ACCT 200 Lecture Notes - Lecture 7: Bank Reconciliation, Debit Card, Petty Cash
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Supreme Companyâs 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 | $ 12,760 |
| Six deposits and other credits totaling | 7,596 |
| Eleven checks and other debts totaling | 4,977 |
| Current balance as of this statement | $ 15, 379 |
| Date | Amount | Transition Type | |
| 5/1 | $ 915 | Deposit | See Duplicate Deposit Slips Page 2 |
| 5/2 | $ 1,000 | Deposit | |
| 5/5 | $ 737 | Deposit | |
| 5/14 | $ 850 | Deposit | |
| 5/21 | $ 729 | Deposit | |
| 5/28 | $ 815 | Deposit | |
| 5/28 | $ (581) | NSF Check | |
| 5/31 | $ (11) | Service Charge | |
| 5/31 | $ 2,550 | Bank Collection | (Collection on note, principal $2,500) |
| Date | Check # | Amount | |
| 5/1 | 391 | $ 125 | See Carbon Copy of Checks Issued Pages 3 - 5 |
| 5/1 | 392 | $ 112 | |
| 5/2 | 393 | $ 500 | |
| 5/3 | 394 | $ 215 | |
| 5/4 | 395 | $ 100 | |
| 5/13 | 398 | $ 750 | |
| 5/17 | 399 | $ 1,000 | |
| 5/27 | 400 | $ 543 | |
| 5/28 | 401 | $ 450 | |
| 5/29 | 402 | $ 175 | |
| 5/31 | 403 | $ 415 |
Duplicate Deposit Slips
| Deposit Slip | Cash | Currency Coins | 00 | 00 |
| Date | List of Checks | |||
| 4/30/10 | Gilly | 915 | 00 | |
| Total | 915 | 00 |
| Deposit Slip | Cash | Currency Coins | 750 | 00 |
| Date | List of Checks | |||
| 5/1/10 | Jones | 250 | 00 | |
| Total | 1000 | 00 |
| Deposit Slip | Cash | Currency Coins | 156 | 00 |
| Date | List of Checks | |||
| 5/4/10 | Slade | 581 | 00 | |
| Total | 737 | 00 |
| Deposit Slip | Cash | Currency Coins | 500 | 00 |
| Date | List of Checks | |||
| 5/13/10 | Luce | 350 | 00 | |
| Total | 850 | 00 |
| Deposit Slip | Cash | Currency Coins | 600 | 00 |
| Date | List of Checks | |||
| 5/20/10 | Pyle | 129 | 00 | |
| Total | 729 | 00 |
| Deposit Slip | Cash | Currency Coins | 445 | 00 |
| Date | List of Checks | |||
| 5/27/10 | Dudley | 370 | 00 | |
| Total | 815 | 00 |
| Deposit Slip | Cash | Currency Coins | 0 | 00 |
| Date | List of Checks | |||
| 5/31/10 | Gilly | 915 | 00 | |
| Total | 915 | 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 | |
| Memo: Invoice 010 | Jill Supreme | |
| Supreme Company | Date: 4/30/10 | 397 |
| 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 Carr 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 Ollyoop | $ 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 | |
| Supreme Company | Date: 5/31/10 | 406 |
| 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 |
| Pay to the Order of Ollyoop | $ 800.00 | |
| NBT Bank | Eight Hundred and no cents | |
| Memo: Invoice 5020 | Jill Supreme | |
SUPREME COMPANYâS BOOKS
| Cash Receipts Recorded in Cash Receipts Journal | ||
| Date | Cash Debit | |
| 5/1 | $ 1,000 | *JS |
| 5/4 | $ 737 | *JS |
| 5/9 | $ 1,285 | *JS |
| 5/13 | $ 850 | *JS |
| 5/20 | $ 729 | *JS |
| 5/27 | $ 815 | *JS |
| 5/31 | $ 915 | *JS |
| Total= | $ 6,331 | |
| 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 | $ 300 |
| 405 | $ 160 |
| 406 | $ 514 |
| 407 | $ 800 |
| Total= | $ 4,909 |
See duplicate deposit slips on page 2. See duplicate carbon copies of checks on pages 3 - 5.
Assume that all cash receipts were counted by owner-Jill Supreme, 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 â see page 1). Assume that any cash receipt that did not clear the bank by the next day was never deposited in the bank.
| Cash General Ledger | ||||
| Date | Explanation | Debit | Credit | Balance |
| 4/30 | Balance | 11,338 | ||
| 5/31 | Cash Receipts | 6,331 | ||
| 5/31 | Cash Payments | 4,909 | 12,760 | |
Check No. 400 was issued for $543 to Hooyah 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
| Cash balance according to bank statement | $12,760 | |
| Add: Deposits in Transit 4/30 | $ 915 | |
| $ 915 | ||
| $ 13,675 | ||
| Less: | ||
| Outstanding Checks: | ||
| 391 | $ 125 | |
| 392 | $ 112 | |
| 393 | $ 500 | |
| 394 | $ 215 | |
| 395 | $ 100 | |
| 396 | $ 514 | |
| 397 | $ 771 | |
| $ 2,337 | ||
| Adjusted Balance | $ 11,338 |
| Cash balance according to the ledger | $ 9,200 | |
| 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 | $ 581 | |
| Bank Service Charge | $ 11 | |
| $ 592 | ||
| Adjusted Balance | $ 11,338 |
SUPREME COMPANY
BANK RECONCILIATION
May 31, 2010
| Cash balance according to bank statement | $ 15,379 | |
| Add: Deposits in Transit 5/31 | $ 915 | |
| $ 915 | ||
| $ 16,294 | ||
| Less: | ||
| Outstanding Checks: | ||
| 404 | $ 300 | |
| 405 | $ 160 | |
| 406 | $ 514 | |
| 407 | $ 800 | |
| $ 1,774 | ||
| Adjusted Balance | $ 14,520 |
| Cash balance according to the ledger | $ 12,760 | |
| 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 | $ 581 | |
| Bank Service Charge | $ 11 | |
| Error in recording check 400 | $ 198 | |
| $ 790 | ||
| Adjusted Balance | $ 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)
4.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.
Problem 2 (40 points)
1.Read the following instructions and enter and submit all information on the Group Project Excel spreadsheet Problem 2 parts 2 - 6 tab and Problem 2 part 7- 8 tab.
2.Open the following selected accounts recording the opening balances as of January 1 of the current year. In the (Group Project Excel Spreadsheet Problem 2 Parts 2 - 6 tab).
| 114.1 | Allowance for doubtful accounts | 12,200 Credit |
| 313 | Income summary | |
| 718 | Bad debts expense |
3.Record the following transactions in general journal form in the Group Project Excel Spreadsheet Problem 2 Parts 2 - 6 tab.
4.Post these transactions to the three selected accounts above and to Accounts receivable in the Group Project Excel Spreadsheet Problem 2 parts 2 - 6 tab.
5.Enter the ending balances in the three accounts above and enter the ending balance in the Accounts Receivable account. Enter those balances in the Group Project Excel Spreadsheet Problem 2 parts 2 - 6 tab.
| Apr 1, 09 | Accepted a $20,000, one - year, 8% note dated April 1 from Bruce Hanson for the sale of inventory; Cost of Goods Sold was $16,500. |
| June 27 | Wrote off the $2,375 balance owed by Miller Corp., which has no assets. |
| Oct. 5 | Received 25% of the $12,000 balance owed by F.M. Knox Co., a bankrupt, and wrote off the remainder as uncollectible. |
| Dec. 31 | Based on an analysis of the $257,724 of accounts receivable, it was estimated that $14,500 will be uncollectible. Record the adjusting entry using the Aging method. |
| Dec. 31 | Record the adjusting entry for interest accrued on the Bruce Hanson note |
| Dec. 31 | Record the entries to close the appropriate accounts into Retained Earnings. |
| April 1, 10 | Collected the maturity value on the Hanson note. |
6.Determine the net accounts receivable (the amount Summer expects to collect as of December 31 and enter in the Group Project Spreadsheet Problem 2 Parts 2 - 6 tab).
7.Compute the accounts receivable turnover and the dayâs sales in receivables for the year. Assume that there were $1,800,000 sales account. (You will need to refer to the Group Project Excel Spreadsheet Problem 2 part 7 - 8 tab).
8.How is Summer Company doing with collection of their accounts receivable compared to the industry? Assume the industry average for the accounts receivable turnover is 11 and the industry average for the dayâs sales in receivables is 37 days? (Enter in the Group Project Excel Spreadsheet Problem 2 part 7- 8 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.
Problem 3 (30 points)
Part 1
New tire re-treading equipment, acquired at a cost of $120,000 on 1/2/06, has an estimated useful life of 5 years and an estimated residual value of $10,000. The manager requested information regarding the alternative methods on the amount of depreciation expense each year.
Instructions: Determine the amount of depreciation expense, accumulated depreciation, and book value for the years ended December 31, 2006, 2007, 2008, 2009, 2010 by
the straight line method
the double declining balance method
units of production
Assume that it is estimated that the equipment will be used for 10,000 operating hours. (2,500 (06), 3,000 (07), 2,750 (08), 1,500 (09), 250 (2010).
(Present and submit all of your work in the Problem 3 Part 1 Tab)
Part 2
Assume that the manager decided to use the double declining balance method for the tire re-treading equipment above. Record the following journal entries:
1.On 4/15/2006 the company paid $1,000 for an ordinary repair.
2.On 1/1/07 the company paid $10,000 for a major engine overhaul.
3.On 7/01/2009 the company sold the equipment for $20,000.
(Present and submit all of your work in the Problem 3 Part 2 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.
Problem 4 (30 points)
Evaluate the financial performance of Coca-Cola; (KO) and Pepsi (PEP) for the year ended December 31, 2016. Follow the instructions below to access each companyâs information and perform a financial analysis based on the financial measures we have learned in this course.
Select Http://www.yahoo.com/ and then select Finance. In the Search section at the top of the screen select KO for Coca-Cola and PEP for Pepsi
Select âFinancialsâ and select Income Statement when accessing the Income Statement
Select âFinancialsâ and select Balance Sheet when accessing the Balance Sheet
Do the following for KO and PEP for the year ended 12/31/16 only
Perform a vertical analysis of the Income Statement for KO and PEP for the year ended 12/31/16.
Include in your vertical analysis all of following as a % of total revenue:
Cost of Revenue as a % of Total Revenue
Gross Profit as a % of Total Revenue
Selling, gen and administrative expenses as a % of Total Revenue
Operating Income as a % of Total Revenue
Net Income as a % of Total Revenue
Current Ratio
Accounts Receivable turnover. Assume the total revenue on the income statement represents all sales on account for the year
Average collection period
Merchandise Inventory turnover. Assume the Cost of Revenue on the Income Statement is the same as the Cost of Goods Sold
Debt to Asset Ratio
Return on Assets Ratio
Asset Turnover
In preparing the vertical analysis and other financial analysis above; define each measure and identify the strengths and weaknesses of KO and PEP as related to each other. Below is an example of you should set it up.
| Working Capital | KO | PEP |
| Current Assets | $ 34,010,000 | $ 27,089,000 |
| - Current Liabilities | $ 26,532,000 | $ 21,135,000 |
| Net Working Capital = | $ 7,478,000 | $ 5,954,000 |
Strength or Weakness
Working Capital measures the ability of a company to meet its short-term obligations with current assets. Pepsi is and Coke are performing at about the same level. Cokes working capital is a little higher because they have higher current assets and current liabilities.
