Supreme Company's 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 Six deposits and other credits totaling Eleven checks and other debts totaling Current balance as of this statement $ 12,760 7,596 4,977 $ 15, 379 See Duplicate Deposit Slips Page 2 Date 5/1 5/2 5/5 5/14 5/21 5/28 5/28 5/31 5/31 Amount $ 915 $ 1,000 $ 737 $ 850 $ 729 $ 815 S (581) $ (11) $ 2,550 Transition Type Deposit Deposit Deposit Deposit Deposit Deposit NSF Check Service Charge Bank Collection (Collection on note, principal $2,500) See Carbon Copy of Checks Issued Pages 3-5 Date 5/1 5/1 5/2 5/3 5/4 5/13 5/17 5/27 5/28 5/29 5/31 Check # 391 392 393 394 395 398 399 400 401 402 403 Amount $ 125 $ 112 $ 500 $ 215 $ 100 $ 750 $ 1.000 $ 543 $ 450 $ 175 $ 415 Duplicate Deposit Slips Currency Coins 00 00 Deposit Slip Cash Date List of Checks 4/30/10 Gilly 915 915 00 00 Total Currency Coins 750 00 Deposit Slip Cash Date List of Checks 5/1/10 Jones 250 1000 00 00 Total Currency Coins 156 00 Deposit Slip Cash Date List of Checks 5/4/10 Slade 581 00 00 Total 737 Currency Coins 500 00 Deposit Slip Cash Date List of Checks 5/13/10 Luce 350 850 Total 00 00 Currency Coins 600 00 Date Deposit Slip Cash List of Checks 5/20/10 Pyle Total 129 729 00 00 Currency Coins 445 00 Deposit Slip Cash Date List of Checks 5/27/10 Dudley 370 815 00 00 Total Currency Coins 0 00 Deposit Slip Cash Date List of Checks 5/31/10 Gilly Total 915 915 00 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 Jill Supreme Memo: Invoice 010 397 Supreme Company Date: 4/30/10 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 Cart 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 Ollyoon $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 406 Supreme Company Date: 5/31/10 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 $ 800.00 Pay to the Order of Ollyoor NBT Bank Eight Hundred and no cents Memo: Invoice 5020 Jill Supreme SUPREME COMPANY'S BOOKS Cash Receipts Recorded in Cash Receipts Journal Date Cash Debit 5/1 $1,000 JS 574 $ 737 JS 5/9 $ 1,285 US 5/13 $ 850 JS 5/20 $729 JS 5127 $ 815 JS 5/31 $915 JS Total 156,331 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 $1300 405 $ 160 406 $514 $800 Total= $ 4,909 407 See duplicate deposit slips on page 2. Soe duplicate carbon copies of checks on pages 3 - 5. Assume that owner-Jill Supreme counted all cash receipts, 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. Date 4/30 5/31 5131 Cash General Ledger Explanation Debit Credit Balance Cash Receipts 6,331 Cash Payments Balance 11,338 4,909 12,760 Check No. 400 was issued for $543 to Hookah 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 $12,760 Cash balance according to bank statement Add: Deposits in Transit 4/30 $ 915 $ 915 $ 13,675 Less: Outstanding Checks: 391 392 393 394 395 396 397 $ 125 $ 112 $ 500 $ 215 $ 100 $ 514 $ 771 Adjusted Balance $ 2,337 $ 11,338 $9,200 Cash balance according to the ledger 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 Bank Service Charge $ 581 $11 $592 $ 11,338 Adjusted Balance SUPREME COMPANY BANK RECONCILIATION May 31, 2010 $ 15,379 Cash balance according to bank statement Add: Deposits in Transit 5/31 $ 915 3915 $ 16,294 Less: Outstanding Checks: 404 405 406 407 $300 $ 160 $514 $ 800 Adjusted Balance $ 1,774 $ 14,520 $ 12,760 Cash balance according to the ledger 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 Bank Service Charge Error in recording check 400 $581 $ 11 $ 198 Adjusted Balance $ 790 $ 14,520 Required: 1. Review the Bank Reconciliation prepared by your employee on May 31 above and prepare a corrected bank reconciliation. (Prepare on the Group Project Excel Spreadsheet Problem 1 parts 1 & 4 tab) 2. Explain why you think your corrected bank reconciliation does not balance. How did the employee conceal the embezzlement? (Prepare on the Group Project Excel Spreadsheet Problem 1 parts 2 & 3 tab) 3. 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 Group Project 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 Group Project Excel Spreadsheet Problem 1 1 & 4 tab) Submit one set of answers per group for all four problems. Make sure to include each group members name at the top of each spreadsheet. 4. . Supreme Company's 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 Six deposits and other credits totaling Eleven checks and other debts totaling Current balance as of this statement $ 12,760 7,596 4,977 $ 15, 379 See Duplicate Deposit Slips Page 2 Date 5/1 5/2 5/5 5/14 5/21 5/28 5/28 5/31 5/31 Amount $ 915 $ 1,000 $ 737 $ 850 $ 729 $ 815 S (581) $ (11) $ 2,550 Transition Type Deposit Deposit Deposit Deposit Deposit Deposit NSF Check Service Charge Bank Collection (Collection on note, principal $2,500) See Carbon Copy of Checks Issued Pages 3-5 Date 5/1 5/1 5/2 5/3 5/4 5/13 5/17 5/27 5/28 5/29 5/31 Check # 391 392 393 394 395 398 399 400 401 402 403 Amount $ 125 $ 112 $ 500 $ 215 $ 100 $ 750 $ 1.000 $ 543 $ 450 $ 175 $ 415 Duplicate Deposit Slips Currency Coins 00 00 Deposit Slip Cash Date List of Checks 4/30/10 Gilly 915 915 00 00 Total Currency Coins 750 00 Deposit Slip Cash Date List of Checks 5/1/10 Jones 250 1000 00 00 Total Currency Coins 156 00 Deposit Slip Cash Date List of Checks 5/4/10 Slade 581 00 00 Total 737 Currency Coins 500 00 Deposit Slip Cash Date List of Checks 5/13/10 Luce 350 850 Total 00 00 Currency Coins 600 00 Date Deposit Slip Cash List of Checks 5/20/10 Pyle Total 129 729 00 00 Currency Coins 445 00 Deposit Slip Cash Date List of Checks 5/27/10 Dudley 370 815 00 00 Total Currency Coins 0 00 Deposit Slip Cash Date List of Checks 5/31/10 Gilly Total 915 915 00 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 Jill Supreme Memo: Invoice 010 397 Supreme Company Date: 4/30/10 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 Cart 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 Ollyoon $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 406 Supreme Company Date: 5/31/10 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 $ 800.00 Pay to the Order of Ollyoor NBT Bank Eight Hundred and no cents Memo: Invoice 5020 Jill Supreme SUPREME COMPANY'S BOOKS Cash Receipts Recorded in Cash Receipts Journal Date Cash Debit 5/1 $1,000 JS 574 $ 737 JS 5/9 $ 1,285 US 5/13 $ 850 JS 5/20 $729 JS 5127 $ 815 JS 5/31 $915 JS Total 156,331 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 $1300 405 $ 160 406 $514 $800 Total= $ 4,909 407 See duplicate deposit slips on page 2. Soe duplicate carbon copies of checks on pages 3 - 5. Assume that owner-Jill Supreme counted all cash receipts, 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. Date 4/30 5/31 5131 Cash General Ledger Explanation Debit Credit Balance Cash Receipts 6,331 Cash Payments Balance 11,338 4,909 12,760 Check No. 400 was issued for $543 to Hookah 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 $12,760 Cash balance according to bank statement Add: Deposits in Transit 4/30 $ 915 $ 915 $ 13,675 Less: Outstanding Checks: 391 392 393 394 395 396 397 $ 125 $ 112 $ 500 $ 215 $ 100 $ 514 $ 771 Adjusted Balance $ 2,337 $ 11,338 $9,200 Cash balance according to the ledger 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 Bank Service Charge $ 581 $11 $592 $ 11,338 Adjusted Balance SUPREME COMPANY BANK RECONCILIATION May 31, 2010 $ 15,379 Cash balance according to bank statement Add: Deposits in Transit 5/31 $ 915 3915 $ 16,294 Less: Outstanding Checks: 404 405 406 407 $300 $ 160 $514 $ 800 Adjusted Balance $ 1,774 $ 14,520 $ 12,760 Cash balance according to the ledger 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 Bank Service Charge Error in recording check 400 $581 $ 11 $ 198 Adjusted Balance $ 790 $ 14,520 Required: 1. Review the Bank Reconciliation prepared by your employee on May 31 above and prepare a corrected bank reconciliation. (Prepare on the Group Project Excel Spreadsheet Problem 1 parts 1 & 4 tab) 2. Explain why you think your corrected bank reconciliation does not balance. How did the employee conceal the embezzlement? (Prepare on the Group Project Excel Spreadsheet Problem 1 parts 2 & 3 tab) 3. 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 Group Project 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 Group Project Excel Spreadsheet Problem 1 1 & 4 tab) Submit one set of answers per group for all four problems. Make sure to include each group members name at the top of each spreadsheet. 4