Week 5: HomeworkQuestion 1 of 6
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The following control procedures are used in Keaton Company for over-the-counter cash receipts.
For each procedure, explain the weakness in internal control and identify the control principle that is violated.
Procedure
1.
Each store
manager is
responsible
for
interviewing
applicants
for cashier
jobs. They
are hired if
they seem
honest and
trustworthy.
2.
All overthe-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
briefcase 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.
Weakness
Principle Violated
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Week 5: Homework
Question 2 of 6
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The following information pertains to Sheridan Company.
1.
Cash balance per bank, July 31, $10,092.
2.
July bank service charge not recorded by the depositor $58.
3.
Cash balance per books, July 31, $10,208.
4.
Deposits in transit, July 31, $4,118.
5.
$2,320 collected from a customer for Sheridan Company in July by the bank through electronic funds transfer. The collection
has not been recorded by Sheridan Company.
6.
Outstanding checks, July 31, $1,740.
(a)
Prepare a bank reconciliation at July 31, 2025. (List items that increase balance as per bank & books first.)
SHERIDAN COMPANY
Bank Reconciliation
$
:
:
$
$
:
:
$
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List of Accounts
Assistance Used
Accounts Payable
Accounts Receivable
Accumulated Depreciation-Equipment
Bank Charges Expense
Cash
Cash Over and Short
Common Stock
Cost of Goods Sold
Deferred Revenue
Delivery Expense
Depreciation Expense
Entertainment Expense
Equipment
Freight-In
Freight-Out
Income Tax Expense
Income Tax Payable
Insurance Expense
Interest Expense
Interest Income
Interest Receivable
Interest Revenue
Inventory
Miscellaneous Expense
No Entry
Notes Payable
Notes Receivable
Petty Cash
Postage Expense
Prepaid Insurance
Rent Revenue
Repairs Expense
Retained Earnings
Salaries and Wages Expense
Sales Discounts
Sales Revenue
Service Revenue
Supplies
Supplies Expense
Travel Expense
Utilities Expense
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(b)
Journalize the adjusting entries at July 31 on the books of Sheridan Company. (Credit account titles are automatically
indented when amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry is
required, select “No Entry” for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
July
31
(To record electronic funds transfer)
July
31
(To record bank service charge)
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Week 5: Homework
Question 3 of 6
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You are provided with the following information taken from Pharoah Inc.’s March 31, 2025, balance sheet.
Cash
$ 12,420
Accounts receivable
21,350
Inventory
36,490
Property, plant, and equipment, net of depreciation
121,600
Accounts payable
23,360
Common stock
154,900
Retained earnings
12,460
Additional information concerning Pharoah Inc. is as follows.
1.
Gross profit is 25% of sales.
2.
Actual and budgeted sales data:
3.
March (actual)
$47,900
April (budgeted)
73,500
Sales are both cash and credit. Cash collections expected in April are:
March
$19,160
(40% of $47,900)
April
44,100
(60% of $73,500)
$63,260
4.
Half of a month’s purchases are paid for in the month of purchase and half in the following month. Cash disbursements expected in April are:
Purchases March
$23,360
Purchases April
29,070
$52,430
5.
Cash operating costs are anticipated to be $11,870 for the month of April.
6.
Equipment costing $2,880 will be purchased for cash in April.
7.
The company wishes to maintain a minimum cash balance of $12,420. An open line of credit is available at the bank. All
borrowing is done at the beginning of the month, and all repayments are made at the end of the month. The interest rate
is 13% per year, and interest expense is accrued at the end of the month and paid in the following month.
Prepare a cash budget for the month of April. Determine how much cash Pharoah Inc. must borrow, or can repay, in April. (List items
that increase cash balance first.)
PHAROAH INC.
Cash Budget
$
:
:
:
:
$
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Week 5: Homework
Question 4 of 6
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Assume the following information for Metlock Corp.
Accounts receivable (beginning balance)
$154,000
Allowance for doubtful accounts (beginning balance)
11,360
Net credit sales
936,000
Collections
917,000
Write-offs of accounts receivable
6,300
Collections of accounts previously written off
1,900
Uncollectible accounts are expected to be 7% of the ending balance in accounts receivable.
(a)
Prepare the entries to record sales and collections during the period. (List all debit entries before credit entries. Credit
account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is
required, select “No Entry” for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit
Credit
(To record sales on account)
(To record collection of accounts receivable)
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(b)
(c)
(d)
(e)
(f)
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Week 5: Homework
Question 6 of 6
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Mary.com uses the allowance method of accounting for bad debts. The company produced the following aging of the accounts
receivable at year-end.
(a)
Calculate the total estimated bad debts based on the below information.
Number of Days Outstanding
Accounts receivable
Total
0–30
31–60
$408,000
$246,000
$90,000
1%
4%
% uncollectible
Estimated bad debts
$
$
$
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(b)
Prepare the year-end adjusting journal entry to record the bad debts using the aged uncollectible accounts receivable determined
above. Assume the unadjusted balance in Allowance for Doubtful Accounts is a $3,700 debit. (List debit entry before credit
entry. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry
is required, select “No Entry” for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit
Credit
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(c)
Of the above accounts, $5,500 is determined to be specifically uncollectible. Prepare the journal entry to write off the
uncollectible account. (List debit entry before credit entry. If no entry is required, select “No Entry” for the account
titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not
indent manually.)
Account Titles and Explanation
Debit
Credit
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(d)
The company collects $5,500 subsequently on a specific account that had previously been determined to be uncollectible in part
(c). Prepare the journal entries necessary to (1) restore the account and (2) record the cash collection. (List all debit entries
before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent
manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)
No. Account Titles and Explanation
Debit
Credit
1.
2.
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Assistance Used
Accounts Payable
Accounts Receivable
Accumulated Depreciation-Equipment
Allowance for Doubtful Accounts
Bad Debt Expense
Cash
Common Stock
Cost of Goods Sold
Dividends
Income Tax Expense
Income Taxes Payable
Interest Receivable
Interest Revenue
Inventory
No Entry
Notes Receivable
Other Operating Expenses
Other Receivables
Retained Earnings
Sales Discounts
Sales Returns and Allowances
Sales Revenue
Service Charge Expense
Supplies
Supplies Expense
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