Problem One - Prepare a bank reconciliation dated December 31, 2009, for Belton Company based on the following information:
- Balance per bank statement is $26,222.
- Balance per books is $24,641.
- The December bank statement indicated a service charge of $35.
- Check #1169 for $730 and Check #1183 for $2,150 were not returned with the bank statement.
- A $3,472 deposit made on December 30 did not appear on the bank statement.
- A bank debit memo indicated an NSF check written by Bill Bush to Jacque's Espresso and Books on December 11, 2009, for $644.
- A bank credit memo indicated a bank collection of $2,800 and interest revenue of $52 on December 15, 2009.
Problem Two -
(1) Prepare any journal entries based on the following data regarding the bank reconciliation prepared by Washington & Leigh Company on July 31, 2009.
a. A customer's check for $260 was returned with the bank statement and stamped NSF.
b. Outstanding checks amount to $850.
c. Service charges for July per bank statement are $25.
d. Check #5207 for $8,450 for office equipment was erroneously recorded by the bookkeeper as $4,850.
e. The bank collected a $2,500 note receivable on behalf of Washington & Leigh.
f. A deposit ticket correctly prepared for $695 appeared on the bank statement as a deposit for $965.
g. Check #930 for $900 for rent expense was erroneously recorded by the bookkeeper as $90.
(2) Armstrong Company reports the following information for the years ended December 31, 2009 and 2010:
2009 2010
Sales $980,000 $820,000
Accounts Receivable 75,000 65,000
Sales consisted of 80% credit sales and 20% cash sales during 2009 and 2010.
From the information given above for Armstrong Company, determine the:
a. accounts receivable turnover for 2010.
b. days to collect accounts receivable for 2010 .
Problem Three -
(1) On March 1, 2010, Metro Electric Enterprises established an imprest petty cash fund for $200. An audit of the fund conducted on March 31, 2010, revealed the $30 cash on hand and the following receipts for petty cash disbursements:
Office supplies $135
Refreshments for meeting 20
Postage on packages mailed 15
Prepare the entry on March 1, 2010, to establish the petty cash fund, and the entry on March 31, 2010, to replenish the petty cash fund.
(2) In each of the following situations, identify the internal control weakness as well as the business's potential problem, and suggest a solution.
a. Sandy Bingham purchases supplies for Joe Mack Music Company and stores them in a locked room for which she has the key. She is also responsible for distributing these supplies to employees upon request. At the end of each month, Sandy takes an inventory of the supplies on hand and notifies the accounting department of the amount for the adjusting entry for supplies used.
b. The law firm of Wheeler, Dealer, and Brandt has been extremely busy in recent months. They need another lawyer, but the company has not had the chance to hire one. In the meantime, one of the secretaries has been preparing briefs, writing up wills, and preparing the closing papers for various real estate deals.