your discussion the following:

Who should receive the cash receipts and make the deposit at the bank when the owner is out of the office? Include the rationale for your answer.

Who should prepare the monthly bank reconciliation? Include the rationale for your answer.

Who should sign the checks? Include the rationale for your answer.

Who should do the bookkeeping? Include the rationale for your answer. (Prepare Part 3 on the Project 3 Excel Spreadsheet Problem 1 parts 2 & 3 tab)

Record all required journal entries for May 31, 2010 related to the bank reconciliation including a journal entry for the embezzlement. Assume the embezzlement was never recovered. (Record the journal entries on the Project 3 Excel Spreadsheet Problem 1 1 & 4 tab)

image text in transcribed

Requirement 4. Record the journal entries including a journal entry for the embezzlement Supreme Company Corrected Bank Reconciliation Journal E Date 31, 2010 Accounts Debit Credit Bank: Month End Cash Balance per bank statement, May 31 Add: May 31, 2010 Deposits in transit Journal En Outstanding checks: Date Accounts Debit May 31, 2010 ournal En Date May 31, 2010 Debit Credit Adjusted bank bank balance, May 31 Month End Cash Balance According to ledger Balance, May 31 Add: Journal En Date Debit May 31, 2010 Journal En Date Accounts Debit Adjusted book balance, May 31 May 31, 2010 Requirement 4. Record the journal entries including a journal entry for the embezzlement Supreme Company Corrected Bank Reconciliation Journal E Date 31, 2010 Accounts Debit Credit Bank: Month End Cash Balance per bank statement, May 31 Add: May 31, 2010 Deposits in transit Journal En Outstanding checks: Date Accounts Debit May 31, 2010 ournal En Date May 31, 2010 Debit Credit Adjusted bank bank balance, May 31 Month End Cash Balance According to ledger Balance, May 31 Add: Journal En Date Debit May 31, 2010 Journal En Date Accounts Debit Adjusted book balance, May 31 May 31, 2010