Homework Solutions2 - ACCT 2101 Solutions to Homework...

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ACCT 2101 Solutions to Homework Problems EXERCISE 7-3 (a) (b) Procedure Weakness Principle Violated Recommended Change 1. Cashiers are not bonded. Other controls. All cashiers should be bonded. 2. Inability to establish responsibility for cash on a specific clerk. Establishment of responsibility. There should be separate cash drawers and register codes for each clerk. 3. Cash is not adequately protected from theft. Physical, mechanical, and electronic controls. Cash should be stored in a safe until it is deposited in bank. 4. Cash is not independently counted. Independent internal verification. A cashier office supervisor should count cash, and reconcile the total to the cash register tape. 5. The accountant should not handle cash. Segregation of duties. The cashier’s department should make the deposits. 10-1
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PROBLEM 7-4A (a) KINGSTON COMPANY Bank Reconciliation November 30, 2007 Balance per bank statement .............................................. $17,851.60 Add: Deposits in transit ................................................... 1,218.00 19,069.60 Less: Outstanding checks No. 2451 ............................................................. $1,260.40 No. 2472 ............................................................. 426.80 No. 2478 ............................................................. 538.20 No. 2482 ............................................................. 612.00 No. 2484 ............................................................. 829.50 No. 2485 ............................................................. 974.80 No. 2486 ............................................................. 900.00 No. 2488 ............................................................. 800.00 6,341.70 Adjusted cash balance per bank ....................................... $12,727.90 Balance per books .............................................................. $11,126.90 Add: Note collected by bank ........................................... 1,875.00 ($1,800 + $90 – $15) 13,001.90 Less: Check printing charge ............................................ $ 85.00 Error in recording check No. 2479 ($1,750 – $1,570) ................................ 180.00 Error in 11-21 deposit ($2,954 – $2,945) ............................................... 9.00 274.00 Adjusted cash balance per books ..................................... $12,727.90 (b) Nov. 30Cash 1,875 Miscellaneous Expense ............................... 15 Notes Receivable ................................ 1,800 Interest Revenue ................................ 90 30 Miscellaneous Expense ............................... 85 Cash ..................................................... 85 Nov. 30 Accounts Payable ...................................................... 180 Cash .................................................................. 180 30 Accounts Receivable ................................................. 9 10-2
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Cash .................................................................. 9 EXERCISE 8-7 Nov. 1 Notes Receivable ................................................................... 30,000 Cash ............................................................................... 30,000 Dec. 11 Notes Receivable ................................................................... 3,600 Sales ............................................................................... 3,600 16 Notes Receivable ................................................................... 8,000 Accounts Receivable—M. Fong .................................. 8,000 31 Interest Receivable ................................................................ 444 Interest Revenue* .......................................................... 444 *Calculation of interest revenue: Wedunn’s note: $30,000 X 8% X 2/12 = $400 Meier’s note: 3,600 X 7% X 20/360 = 14 Fong’s note: 8,000 X 9% X 15/360 = 30 Total accrued interest = $444 PROBLEM 8-1A (a) Total estimated bad debts Number of Days Outstanding Total 0–30 31–60 61–90 91–120 Over 120 Accounts receivable $378,000 $222,000 $90,000 $38,000 $10,000 $18,000 % uncollectible 1% 4% 5% 6% 10% Estimated bad debts $10,120 $2,220 $3,600 $1,900 $600 $1,800 (b) Bad Debts Expense .............................................................. 14,120 Allowance for Doubtful Accounts .............................. 14,120 ($10,120 + $4,000) (c) Allowance for Doubtful Accounts ....................................... 5,000 10-3
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Accounts Receivable .................................................. 5,000 (d) Accounts Receivable ........................................................... 5,000 Allowance for Doubtful Accounts .............................. 5,000 Cash .............................................................................. 5,000 Accounts Receivable .................................................. 5,000 (e) If Donedeal.com used 3% of total accounts receivable rather than aging the individual accounts the bad debt expense adjustment would be $15,340 [($378,000 X 3%) + $4,000].
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