SARBANES OXLEY, INTERNAL CONTROL, AND CASH The March 2014 bank reconciliation, detailed below, was incorrectly prepared (NOTE the descriptions and amounts of the listed items are correct) Because the bank reconciliation did not balance, the ledger account balances provided (in the form of T accounts) are shown BEFORE the bank reconciliation journal entries were posted The financial statements were left unfinished as well Your Challenge today is to 1 Prepare a correct bank reconciliation (the form is provided on the following page) 2 Prepare the necessary journal entries stemming from the correctly prepared bank reconciliation Be sure to include proper dates AND explanations for each journal entry 3 Post the journal entries you prepared to the ledger using the T accounts provided 4 Correctly complete the incomplete financial statements 5 Answer the questions below Steggo Corporation Bank Reconciliation March 31, 2014 Cash balance according to bank statement $ 11,708 Cash balance according to companys books $ 16,659 Add Check from customer to pay on A R, returned Add Proceeds of note collected by bank by customer's bank as NSF 1,976 Principal $ 3,000 13,684 Interest 120 $ 3,120 Bank service charges 75 3,195 Deduct Deposits in transit on March 31 $ 9,460 19,854 Error in March 10 deposit Deposit was for actual cash sales of Deduct Outstanding checks $9,765 Deposit was recorded No 854 600 correctly by the bank but 862 884 incorrectly in journal as $7,965 1,800 11,260 863 156 1,640 Updated cash balance $ 2,424 Updated cash balance $ 18,214 5 QUESTIONS How would the financial statements be affected if you did not post the journal entries from the bank reconciliation to the ledger Income Statement Understated Overstated No Change Balance Sheet Understated Overstated No Change Total revenue Total assets Total expenses Total liabilities Net income Total stockholders' equity 1 PREPARE CORRECT BANK RECONCILIATION Cash balance according to bank statement $ Cash balance according to books $ Add Add Total additions Total additions Subtotal Subtotal Deduct Deduct Total deductions Total deductions Updated cash balance $ Updated cash balance $ 2 PREPARE NECESSARY JOURNAL ENTRIES Bank reconciliation journal entries Post Ref Debit Credit 3 POST JOURNAL ENTRIES AND UPDATE LEDGER BALANCES Steggo Corporation General Ledger Balances at March 31, 2014 (before bank reconciliation adjustments) Cash 100 Accounts Payable 200 Cost of Goods Sold 500 Beg Balance 14,659 Beg Balance 1,600 Beg Balance 0 Annual activity 217,239 215,239 Annual activity 162,000 164,500 Annual activity 109,500 Bal before recon 16,659 Bal before recon 4,100 Bal before recon 109,500 Notes Pay current 201 Sales Salaries Exp 600 Beg Balance 2,000 Beg Balance 0 Accounts Receivable 110 Annual activity Annual activity 38,000 Beg Balance 10,495 Bal before recon 2,000 Bal before recon 38,000 Annual activity 103,000 103,465 Bal before recon 10,030 Deprec Exp Store 605 Notes Payable 220 Beg Balance 0 Beg Balance 25,500 Annual activity 8,000 Annual activity 20,000 Bal before recon 8,000 Bal before recon 5,500 Notes Receivable 115 Beg Balance 4,000 Advertising Expense 610 Annual activity 2,000 Common Stock 300 Beg Balance 0 Bal before recon 6,000 Beg Balance 30,000 Annual activity 4,890 Annual activity Bal before recon 4,890 Bal before recon 30,000 Bank Fee Expense 620 Merch Inventory 120 Retained Earnings 310 Beg Balance 0 Beg Balance 8,700 Beg Balance 32,654 Annual activity 575 Annual activity 115,500 109,500 Annual activity Bal before recon 575 Bal before recon 14,700 Bal before recon 32,654 Office Supplies 140 Dividends 315 Beg Balance 500 Beg Balance 0 Insurance Expense 622 Annual activity 1,000 1,250 Annual activity 3,850 Beg Balance 0 Bal before recon 250 Bal before recon 3,850 Annual activity 12,000 Bal before recon 12,000 Prepaid Insurance 141 Sales 400 Beg Balance 900 Beg Balance 0 Office Supplies Exp 625 Annual activity 2,000 2,700 Annual activity 225,000 Beg Balance 0 Bal before recon 200 Bal before recon 225,000 Annual activity 1,250 Bal before recon 1,250 Store Equipment 150 Rent Expense 630 Beg Balance 55,500 Beg Balance 0 Annual activity 15,000 Sales Discounts 410 Annual activity 9,600 Bal before recon 70,500 Beg Balance 0 Bal before recon 9,600 Annual activity 1,100 Bal before recon 1,100 Accum Depreciation 155 Interest Revenue 700 Beg Balance 3,000 Sale Returns Allow 415 Beg Balance 0 Annual activity 8,000 Beg Balance 0 Annual activity 250 Bal before recon 11,000 Annual activity 3,400 Bal before recon 250 Bal before recon 3,400

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SARBANES-OXLEY, INTERNAL CONTROL, AND CASH The March 2014 bank reconciliation, detailed below, was incorrectly prepared (NOTE: the descriptions and amounts of the listed items are

SARBANES-OXLEY, INTERNAL CONTROL, AND CASH

The March 2014 bank reconciliation, detailed below, was incorrectly prepared (NOTE: the descriptions and amounts of the listed items are correct).
Because the bank reconciliation did not balance, the ledger account balances provided (in the form of T-accounts) are shown BEFORE the bank
reconciliation journal entries were posted. The financial statements were left unfinished as well.

Your Challenge today is to:
	1	Prepare a correct bank reconciliation (the form is provided on the following page).
	2	Prepare the necessary journal entries stemming from the correctly prepared bank reconciliation. Be sure to include proper dates
			AND explanations for each journal entry.
	3	Post the journal entries you prepared to the ledger using the T-accounts provided.
	4	Correctly complete the incomplete financial statements.
	5	Answer the questions below.

Steggo Corporation
Bank Reconciliation
March 31, 2014
Cash balance according to bank statement							$	11,708	Cash balance according to companys books							$	16,659

Add:	Check from customer to pay on A/R, returned								Add:	Proceeds of note collected by bank
		by customer's bank as NSF						1,976			Principal	$	3,000
								13,684			Interest		120	$	3,120
										Bank service charges					75		3,195
Deduct:	Deposits in transit on March 31				$	9,460											19,854
	Error in March 10 deposit. Deposit
		was for actual cash sales of							Deduct:	Outstanding checks
		$9,765. Deposit was recorded									No.		854		600
		correctly by the bank but											862		884
		incorrectly in journal as $7,965				1,800		11,260					863		156
																	1,640
Updated cash balance							$	2,424	Updated cash balance							$	18,214


5.	QUESTIONS
		How would the financial statements be affected if you did not post the journal entries from the bank reconciliation to the ledger?

		Income Statement		Understated/Overstated/No Change						Balance Sheet			Understated/Overstated/No Change
		Total revenue								Total assets
		Total expenses								Total liabilities
		Net income								Total stockholders' equity

PREPARE CORRECT BANK RECONCILIATION

Cash balance according to bank statement

Cash balance according to books

Add:

Total additions

Subtotal

Deduct:

Total deductions

Updated cash balance

PREPARE NECESSARY JOURNAL ENTRIES

Bank reconciliation journal entries:

Post Ref.

Debit

Credit

3.	POST JOURNAL ENTRIES AND UPDATE LEDGER BALANCES

Steggo Corporation
General Ledger
Balances at March 31, 2014 (before bank reconciliation adjustments)

	Cash #100			Accounts Payable #200			Cost of Goods Sold #500
Beg. Balance	14,659		Beg. Balance		1,600	Beg. Balance	0
Annual activity	217,239	215,239	Annual activity	162,000	164,500	Annual activity	109,500
Bal. before recon	16,659		Bal. before recon		4,100	Bal. before recon	109,500


				Notes Pay. - current #201			Sales Salaries Exp. #600
			Beg. Balance		2,000	Beg. Balance	0
	Accounts Receivable #110		Annual activity			Annual activity	38,000
Beg. Balance	10,495		Bal. before recon		2,000	Bal. before recon	38,000
Annual activity	103,000	103,465
Bal. before recon	10,030						Deprec. Exp. - Store #605
				Notes Payable #220		Beg. Balance	0
			Beg. Balance		25,500	Annual activity	8,000
			Annual activity	20,000		Bal. before recon	8,000
			Bal. before recon		5,500
	Notes Receivable #115
Beg. Balance	4,000						Advertising Expense #610
Annual activity	2,000			Common Stock #300		Beg. Balance	0
Bal. before recon	6,000		Beg. Balance		30,000	Annual activity	4,890
			Annual activity			Bal. before recon	4,890
			Bal. before recon		30,000

							Bank Fee Expense #620
	Merch. Inventory #120			Retained Earnings #310		Beg. Balance	0
Beg. Balance	8,700		Beg. Balance		32,654	Annual activity	575
Annual activity	115,500	109,500	Annual activity			Bal. before recon	575
Bal. before recon	14,700		Bal. before recon		32,654


	Office Supplies #140			Dividends #315
Beg. Balance	500		Beg. Balance	0			Insurance Expense #622
Annual activity	1,000	1,250	Annual activity	3,850		Beg. Balance	0
Bal. before recon	250		Bal. before recon	3,850		Annual activity	12,000
						Bal. before recon	12,000

	Prepaid Insurance #141			Sales #400
Beg. Balance	900		Beg. Balance		0		Office Supplies Exp. #625
Annual activity	2,000	2,700	Annual activity		225,000	Beg. Balance	0
Bal. before recon	200		Bal. before recon		225,000	Annual activity	1,250
						Bal. before recon	1,250

	Store Equipment #150						Rent Expense #630
Beg. Balance	55,500					Beg. Balance	0
Annual activity	15,000			Sales Discounts #410		Annual activity	9,600
Bal. before recon	70,500		Beg. Balance	0		Bal. before recon	9,600
			Annual activity	1,100
			Bal. before recon	1,100
	Accum. Depreciation #155						Interest Revenue #700
Beg. Balance		3,000		Sale Returns & Allow. #415		Beg. Balance		0
Annual activity		8,000	Beg. Balance	0		Annual activity		250
Bal. before recon		11,000	Annual activity	3,400		Bal. before recon		250
			Bal. before recon	3,400