EXERCISE
7-4
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(a) Weaknesses |
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(b) Suggested Improvement |
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1. Checks
are not prenumbered. |
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Use
prenumbered checks. |
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2. The
purchasing agent signs checks. |
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Only
the treasurer’s department personnel should sign checks. |
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3. Unissued checks are stored in unlocked file cabinet. |
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Unissued
checks should be stored in a locked file cabinet with access restricted to
authorized personnel. |
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4. Purchasing agent approves and pays
for goods purchased. |
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Purchasing
should approve bills for payment by the treasurer. |
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5. After
payment, the invoice is filed. |
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The
invoice should be stamped PAID. |
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6. The
purchasing agent records payments in cash disbursements journal. |
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Only
accounting department |
EXERCISE 7-4 (Continued)
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(a) Weaknesses |
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(b) Suggested Improvement |
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7. The
treasurer records the checks in cash disbursements journal. |
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Same
as answer to No. 6 above. |
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8. The
treasurer reconciles the bank statement. |
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An
internal auditor should reconcile the bank statement. |
EXERCISE
7-5
(a) Cash
balance per bank statement.............................................. $3,660.20
Add: Deposits in transit.............................................................
590.00
4,250.20
Less: Outstanding checks..........................................................
730.00
Adjusted
cash balance per bank................................................ $3,520.20
Cash
balance per books............................................................. $3,975.20
Less: NSF check........................................................................ $430.00
Bank
service charge.................................................... 25.00 455.00
Adjusted
cash balance per books............................................... $3,520.20
(b) Accounts
Receivable.............................................................................. 430.00
Cash............................................................................................. 430.00
Miscellaneous
Expense.......................................................................... 25.00
Cash............................................................................................. 25.00
EXERCISE 7-10
HANOVER COMPANY
Cash Budget
For the Two Months Ending
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January |
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February |
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Beginning cash balance........................................................................ Add:
Receipts Collections
from customers..................................................... Total
receipts........................................................................... Total available cash............................................................................... Less:
Disbursements Payments
to suppliers............................................................. Direct
labor.............................................................................. Manufacturing
overhead......................................................... Selling
and administrative expenses...................................... Total
disbursements................................................................ Excess (deficiency) of available cash over disbursements.................................................................................... Financing Borrowings................................................................................... Repayments................................................................................. Ending cash balance.............................................................................. |
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$46,000 70,000 7,000 77,000 123,000 40,000 30,000 20,000 14,000 104,000 19,000 1,000 0 $20,000 |
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$20,000 155,000 0 155,000 175,000 75,000 40,000 29,000 18,000 162,000 13,000 7,000 0 $20,000 |
EXERCISE
7-11
The
cash to daily cash expenses ratio is calculated by first calculating average
daily cash expenses:
=
18.9 million per day.
Then cash on hand is divided by average daily cash
expenses:
= 28.6 days.
Free cash flow is calculated
as:
$1,251 – $133 – $1,031 = $87 million.
to pay for 28.6 days of expenses. Its free cash flow is very satisfactory. It generated
enough cash from its operating activities to pay for its capital expenditures
and has enough left over that it could either expand operations
or increase dividends.
*EXERCISE 7-12
Oct. 1 Petty Cash.................................................................................. 100
Cash................................................................................. 100
31 Office Supplies........................................................................... 28.10
Miscellaneous
Expense.............................................................. 16.40
Postage
Expense........................................................................ 41.30
Freight-out.................................................................................. 6.80
Cash
Short and Over.................................................................. 1.00
Cash................................................................................. 93.60
Petty
Cash.................................................................................. 100
Cash................................................................................. 100
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PROBLEM 7-3A |
(a) GRACE
COMPANY
Bank
Reconciliation
Cash
balance per bank statement................................................ $7,695.80
Add: Deposits in transit............................................................... 1,819.60
9,515.40
Less: Outstanding checks............................................................ 1,480.10
Adjusted
cash balance per bank.................................................. $8,035.30
Cash
balance per books............................................................... $6,815.30
Add: Collection of note receivable
($1,800 plus accrued interest $68,
less collection fee $10).............................................. 1,858.00
8,673.30
Less: NSF check.......................................................................... $550.00
Error
in recording check No. 2480.................................. 63.00
Bank
service charge...................................................... 25.00 638.00
Adjusted
cash balance per books................................................. $8,035.30
(b) July 31 Cash 1,858
Miscellaneous
Expense.......................................................... 10
Notes
Receivable......................................................... 1,800
Interest
Revenue.......................................................... 68
31 Accounts Receivable—R. Close.............................................. 550
Cash............................................................................. 550
31 Accounts Payable—J. Brokaw................................................ 63
Cash............................................................................. 63
31 Miscellaneous Expense.......................................................... 25
Cash............................................................................. 25
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PROBLEM 7-4A |
(a) ZURICH
COMPANY
Bank
Reconciliation
Balance
per bank statement................................................... $17,394.60
Add: Deposits in transit......................................................... 1,225.00
18,619.60
Less: Outstanding checks
No. 2451............................................................... $1,260.40
No. 2472............................................................... 426.80
No. 2478............................................................... 538.20
No. 2482............................................................... 612.00
No. 2484............................................................... 829.50
No. 2485............................................................... 974.80
No. 2487............................................................... 398.00
No. 2488............................................................... 800.00 5,839.70
Adjusted
cash balance per bank............................................ $12,779.90
Balance
per books.................................................................. $11,133.90
Add: Note collected by bank................................................ 1,905.00
13,038.90
Less: Check printing charge.................................................. $70.00
Error
in recording check
No. 2479 ($1,750 – $1,570)..................................... 180.00
Error
in 11-21 deposit
($2,954 – $2,945)................................................... 9.00 259.00
Adjusted
cash balance per books........................................... $12,779.90
(b) Nov. 30 Cash .................................................................................... 1,905
Miscellaneous
Expense......................................................... 15
Notes
Receivable......................................................... 1,800
Interest
Revenue......................................................... 120
30 Miscellaneous Expense......................................................... 70
Cash............................................................................ 70
Nov. 30 Accounts
Payable.......................................................................... 180
Cash.................................................................................... 180
30 Accounts
Receivable..................................................................... 9
Cash.................................................................................... 9