SP7 Kate's Cards On February 15, 2019. Kate Collins, owner of Kate's Cards, asks you to investigate the cash han- dling activities in her business. She believes that a new employee might be stealing funds. "I have no proof," she says, "but I'm fairly certain that the January 31, 2019, undeposited receipts amounted to more than $12,000, although the January 31 bank reconciliation prepared by the cashier (who works in the treasurer's department) shows only $7.238.40. Also, the January bank reconciliation doesn't show several checks that have been outstanding for a long time. The cashier told me that these checks needn't appear on the reconciliation because he had notified the bank to stop payment on them and he had made the necessary adjustment on the books. Does that sound reasonable to you?" At your request, Kate shows you the following (unaudited) January 31, 2019, bank reconciliation prepared by the cashier: $10,893.89 KATE'S CARDS Bank Reconciliation January 31, 2019 Ending balance from bank statement... $ 4,843.69 Balance from general ledger ... Add: Deposits in transit 7.238.40 $12,082.09 Less: Less: Outstanding checks: Bank service charge.. No. 2351 $1,100.20 Unrecorded credit No. 2353 578.32 No. 2354 969.68 (2.448.20) Reconciled cash balance $ 9,633.89 Reconciled cash balance ...... .. 60.00 1,200.00 (1.260.00 $ 9,633.89 You discover that the $1,200 unrecorded bank credit represents a note collected by the bank on Kate's behalf; it appears in the deposits column of the January bank statement. Your investigation also reveals that the December 31, 2018, bank reconciliation showed three checks that had been outstanding longer than 10 months: No. 1432 for $600, No. 1458 for $466.90, and No. 1512 for $253.10. You also discover that these items were never added back into the Cash account in Kate's books. In confirming that the checks shown on the cashier's January 31 bank reconciliation were outstanding on that date, you discover that check No. 2353 was actually a payment of $1.658.32 and had been recorded on the books for that amount. To confirm the amount of undeposited receipts at January 31. you request a bank statement for February 1-12 (called a cutoff bank statement). This indeed shows a January 1 deposit of $7,238.40. Calculate the amount of funds stolen by the employee. (Hint: re-do the bank reconciliation using all the information available to you) Describe how the employee concealed the theft What suggestions would you make to Kate about cash control procedures