Required Prepare the June bank reconcil a. b. Prepare any necessary adjusting entries. SERIAL PROBLEM: KATE'S CARDS dling activities in her business. She believes that a new employee might be stealing funds "T proof." she says, "but I'm fairly certain that the January 31, 2019, undeposited receipts amounta (Note: This is a continuation of the Serial Problem: Kate's Cards from Chapters 1 through 6 ) On February 15, 2019, Kate Collins, owner of Kate's Cards, asks you to investigate the cash ha- no SP7. more than $12,000, although the January 31 bank reconciliation prepared by the cashier (who works in the treasurer's department) shows only $7,238.40. Also, the January bank reconciliation doesn't show several checks that have been outstanding for a long time. The cashier told me that these choal needn't appear on the reconciliation because he had notified the bank to stop payment on them and 1 had made the necessary adjustment on the books. Does that sound reasonable to you?" At your request, Kate shows you the following (unaudited) January 31, 2019, bank reconciliation prepared by the cashier: Kate's Cards KATE'S CARDS Bank Reconciliation January 31, 2019 Ending balance from bank statement... Add: Deposits in transit.. $ 4,843.69 Balance from general ledger ... ... 7,238.40 $10,893.89 Less: $12,082.09 Outstanding checks: No. 2351.... No. 2353.. No. 2354 .. Less: $1,100.20 Bank service charge. .. . . . . . $ 60.00 578.32 Unrecorded credit. . . Reconciled cash balance 969.68 (2,448.20) 1,200.00 (1,260.00) $ 9,633.89 Reconciled cash balance. . ... $ 9,633.89 Cambridge Business Publishers Chapter 7 Internal Control and Cash You discover that the $1,200 unrecorded bank credit represents a note collected by the bank on Vate's behalf; it appears in the deposits column of the January bank statement. Your investigation also aveals that the December 31, 2018, bank reconciliation showed three checks that had been outstanding longer than 10 months: No. 1432 for $600, No. 1458 for $466.90, and No. 1512 for $253.10. You also discover that these items were never added back into the Cash account in Kate's books. In confirming that the checks shown on the cashier's January 31 bank reconciliation were outstanding on that date, vou discover that check No. 2353 was actually a payment of $1,658.32 and had been recorded on the you books for that amount. To confirm the amount of undeposited receipts at January 31, you request a bank statement for February 1-12 (called a cutoff bank statement). This indeed shows a January 1 deposit of $7,238.40. Required Calculate the amount of funds stolen by the employee. b. Describe how the employee concealed the theft. a. What suggestions would you make to Kate about cash control procedures? C. EXTENDING YOUR KNO

Required Prepare the June bank reconcil a. b. Prepare any necessary adjusting entries. SERIAL PROBLEM: KATE'S CARDS dling activities in her business. She believes that a new employee might be stealing funds "T proof." she says, "but I'm fairly certain that the January 31, 2019, undeposited receipts amounta (Note: This is a continuation of the Serial Problem: Kate's Cards from Chapters 1 through 6 ) On February 15, 2019, Kate Collins, owner of Kate's Cards, asks you to investigate the cash ha- no SP7. more than $12,000, although the January 31 bank reconciliation prepared by the cashier (who works in the treasurer's department) shows only $7,238.40. Also, the January bank reconciliation doesn't show several checks that have been outstanding for a long time. The cashier told me that these choal needn't appear on the reconciliation because he had notified the bank to stop payment on them and 1 had made the necessary adjustment on the books. Does that sound reasonable to you?" At your request, Kate shows you the following (unaudited) January 31, 2019, bank reconciliation prepared by the cashier: Kate's Cards KATE'S CARDS Bank Reconciliation January 31, 2019 Ending balance from bank statement... Add: Deposits in transit.. $ 4,843.69 Balance from general ledger ... ... 7,238.40 $10,893.89 Less: $12,082.09 Outstanding checks: No. 2351.... No. 2353.. No. 2354 .. Less: $1,100.20 Bank service charge. .. . . . . . $ 60.00 578.32 Unrecorded credit. . . Reconciled cash balance 969.68 (2,448.20) 1,200.00 (1,260.00) $ 9,633.89 Reconciled cash balance. . ... $ 9,633.89 Cambridge Business Publishers Chapter 7 Internal Control and Cash You discover that the $1,200 unrecorded bank credit represents a note collected by the bank on Vate's behalf; it appears in the deposits column of the January bank statement. Your investigation also aveals that the December 31, 2018, bank reconciliation showed three checks that had been outstanding longer than 10 months: No. 1432 for $600, No. 1458 for $466.90, and No. 1512 for $253.10. You also discover that these items were never added back into the Cash account in Kate's books. In confirming that the checks shown on the cashier's January 31 bank reconciliation were outstanding on that date, vou discover that check No. 2353 was actually a payment of $1,658.32 and had been recorded on the you books for that amount. To confirm the amount of undeposited receipts at January 31, you request a bank statement for February 1-12 (called a cutoff bank statement). This indeed shows a January 1 deposit of $7,238.40. Required Calculate the amount of funds stolen by the employee. b. Describe how the employee concealed the theft. a. What suggestions would you make to Kate about cash control procedures? C. EXTENDING YOUR KNO

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Kate's Cards Serial Problem -- Chapter 7

a
	Kate's Card's
	Corrected Bank Reconciliation
	January 31, 2019

	Ending balance per bank		$ 4,844	Ending balance per books	$ 10,894
	Add:			Add:
	Deposits not credited by banks		7,238	No. 2353	1,080
			$ 12,082		$ 11,974
	Less: Outstanding checks			Less:
	No. 1432	600		Unrecovered Credit	1,200
	No. 1458	467
	No. 1512	253


			1,320
	Reconciled cash balance		$ 10,762		$ 10,774



	Reconciled balance per books
	Reconciled balance per bank
	Discrepancy/stolen funds


b





			$ -

c