identify the internal control weaknesses that exist at big bad burgers and discuss w 394129 | Homework Solutions
Internal control of cash receipts
Obj|2, 3
Kevin Clavin works at the drive through window of Big Bad Burgers. Occasionally, when a drive through customer orders, Kevin fills the order and pockets the customer’s money. He does not ring up the order on the cash register.
Identify the internal control weaknesses that exist at Big Bad Burgers, and discuss what can be done to prevent this theft.
E5 11
Internal control of cash receipts
Obj|2, 3
The mailroom employees send all remittances and remittance advices to the cashier. The cashier deposits the cash in the bank and forwards the remittance advices and duplicate deposit slips to the Accounting Department.
a.
Indicate the weak link in internal control in the handling of cash receipts.
b.
How can the weakness be corrected?
E5 12
Entry for cash sales; cash short
Obj|2, 3
The actual cash received from cash sales was $27,199, and the amount indicated by the cash register total was $27,228.
a.
What is the amount deposited in the bank for the day’s sales?
b.
What is the amount recorded for the day’s sales?
c.
How should the difference be recorded?
d.
If a cashier is consistently over or short, what action should be taken?
E5 13 due on 11/10
Recording cash sales; cash over
The actual cash received from cash sales was $14,356, and the amount indicated by the cash register total was $14,290.
a.
What is the amount deposited in the bank for the day’s sales?
b.
What is amount recorded for the day’s sales?
c.
How should the difference be recorded?
d.
If a cashier is consistently over or short, what action should
5 15
Torpedo Digital Company, a communications equipment manufacturer, recently fell victim to a fraud scheme developed by one of its employees. To understand the scheme, it is necessary to review Torpedo’s procedures for the purchase of services.
The purchasing agent is responsible for ordering services (such as repairs to a photocopy machine or office cleaning) after receiving a service requisition from an authorized manager. However, since no tangible goods are delivered, a receiving report is not prepared. When the Accounting Department receives an invoice billing Torpedo for a service call, the accounts payable clerk calls the manager who requested the service in order to verify that it was performed.
The fraud scheme involves Ross Dunbar, the manager of plant and facilities. Ross arranged for his uncle’s company, Capo Industrial Supplies and Service, to be placed on Torpedo’s approved vendor list. Ross did not disclose the family relationship.
On several occasions, Ross would submit a requisition for services to be provided by Capo Industrial Supplies and Service. However, the service requested was really not needed, and it was never performed. Capo Industrial Supplies and Service would bill Torpedo for the service and then split the cash payment with Ross.
Explain what changes should be made to Torpedo’s procedures for ordering and paying for services in order to prevent such occurrences in the future.
1.
Bank service charges, $40
2.
Check drawn by company for $480 but incorrectly recorded by company as $840.
3.
Check for $100 incorrectly charged by bank as $1,000.
4.
Check of a customer returned by bank to company because of insufficient funds, $975.
5.
Deposit in transit, $18,800.
6.
Outstanding checks, $12,200.
7.
Note collected by bank, $20,500.
E5 17
Entries based on bank reconciliation
Obj|5
Which of the reconciling items listed in Exercise 5 16 are required to be recorded in the company’s accounts?
E5 16
Bank reconciliation
Obj|5
Identify each of the following reconciling items as: (a) an addition to the cash balance according to the bank statement, (b) a deduction from the cash balance according to the bank statement, (c) an addition to the cash balance according to the company’s records, or (d) a deduction from the cash balance according to the company’s records. (None of the transactions reported by bank debit and credit memos have been recorded by the company.)
1.
Bank service charges, $40.
2.
Check drawn by company for $480 but incorrectly recorded by company as $840.
3.
Check for $100 incorrectly charged by bank as $1,000.
4.
Check of a customer returned by bank to company because of insufficient funds, $975.
5.
Deposit in transit, $18,800.
6.
Outstanding checks, $12,200.
7.
Note collected by bank, $20,500.
Attachments:
Past due assi….docx
