The following information is available to reconcile Style Co.’s book balance of cash with its bank statement cash balance as of December 31, 2005

Problems 8-4B

The following information is available to reconcile Style Co.’s book balance of cash with its bank statement cash balance as of December 31, 2005:

a. After posting is complete, the December 31 cash balance according to the accounting records is $31,743.70, and the bank statement cash balance for that date is $45,091.80.
b. Check No. 1273 for $1,084.20 and Check No. 1282 for $390.00, both written and entered in the accounting records in December, are not among the canceled checks. Two checks, No. 1231 for $2,289.00 and No. 1242 for $370.50, were outstanding on the most recent November 30 reconciliation. Check No. 1231 is listed with the December canceled checks, but Check No. 1242 is not.
c. When the December checks are compared with entries in the accounting records, it is found that Check No. 1267 had been correctly drawn for $2,435 to pay for office supplies but was erroneously entered in the accounting records as $2,453.
d. Two debit memoranda are enclosed with the statement and are unrecorded at the time of the reconciliation. One debit memorandum is for $749.50 and dealt with an NSF check for $732 received from a customer, Titus Industries, in payment of its account. The bank assessed a $17.50 fee for processing it. The second debit memorandum is a $79.00 charge for check printing. Style did not record these transactions before receiving the statement.
e. A credit memorandum indicates that the bank collected $20,000 cash on a note receivable for the company, deducted a $20 collection fee, and credited the balance to the company’s Cash account. Style did not record this transaction before receiving the statement.
f. Style’s December 31 daily cash receipts of $7,666.10 were placed in the bank’s night depository on that date, but do not appear on the December 31 bank statement.

Required
1. Prepare the bank reconciliation for this company as of December 31, 2005.
2. Prepare the journal entries necessary to bring the company’s book balance of cash into conformity with the reconciled cash balance as of December 31, 2005.
Analysis Component
3. Explain the nature of the communications conveyed by a bank when the bank sends the depositor (a) a debit memorandum and (b) a credit memorandum.

Check (1) Reconciled balance, $50,913.20; (2) Cr. Note Receivable $20,000


Click here for the solution: The following information is available to reconcile Style Co.’s book balance of cash with its bank statement cash balance as of December 31, 2005

Pink Martini Corporation is projecting a cash balance of $31,000 in its December 31, 2007, balance sheet

Pink Martini Corporation is projecting a cash balance of $31,000 in its December 31, 2007, balance sheet. Pink Martini’s schedule of expected collections from customers for the first quarter of 2008 shows total collections of $180,000. The schedule of expected payments for direct materials for the first quarter of 2008 shows total payments of $41,000. Other information gathered for the first quarter of 2008 is: sale of equipment $3,500; direct labor $70,000, manufacturing overhead $35,000, selling and administrative expenses $45,000; and purchase of securities $12,000. Pink Martini wants to maintain a balance of at least $25,000 cash at the end of each quarter.

Instructions
Prepare a cash budget for the first quarter.

Click here for the solution: Pink Martini Corporation is projecting a cash balance of $31,000 in its December 31, 2007, balance sheet

(Bank reconciliation and internal control) The records of Parker Company indicate a July 31 cash balance of $10,400, which includes undeposited receipts for July 30 and 31

CP 8-5 Bank reconciliation and internal control (25th edition)

The records of Parker Company indicate a July 31 cash balance of $10,400, which includes undeposited receipts for July 30 and 31. The cash balance on the bank statement as of July 31 is $10,575. This balance includes a note of $2,250 plus $150 interest collected by the bank but not recorded in the journal. Checks outstanding on July 31 were as follows: No. 2670, $1,050; No. 3679, $675; No. 3690, $1,650; No. 5148, $225; No. 5149, $750; and No. 5151, $800. On July 25, the cashier resigned, effective at the end of the month. Before leaving on July 31, the cashier prepared the following bank reconciliation:


Cash balance per books, July 31 .................................... $10,400

Add outstanding checks:
No. 5148 ........................................................ $225


5149 ........................................................ 750

5151 ........................................................ 800 1,675

$12,075


Less undeposited receipts ......................................... 1,500

Cash balance per bank, July 31 ..................................... $10,575

Deduct unrecorded note with interest .............................. 2,400

True cash, July 31.................................................. $ 8,175


Calculator Tape of Outstanding Checks:

0*

225

750

800

1,675*


Subsequently, the owner of Parker Company discovered that the cashier had stolen an unknown amount of undeposited receipts, leaving only $1,500 to be deposited on July 31. The owner, a close family friend, has asked your help in determining the amount that the former cashier has stolen.


1. Determine the amount the cashier stole from Parker Company. Show your computations in good form.

2. How did the cashier attempt to conceal the theft?

3. a. Identify two major weaknesses in internal controls, which allowed the cashier to steal the undeposited cash receipts.

b. Recommend improvements in internal controls, so that similar types of thefts of undeposited cash receipts can be prevented.

Click here for the solution: (Bank reconciliation and internal control) The records of Parker Company indicate a July 31 cash balance of $10,400, which includes undeposited receipts for July 30 and 31