Chapter 7 Solutions - PRACTICE EXERCISES PE 71A 1. 2. 3....

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PRACTICE EXERCISES PE 7–1A 1. (c) monitoring 2. (a) the control environment 3. (b) control procedures PE 7–1B 1. (a) the control environment 2. (c) information and communication 3. (b) control procedures PE 7–2A Appears on the Bank Increases or Decreases Statement as a Debit the Balance of the Item No. or Credit Memo Company’s Bank Account 1 credit memo increases 2 credit memo increases 3 credit memo increases 4 debit memo decreases PE 7–2B Appears on the Bank Increases or Decreases Statement as a Debit the Balance of the Item No. or Credit Memo Company’s Bank Account 1 credit memo increases 2 debit memo decreases 3 credit memo increases 4 debit memo decreases
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PE 7–3A a. $14,680 as shown below. Bank section of reconciliation: $19,340 + $2,500 – $7,160 = $14,680 Company section of reconciliation: $6,480 + $8,250 – $50 = $14,680 b. Miscellaneous Expense. ...................................... 50 Cash. ................................................................. 50 Cash. ...................................................................... 8,250 Notes Receivable. ........................................... 8,000 Interest Revenue. ............................................ 250 PE 7–3B a. $8,670 as shown below. Bank section of reconciliation: $11,200 + $1,650 – $4,180 = $8,670 Company section of reconciliation: $9,295 – $25 – $600 = $8,670 b. Accounts Receivable. .......................................... 600 Miscellaneous Expense. ...................................... 25 Cash. ................................................................. 625 PE 7–4A a. Petty Cash. ............................................................ 300 Cash. ................................................................. 300 b. Store Supplies. ..................................................... 120 Miscellaneous Selling Expense. ......................... 75 Cash Short and Over. ........................................... 10 Cash. ................................................................. 205 PE 7–4B a. Petty Cash. ............................................................ 500 Cash. ................................................................. 500 b. Repairs Expense. .................................................. 260 Miscellaneous Selling Expense. ......................... 84 Cash Short and Over. ........................................... 16 Cash. ................................................................. 360
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EXERCISES Ex. 7–2 a. Disagree. Stealing is a serious issue. An employee who can justify taking a box of tea bags can probably justify “borrowing” cash from the cash register. b. Agree. Blake has made one employee responsible for the cash drawer in accordance with the internal control principle of assignment of responsibility. In addition, Blake has segregated the operations (preparing the orders) from
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Chapter 7 Solutions - PRACTICE EXERCISES PE 71A 1. 2. 3....

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