Question Chapter 7

San Diego Harbor Tours has poor internal control over cash. Ben Johnson, the manager, suspects the cashier of stealing. Here are some details of company cash on September 30:

A-The Cash account in the ledger shows a balance of $6,450.

B-The September 30 bank statement shows a balance of $4,300. The bank statement lists a $200 bank collection, a $10 service charge, and a $40 NSF check.

C-On September 30, the following checks are outstanding:

Amount

$ 100

300

600

200

D-There is a $3,000 deposit in transit on September 30.

E-The cashier handles all incoming cash and makes bank deposits. He also writes checks and reconciles the monthly bank statement.

Requirements

1-Perform your own bank reconciliation, using the format illustrated in the chapter. There are no bank or book errors.

2-Assume that the adjusted bank balance is the correct cash amount and that all timing differences have been accounted for. How much has the cashier stolen? How can you tell?

3-Explain how Johnson can improve his internal controls.