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The records of Parker Company indicate a July 31 cash balance of $10,400, which includes undeposited receipts for July 30 and 31

The records of Parker Company indicate a July 31 cash balance of $10,400, which includes undeposited receipts for July 30 and 31
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Solution Guide / Answer Key:

ACCOUNTING

CP 8-5 Bank reconciliation and internal control (25th edition)

The records of Parker Company indicate a July 31 cash balance of $10,400, which includes undeposited receipts for July 30 and 31. The cash balance on the bank statement as of July 31 is $10,575. This balance includes a note of $2,250 plus $150 interest collected by the bank but not recorded in the journal. Checks outstanding on July 31 were as follows: No. 2670, $1,050; No. 3679, $675; No. 3690, $1,650; No. 5148, $225; No. 5149, $750; and No. 5151, $800. On July 25, the cashier resigned, effective at the end of the month. Before leaving on July 31, the cashier prepared the following bank reconciliation:

 

Cash balance per books, July 31 .................................... $10,400

Add outstanding checks:

No. 5148 ........................................................ $225

5149 ........................................................ 750

5151 ........................................................ 800 1,675

$12,075

Less undeposited receipts ......................................... 1,500

Cash balance per bank, July 31 ..................................... $10,575

Deduct unrecorded note with interest .............................. 2,400

True cash, July 31.................................................. $ 8,175

Calculator Tape of Outstanding Checks:

0*

225

750

800

1,675*

 

Subsequently, the owner of Parker Company discovered that the cashier had stolen an unknown amount of undeposited receipts, leaving only $1,500 to be deposited on July 31. The owner, a close family friend, has asked your help in determining the amount that the former cashier has stolen.

 

1. Determine the amount the cashier stole from Parker Company. Show your computations in good form.

2. How did the cashier attempt to conceal the theft?

3. a. Identify two major weaknesses in internal controls, which allowed the cashier to steal the undeposited cash receipts.

b. Recommend improvements in internal controls, so that similar types of thefts of undeposited cash receipts can be prevented.

 

FILE: MS WORD

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