P3-1A
On April 1 Flint Hills Travel Agency Inc. was established. These transactions
were completed during the month.
1.
Stockholders invested $25,000 cash in the company in exchange for common stock.
2.
Paid $900 cash for April office rent.
3.
Purchased office equipment for $2,800 cash.
4.
Purchased $200 of advertising in the Chicago Tribune, on account.
5.
Paid $500 cash for office supplies.
6.
Earned $10,000 for services provided: Cash of $1,000 is received from
customers, and the balance of $9,000 is billed to customers on account.
7.
Paid $400 cash dividends.
8.
Paid Chicago Tribune amount due in transaction (4).
9.
Paid employees’ salaries $1,200.
10.
Received $9,000 in cash from customers billed previously in transaction (6)
Instructions:
(a)
Prepare a tabular analysis of the transactions using these column headings:
Cash, Accounts Receivable, Supplies, Office Equipment, Accounts Payable, Common
Stock, and Retained Earnings (with separate columns for Revenues, Expenses, and
Dividends). Include margin explanations for any changes in Retained Earnings.
(b)
From an analysis of the Retained Earnings columns, compute the net income or
net loss for April.
E4-3 The following control procedures are used in Falk Company for over-the-counter cash receipts.
1.
Cashiers are experienced; thus, they are not bonded.
2. All
over-the-counter receipts are registered by three clerks who share a cash
register with a single cash drawer.
3. To minimize
the risk of robbery, cash in excess of $100 is stored in an unlocked attaché
case in the stock room until it is deposited in the bank.
4. At
the end of each day the total receipts are counted by the cashier on duty and
reconciled to the cash register total.
5. The
company accountant makes the bank deposit and then records the day’s receipts.
Instructions
(a)
For each procedure, explain the weakness in internal control and identify the
control principle that is violated.
(b)
For each weakness, suggest a change in the procedure that will result in good
internal control.
P4-3A On July 31, 2010, Fenton Company had a cash balance per books of $6,140. The statement from JacksonState Bankon that date showed a balance of $7,695.80. A comparison of the bank statement with the cash account revealed the following facts.
1.The
bank service charge for July was $25.
2.The
bank collected a note receivable of $1,500 for Fenton Company on July 15, plus
$30 of interest. The bank made a $10 charge for the collection. Fenton has not
accrued any interest on the note.
3.The
July 31 receipts of $1,193.30 were not included in the bank deposits for July.
These receipts were deposited by the company in a night deposit vault on July
31.
4.
Company check No. 2480 issued to H. Coby, a creditor, for $384 that cleared the
bank in July was incorrectly entered in the cash payments journal on July 10
for $348.
5.
Checks outstanding on July 31 totaled $1,980.10.
6. On
July 31 the bank statement showed an NSF charge of $690 for a check received by
the company from P. Figura, a customer, on account.
Instructions
(a)
Prepare the bank reconciliation as of July 31.
(b)
Prepare the necessary adjusting entries at July 31.
File name: P3-1A-E4-3-and-P4-3A.doc File type: application/msword Price: $15
