Page 366 - Accounting Principles (A Business Perspective)

8. Control of cash

Deposit of July 21 was recorded by the company as USD 4,299.75 and by the bank at the actual amount of USD
4,542.75. The receipts for the day were from collections on account.
The deposits amount shown on the bank statement includes USD 675 of interest earned by Irish on its checking

account with the bank.
a. Prepare a bank reconciliation as of 2010 July 31, for Irish Company.
b. Prepare any journal entry or entries needed at 2010 July 31.
Alternate problem C Transactions involving the petty cash fund of Sonar Company are as follows:
Mar. 1 Established a petty cash fund of USD 750, which will be under the control of the assistant office manager.
31 Fund was replenished on this date. Prior to replenishment, the fund consisted of the following:

Coins and currency $ 491.50
Petty cash voucher indicating disbursements for:
Postage stamps $82.00
Suppliers money for office employees working overtime 36.00
Office supplies 32.70
Window washing service 60.00
Flowers for wedding employee 15.00
Flower for hospitalized employee 15.00
Employee's IOU 15.00
Present journal entries for these transactions. Use the Cash Short and Over account for any shortage or overage
in the fund.
Alternate problem D Sun Company has decided to use a petty cash fund. Transactions involving this fund
follow:

June 4 Set up a petty cash fund of USD 225.
22 When the fund had a cash amount of USD 31.35, the custodian of the fund was reimbursed for expenditures
made, including:
Transportation-in $ 82.50
Postage 27.00
Office supplies 81.75
30 The fund was reimbursed to include petty cash items in the financial statement prepared for the fiscal year
ending on this date. The fund had the following cash and vouchers before reimbursement:
Coins and currency $174.00
Petty cash vouchers for:
Employee's IOU 15.00
Postage 27.00
Office supplies 11.10
July 1 The petty cash fund balance is increased to USD 300.
Prepare journal entries for all of these transactions.

Beyond the numbers—Critical thinking
Business decision case A During a national emergency, a managerial accountant was called back to active
duty with the US Army. An acquaintance of the accountant forged papers and assumed the identity of the
accountant. He obtained a position in a small company as the only accountant. Eventually he took over from the
manager the functions of approving bills for payment, preparing and signing checks, and almost all other financial
duties. On one weekend, he traveled to some neighboring cities and mailed invoices made out to the company for
which he worked. On Monday morning, he returned to work and began receiving, approving, and paying the

invoices he had prepared. The following weekend he returned to the neighboring cities and cashed and deposited

367