Question
Problem 1a Supreme Companys bookkeeper prepared the bank reconciliation for May 31, 2010. The bookkeeper had the following responsibilities: All bookkeeping, the handling of cash
Problem 1a
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)
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Cima Official Exam Practice Kit Fundamentals Of Ethics Corporate Governance And Business Law Certificate In Business Accounting
Authors: Larry Mead
4th Edition
1856177092, 978-1856177092
