Auditing general cash for the Pittsburgh Supply Company for the fiscal year ended July 31, 2009. The client has not prepared the July 31 bank reconciliation. After a brief discussion with the owner, you agree to prepare the reconciliation, with assistance from one of the Pittsburgh Supply's clerks. You obtain the following information:
General Ledger Bank Statement
Beginning balance 7/1/09 $6,400 $8,378
Deposits $25,474
Cash receipts journal $26,874
Checks cleared ($25,307)
Cash disbursements journal ($23,171)
July bank service charge ($107)
Notes paid directly ($6,400)
NSF check ($516)
Ending balance $10,103 $1,522
June 30 Bank Reconciliation
Information in General Ledger and Bank Statement
Balance per bank $8,378
Deposits in transit $600
Outstanding checks $2,578
Balance per books $6,400
Additional information obtained as follows:
1. Checks cleared that were outstanding on June 30 totaled $2,411
2. Checks clearing that were recorded in the July disbursements journal totaled $21,120
3. A check for $1,130 cleared the bank but had not been recorded in the cash disbursements journal. It was for an acquisition of inventory. Pittsburgh Supply uses the periodic-inventory method.
4. A check for $646 was charged to Pittsburgh Supply but had been written on a different company's bank account.
5. Deposits included $600 from June and $24,874 for July
6. The bank charged Pittsburgh Supply's account for a nonsufficient check totaling $516. The credit manager concluded that the customer intentionally closed its account and the owner left the city. The check was turned over to a collection agency.
7. A note for $6,000, plus interest, was paid directly to the bank under an agreement signed 4 months ago. The note payable was recorded at $6,000 on Pittsburgh Supply's books.
a. Prepare a bank reconciliation that shows both the unadjusted and adjusted balance per books
b. Prepare all adjusting entries
c. What audit procedures would you use to verify each item in the bank reconciliation?
d. What is the cash balance that should appear on the July 31, 2009, financial statements?
25. You are doing the first-year audit of Sherman School District and have been assigned responsibility for doing a four-column proof of cash for the month of October 2009. You obtain the following information:
Balance per books September 30 October 31
$10,725 $5,836
Balance per bank September 30 October 31
$6,915 $8,276
Outstanding checks September 30 October 31
$1,811 $2,615
Cash receipts for October Per bank Per books
$28,792 $20,271
Deposits in transit September 30 October 31
$5,621 $996
1. Interest on a bank loan for the month of October, charged by the bank but not recorded, was $596
2. Proceeds on a note of the Jones Company were collected by the bank on October 28 but were not entered in the books:
Principal $2,900
Interest 396
$3,296
3. On October 26, a $1,144 check of the Billings Company was charged to Sherman School District's account by the bank in error
4. Dishonored checks are not recorded on the books unless they permanently fail to clear the bank. The bank treats them as disbursements when they are dishonored in October; $600 was redeposited in October and $735 in November
a. Prepare a four-column proof of cash for the month ended October 31. It should show both adjusted and unadjusted cash.
b. Prepare all adjusting entries