ACCT 001 Lecture Notes - Lecture 27: Online Banking, Electronic Funds Transfer, Giro
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Solve the following QS and Exercises from your textbook in chapter 8.
QS 8-1
Internal control objectives
An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies. Evaluate each of the following statements and indicate which are true and which are false regarding the objectives of an internal control system.
____ | 1. | Separation of recordkeeping for assets from the custody over assets is intended to reduce theft and fraud. |
____ | 2. | The primary objective of internal control procedures is to safeguard the business against theft from government agencies. |
____ | 3. | The main objective of internal control procedures is best accomplished by designing an operational system with managerial policies that protect the assets from waste, fraud, and theft. |
____ | 4. | Separating the responsibility for a transaction between two or more individuals or departments will not help prevent someone from creating a fictitious invoice and paying the money to herself or himself. |
QS 8-2
Cash and equivalents
Choose from the following list of terms/phrases to best complete the following statements.
a. | Cash |
b. | Cash equivalents |
c. | Outstanding check |
d. | Liquidity |
e. | Bank reconciliation |
f. | Current assets |
____ | 1. | The category includes currency and coins along with amounts on deposit in bank accounts, checking accounts, and savings accounts. |
____ | 2. | The term __________ refers to a companyâs ability to pay for its near-term obligations |
____ | 3. | The __________ category includes short-term highly liquid investment assets that are readily convertible to a known cash amount and sufficiently close to their due dates so that their market value is not sensitive to interest rate changes. |
QS 8-3
Internal control for cash
A good system of internal control for cash provides adequate procedures for protecting both cash receipts and cash disbursements. Identify each of the following statements as either true or false regarding this protection.
____ | a. | A basic guideline for safeguarding cash is that all cash receipts be deposited weekly or monthly. |
____ | b. | A voucher system of control is a control system exclusively for cash receipts. |
____ | c. | A basic guideline for safeguarding cash is to separate the duties of those who have custody of cash from those who keep cash records. |
____ | d. | A petty cash system is not a control procedure for safeguarding cash. |
QS 8-4
Petty cash accounting
1. | The petty cash fund of the Brooks Agency is established at $150. At the end of the current period, the fund contained $28 and had the following receipts: film rentals, $24; refreshments for meetings, $46 (both expenditures to be classified as Entertainment Expense); postage, $30; and printing, $22. Prepare journal entries to record (a) establishment of the fund and (b) reimbursement of the fund at the end of the current period. |
2. | Identify the two events from the following that cause a Petty Cash account to be credited in a journal entry. |
____ | a. | Fund amount is being reduced | |
____ | b. | Fund amount is being increased | |
____ | c. | Fund is being eliminated | |
____ | d. | Fund is being established |
Exercise 8-13A
Documents in a voucher system
Match each document in a voucher system in column one with its description in column two.
Document
1. | Purchase requisition |
2. | Purchase order |
3. | Invoice |
4. | Receiving report |
5. | Invoice approval |
6. | Voucher |
Description
____ | A. | An itemized statement of goods prepared by the vendor listing the customerâs name, items sold, sales prices, and terms of sale. |
____ | B. | An internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded. |
____ | B. | An internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded. |
____ | C. | A document used to place an order with a vendor that authorizes the vendor to ship ordered merchandise at the stated price and terms. |
____ | D. | A checklist of steps necessary for the approval of an invoice for recording and payment; also known as a check authorization. |
____ | E. | A document used by department managers to inform the purchasing department to place an order with a vendor. |
____ | F. | A document used to notify the appropriate persons that ordered goods have arrived, including a description of the quantities and condition of goods. |
Exercise 8-14B
Record invoices at gross or net amounts
Piere Imports uses the perpetual system in accounting for merchandise inventory and had the following transactions during the month of October. Prepare entries to record these transactions assuming that Piere Imports records invoices (a) at gross amounts and (b) at net amounts.
Oct. | 2 | Purchased merchandise at a $3,000 price, invoice dated October 2, terms 2/10, n/30. |
10 | Received a $500 credit memorandum (at full invoice price) for the return of merchandise that it purchased on October 2. | |
17 | Purchased merchandise at a $5,400 price, invoice dated October 17, terms 2/10, n/30. | |
27 | Paid for the merchandise purchased on October 17, less the discount. | |
31Paid for the merchandise purchased on October 2. Payment was delayed because the invoice was mistakenly filed for payment today. This error caused the discount to be lost. Please provide all the answer thank you |
Narrative andInstructions | |||||||
Rockford Corporation is awholesale plumbing supply distributor. The corporation wasorganized | |||||||
in 1981, under the laws of theState of Illinois, with an authorized capitalization of 10,000shares | |||||||
of no-par common stock with astated value of $18 per share. The common stock is sold overthe | |||||||
the counter in the local area.You have been hired as of Thursday, December 25, 2014, to replacethe | |||||||
controller, who has resigned.As controller, you are responsible for the corporation'saccounting | |||||||
recrods, preparation of thefinancial statements, safeguarding the corporate assets, andproviding | |||||||
management with financialinformation to set prices and to monitor and controloperations. | |||||||
Rockford Corporation closesits books annually on December 31 but prepares financialstatements | |||||||
quarterly. Adjusting entriesare posted to the general ledger only at year-end; at the end ofthe | |||||||
first, second, and thirdquarter the adjustments are entered only on a work sheet, not inthe general | |||||||
ledger. Therefore, theadjusting entries to be recorded on December 31 are annualadjustments that | |||||||
you must journalize and thepost to the general ledger accounts before preparing thefinancial | |||||||
statements. | |||||||
Rockford Corporation maintainsa perpetual inventory system and takes a physical count eachyear | |||||||
to adjust the inventorycarrying amount. Purchases are recorded at the gross amount(discounts | |||||||
taken are recognized at thedate of payment) of the supplier's invoice, and the terms varywith | |||||||
each supplier. Sales onaccount are subject to terms of 1/10, n/30. Discounts are taken andgranted | |||||||
only when the terms are met.The cost of all inventory sold in December was 65% of the salesprice. | |||||||
The corporation uses thefollowing journals and ledgers: | |||||||
Journals | |||||||
1. A sales journal (S) - torecord sales of merchandise on account. | |||||||
2. A purchase journal (P)- torecord purchases of merchandise on account. | |||||||
3. A cash receipts journal(CR) - to record all cash receipts. | |||||||
4. A cash disbursementsjournal (CD) - to record all cash payments. | |||||||
5. A general journal (J) - torecord all transacitons that cannot be recorded in the otherjournals. | |||||||
Ledgers | |||||||
1. A general ledger | |||||||
2. An accounts receivablesubsidiary ledger. | |||||||
3. An accounts payablesubsidiary ledger. | |||||||
In recording salestransactions, each sale should be posted on the day of the saledirectly to the | |||||||
customer's account in thesubsidiary ledger, using the invoice number as the postingreference | |||||||
number in the subsidiaryaccount. Also, cash receipts from customers should be posted tothe | |||||||
subsidiary ledger on the daythey are received. The purchase order number should be used as | |||||||
the posting reference numberin the subsidiary ledger for purchases on account fromsuppliers. | |||||||
Purchases from suppliers andpayments to them should be posted daily. All other individualposting | |||||||
may be made weekly or at themonth-end. Account numbers should be used as posting reference | |||||||
numbers in the journals.Officers and office personnel are salaried employees and are paidmonthly | |||||||
on the last day of each month.The delivery truck drivers and warehouse employees are hourlywage | |||||||
employees and are paidbiweekly. Each biweekly pay period ends Friday. On the followingMonday | |||||||
you assistants provide youwith a payroll summary from which you prepare general journalentries | |||||||
to record the biweekly payrolland the employer's taxes on the payroll. The biweeklyemployees' | |||||||
paychecks are distributed onthe following day (Tuesday). | |||||||
The January 1, 2014, balancesappear in the general ledger accounts as well as the Noverber 30,2014, | |||||||
balances, for those accountswhose balances have changed. All transacitons affecting thenon- | |||||||
current accounts from January1, 2014, through Noverber 30, 2014, with explanations, appearin | |||||||
these accounts to facilitatethe preparation of the statement of cash flows. | |||||||
Subsidiary ledger accountbalances as of Noverber 30, 2014, are as follows: | |||||||
Accounts Receivable | Acct No | Amount | |||||
Boecker Builders | 117 | 62,920 | |||||
The Potts Company | 122 | 46,300 | |||||
Swanson BrothersContruction | 133 | 22,590 | |||||
A & B Hardware | 143 | - | |||||
Trudy's Plumbing | 155 | 15,500 | |||||
Coconino Contractors Inc | 160 | 28,700 | |||||
Rankin Plumbing Corp | 166 | 74,350 | |||||
Beverly's BuildingProducts | 175 | 13,600 | |||||
Bilder Construction Co | 180 | 48,900 | |||||
Iwanaga Plumbing andHeating | 190 | 5,800 | |||||
Total | 318,660 | ||||||
Accounts Payable | Acct No | Amount | |||||
Phoenix Plastics | 14 | 19,280 | |||||
Business Basics Inc | 16 | - | |||||
Edward's PlumbingSuppliers | 18 | 20,050 | |||||
DeKalb Transport | 20 | - | |||||
Oxenford Copperworks | 35 | 28,700 | |||||
Smith Pipe Co | 39 | 37,700 | |||||
Ron & Rod's PlumbingProducts | 44 | 14,850 | |||||
Khatan Steel Corp | 57 | 12,000 | |||||
Total | 132,580 | ||||||
The transactions throughDecember 23 have already been recorded by the former controller.You | |||||||
are to begin your work byentering the transaction of December 25 for the payment of cashto | |||||||
repurchase stock. | |||||||
Dec-14 | |||||||
S | M | T | W | T | F | S | |
1 | 2 | 3 | 4 | 5 | 6 | ||
7 | 8 | 9 | 10 | 11 | 12 | 13 | |
14 | 15 | 16 | 17 | 18 | 19 | 20 | |
21 | 22 | 23 | 24 | 25 | 26 | 27 | |
28 | 29 | 30 | 31 | ||||
December Transactions | |||||||
December | |||||||
1 | Received a check in the amount of $22,364 fromSwanson Brothers Contruction in full | ||||||
payment of invoice No. 1120 dated Novermber 26 inthe amount of $22,590. | |||||||
1 | Sold sewer and drainage pipe to Beverly's BuildingProducts on account, invoice No. 1201 | ||||||
for $28850. | |||||||
2 | Purchased copper tubing and fittings from Edward'sPlumbing Supplies Inc. on account, | ||||||
purchase order No. 315 for $32660, terms n/60. | |||||||
2 | Issued check No. 1580 for $28,700 to OxenfordCopperworks in settlement of the | ||||||
balance owned on purchase order No. 280. | |||||||
3 | A court notice indicates that Iwanaga Plumbing andHeating is bankrupt and payment | ||||||
of its account improbable; the president orders theaccount to be written off as a | |||||||
bad debt (invoice No. 780). | |||||||
3 | Sold bathroom fixtures to Bilder Construction Co onaccount, invoice No. 1202 for | ||||||
$47,700.00 | |||||||
4 | Received a check in the amount of $45,374 from thePotts Co in full payment of invoice | ||||||
No. 1128 dated November 27 for $46,300. | |||||||
4 | Sold plumbing supplies and plastic pipe to CoconinoContractors Inc. on account, invoice | ||||||
No. 1203 for $12,300. | |||||||
4 | Issued check No. 1581 for $720 to Standard Oil Co,in payment of gas, oil, and truck repair | ||||||
from Tierney's Standard Service. | |||||||
5 | Issued check No. 1582 for $11,880 to Khatan SteelCorp. in full settlement of purchase order | ||||||
No. 312 for $12,000. | |||||||
5 | Issued check No. 1583 for $12,054 to PhoenixPlastics in full payment of Phoenix's invoice | ||||||
dated November 28 in the amount of $12,300, forpurchase order No. 313, terms 2/10, n/30. | |||||||
5 | Received a check in the amount of $72,863 fromRankin Plumbing Corp. in full payment | ||||||
of invoice No. 1129 dated November 28 for$74,350. | |||||||
8 | Sold cast pipe to Trudy's Plumbing on account,invoice No. 1204 for $26,300. | ||||||
8 | Received a check in the amount of $28,700 fromCoconion Contractors, Inc. in full payment | ||||||
of invoice No. 1091 dated October 20. | |||||||
8 | Purchased bathroom fixtures from Phoenix Plastics,on account, purchcase order No. 316 | ||||||
for $56,800 terms 1/10, n/30. | |||||||
8 | Received a check in the amount of $29,600 fromBoecker Builders in partial payment of | ||||||
balance outstanding covering invoice Nos. 1050 and1071. | |||||||
9 | The payroll summary for the biweekly pay periodended Friday, December 5 contained the | ||||||
follwing information: | |||||||
Delivery and warehouse wages | 4,860 | ||||||
FICA taxes withheld | 410 | ||||||
Federal income taxes withheld | 900 | ||||||
State income taxes withheld | 190 | ||||||
Net pay | 3,360 | ||||||
Employer's payroll taxes: | |||||||
FICA tax | 410 | ||||||
Federal unemployment tax | - | ||||||
State unemployment tax | - | ||||||
Issued check No. 1584 for the amount of the net payand deposited it in the payroll bank | |||||||
account. Individual payroll checks were thenpreppared for distributions to the biweekly | |||||||
emplyees on Tuesday, December 9, 2014. | |||||||
9 | Issued check No. 1585 for $650 to Scooter Gordonfor lettering and sign painting on some | ||||||
delivery trucks. | |||||||
9 | Issued check No. 1586 for $6,980 to PhoenixPlastics, in payment of Phoenix's invoice dated | ||||||
November 12 in the amount of $6,980, our purchaseorder No. 299. | |||||||
10 | Issued check No. 1587 for $37,323 to Smith Pipe Coin full payment of their invoice dated | ||||||
November 28, terms 1/15, n/30, our purchase orderNo. 314. | |||||||
10 | Received a check in the amount of $15,500 fromTrudy's Plumbing in full settlement of | ||||||
invoice No. 1106 dated November 7. | |||||||
10 | Sold pipe, fixtures, and accessories to Trudy'sPlumbing on account, invoice No. 1205 for | ||||||
$26,850.00 | |||||||
11 | Sold pumbing supplies and copper tubing to ThePotts Company on account, invoice No. | ||||||
1206 for $31,450. | |||||||
11 | Received a check in the amount of $33,320 fromBoecker Builders in full payment of invoice | ||||||
No. 1071. | |||||||
11 | Cash sales to date totaled $10,232. | ||||||
12 | Received a check in the amount of $25,774 fromTrudy's Plumbing in payment of inoivce | ||||||
No. 1204. | |||||||
12 | Sold plumbing fixtures and supplies to BoeckerBuilders, on account, invoice No. 1207 | ||||||
for $24,730. | |||||||
15 | The Potts Co returned defective copper tubing thatis purchased on December 11. A credit | ||||||
memo in the amount of $5680 is issued relative toinvoice No. 1206. The copper tubing | |||||||
had a cost of $3692. | |||||||
15 | The defective copper tubing is returned to Edward'sPlumbing supplies, Inc. along with | ||||||
a debit memo in the amount of $3692 in reduction ofpurchase order No. 315. | |||||||
15 | Issud check No. 1588 for $599 in payment ofNovember telephone bill to Northern | ||||||
Illinois Communications. | |||||||
16 | Issued check No. 1589 in the amount of $12,360 inpayment of federal withholding taxes, | ||||||
$10,573, and FICA taxes, $1787, payable on Novembersalaries and wages; The check is | |||||||
remitted to the Winnebago County Bank as thedepository. | |||||||
16 | Issued check No. 1590 for $56,232 to PhoenixPlastics, Inc, in payment of purchase order | ||||||
No. 316. | |||||||
17 | The president informs you that Bilder ConstructionCo agrees to convert the $48900 | ||||||
overdue account receivable (invoice No. 1120) to a8% note due six months from today. | |||||||
17 | Purchased plumbing materials from Smith PipeCompany on account, purcase order No. | ||||||
317 for $,51,120 terms 1/15, n/60. | |||||||
17 | Sold drain tile, plastic pipe, and copper tubing toA & B Hardware on account, invoice No. | ||||||
1208 for $7,340. | |||||||
18 | Sold fixtures and materials to CoconinoContractors, Inc. on account, invoice No. 1209 for | ||||||
$44,530. | |||||||
18 | An invoice in the amount of $1,021 was receivedfrom S. White Trucking Company for | ||||||
freight on purchase order No. 317 and paid byissuing check No. 1591. | |||||||
18 | Received a check in the amount of $26,582 fromTrudy's Plumbing in payment of invoice | ||||||
No. 1205. | |||||||
19 | Purchased office supplies from the Pen & Pad,issuing check No. 1592 in the amount of | ||||||
$1,460. (Note: Debit asset account). | |||||||
19 | Purchased a new Faith computer for $5600 fromBusiness Basics, Inc, purchase order | ||||||
No, 318, paying $600 down through check No. 1593with the balance due in thirty days | |||||||
(n/30). The computer has an estmated life of 4years with a salvage value of $2200. | |||||||
22 | Purchased bathroom and kitchen fixtures fromPhoenix Plastics, on account, purchase | ||||||
order No. 319 for $48,330, terms 1/10, n/30. | |||||||
22 | Received a bill from DeKalb Transport for $2580 forfreight costs incurred during the last 30 | ||||||
days, terms n/30. | |||||||
23 | The payroll summary for the biweekly pay periodended Friday, December 19 contained the | ||||||
follwing information: | |||||||
Delivery and warehouse wages | 5,770 | ||||||
FICA taxes withheld | 415 | ||||||
Federal income taxes withheld | 1,067 | ||||||
State income taxes withheld | 225 | ||||||
Net pay | 4,063 | ||||||
Employer's payroll taxes: | |||||||
FICA tax | 415 | ||||||
Federal unemployment tax | - | ||||||
State unemployment tax | - | ||||||
Issued check No. 1594 for the amount of the net payand deposited it in the payroll bank | |||||||
account. Individual payroll checks were thenprepared for distributions to the biweekly | |||||||
emplyees on Tuesday, December 23. | |||||||
NOTE: Transactions up to this point have beenrecorded. At this point you became | |||||||
controller and are responsible for recordign allfurther transactions. | |||||||
25 | The board of directors voted to purchase 2,500shares of its own stock from stockholder | ||||||
Dionne Schivone at $76 per share and issued checkNo. 1595 in payment. Stock repurchases | |||||||
are recorded at cost. Rockford is purchasing theseshares because Ms. Schivone had been | |||||||
a valuable employee. | |||||||
26 | The baord of directors declared a $1.25 per sharecash dividend payable on January 14 to | ||||||
shareholders of record by the end of the day ofDecember 26. | |||||||
26 | The president informs you that Beverly's BuildingProducts agrees to convert the $13,600 | ||||||
overdue accounts receivable (invoice No. 1119)balance to a 10% note due six months from | |||||||
today. | |||||||
29 | A half-acre parcel of land adjacent to the buildingis acquired in exchange for 750 shares | ||||||
of unissued common stock. The land has a fair valueof $58,400 and will be used | |||||||
immediately as an outside storage lot and parkinglot. | |||||||
29 | An invoice in the amount of $1,860 is received fromWayne McManus, lawyer, for legal | ||||||
services involved in the acquisition of theadjacent parcel of land; check No. 1596 is issued. | |||||||
29 | Sold pipe and plumbing materials to BoeckerBuilders on account, invoice No. 1210 for | ||||||
$44,280 | |||||||
30 | Issued check No. 1597 in the amount of $3,500 tothe Northern Star for adverstisement run in | ||||||
the home building supplement of December 13. | |||||||
30 | Issued check No. 1598 in the amount of $830 toStandard Oil Co. in payment of gas, oil, | ||||||
and truck repairs from Standard Oil Co. (useFreight-out). | |||||||
30 | Purchased copper and cast iron pipe from OxenfordCopperworks on account, purchase | ||||||
order No. 320 for $55,240, terms 1/10, n/30. | |||||||
30 | Check No. 1599 for $9,400 is issued to the bondsinking fund trustee, Chicago Trust Co., | ||||||
for deposit in the sinking fund. (Use OtherAssets). | |||||||
30 | Sold plumbing supplies to Swanson BrothersConstruction on account, invoice No. 1211 | ||||||
for $24,150. | |||||||
31 | Received a check for $24,730 from Boecker Buildersin payment of invoice No. 1207. | ||||||
31 | Issued check No. 1600 for $50,609 to Smith PipeCompany in payment of purchase order | ||||||
No. 317. | |||||||
31 | The custodian of the petty cash fund submits thefollowing receipts for reimbursement | ||||||
and reports a cash-on-hand count of $8. | |||||||
Postage stampls used (supplies) | $38 | ||||||
United Parcel (freight-out) | 23 | ||||||
C.O.D postage (freight costs) | 51 | ||||||
Christmas office decorations (Misc exp) | 30 | ||||||
Check No. 1601 is issued and cashed to reimbursethe fund. | |||||||
31 | Sold an electric truck-lift to Leila Stierman Co.for $2600 cash. The original cost was | ||||||
$7900 with salvage value of $900, a life of 10years, and accumulated depreciation | |||||||
recorded through 12/31/13 is $4,550. Thestraight-line method is used. (Note: the | |||||||
company follows the practice of recording a halfyear's depreciation in the year of | |||||||
acquisition and a half year in the year ofdisposal.) First, bring the depreciation expense | |||||||
up to date in the general journal. Then journalizethe entire entry for the sale in the cash | |||||||
receipts journal. | |||||||
31 | Sold bathroom fixtures and plumbing supplies toTrudy's Plumbing on account, invoice | ||||||
No. 1212 for $56370. | |||||||
31 | Because for some time the petty cash fund has beensmaller than required for monthly | ||||||
expenditures, the fund is increased by $95 bycashing check No. 1602 and placing the | |||||||
money in the petty cash fund. | |||||||
31 | The payroll summary for the monthly paid employeesin submitted so that December | ||||||
checks can be distributed before the year-end; thedetails are as follows: | |||||||
Office and administrative salaries | $43,900 | ||||||
Federal income taxes withheld | 7,696 | ||||||
State income taxes withheld | 1,517 | ||||||
FICA taxes withheld | 3,120 | ||||||
Net pay | $31,567 | ||||||
Issued check No, 1603 for the amount of the net payand deposited it in the payroll bank | |||||||
account. Individual payroll checks were preparedfor distribution to all monthly employees | |||||||
by the end of the day. | |||||||
Employer's payroll taxes: | |||||||
FICA tax (all office and administrative) | $3,120 | ||||||
Federal unemployment tax | 0 | ||||||
State unemployment tax | 0 | ||||||
31 | Cash sale since December 12 total $42150. | ||||||
Instructions | |||||||
1 | Make the entries in the appropriate journal forDecember 25 through December 31. | ||||||
(adjusting entries are recorded in generaljournal) | |||||||
2 | Post any amounts to be posted as individual amountsfrom journals to the general ledger | ||||||
and update the receivable and payable subsidiaryledger accounts. | |||||||
(only a few entries are posted for Dec, e.g.,account receivable. Please post all other entries) | |||||||
3 | Foot and cross-foot the columnar journals andcomplete the month-end postings of all | ||||||
books of orginal entry. |