SERIAL PROBLEM: KATE'S CARDS (Note: This is a continuation of the Serial Problem: Kate's Cards from Chapters I through 6.) SP7. On February 15, 2019, Kate Collins, owner of Kate's Cards, asks you to investigate the cash han- dling activities in her business. She believes that a new employee might be stealing funds. "I have no proof," she says, "but I'm fairly certain that the January 31, 2019, undeposited receipts amounted to 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 checks needn't appear on the reconciliation because he had notified the bank to stop payment on them and he 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 $12,082.09 Less: Outstanding checks: No. 2351 Less: Bank service charge.. Unrecorded credit. 60.00 $1,100.20 No. 2353 1,200.00 (1,260.00) 578.32 No. 2354 969.68 (2,448.20) Reconciled cash balance. $ 9,633.89 Reconiled cash balance .... $ 9,633.89 You discover that the $1,200 unrecorded bank credit represents a note collected by the bank on Kate's behalf; it appears in the deposits column of the January bank statement. Your investigation also reveals 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, you discover that check No. 2353 was actually a payment of $1,658.32 and had been recorded on the 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.

SERIAL PROBLEM: KATE'S CARDS (Note: This is a continuation of the Serial Problem: Kate's Cards from Chapters I through 6.) SP7. On February 15, 2019, Kate Collins, owner of Kate's Cards, asks you to investigate the cash han- dling activities in her business. She believes that a new employee might be stealing funds. "I have no proof," she says, "but I'm fairly certain that the January 31, 2019, undeposited receipts amounted to 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 checks needn't appear on the reconciliation because he had notified the bank to stop payment on them and he 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 $12,082.09 Less: Outstanding checks: No. 2351 Less: Bank service charge.. Unrecorded credit. 60.00 $1,100.20 No. 2353 1,200.00 (1,260.00) 578.32 No. 2354 969.68 (2,448.20) Reconciled cash balance. $ 9,633.89 Reconiled cash balance .... $ 9,633.89 You discover that the $1,200 unrecorded bank credit represents a note collected by the bank on Kate's behalf; it appears in the deposits column of the January bank statement. Your investigation also reveals 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, you discover that check No. 2353 was actually a payment of $1,658.32 and had been recorded on the 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

On February 15, 2019, Kate Collins, owner of Kate’s Cards, asks you to investigate the cash han-dling activities in her business. She believes that a new employee might be stealing funds. “I have no proof,” she says, “but I’m fairly certain that the January 31, 2019, undeposited receipts amounted to 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 checks needn’t appear on the reconciliation because he had notified the bank to stop payment on them and he 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

You discover that the $1,200 unrecorded bank credit represents a note collected by the bank on Kate’s behalf; it appears in the deposits column of the January bank statement. Your investigation also reveals 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, you discover that check No. 2353 was actually a payment of $1,658.32 and had been recorded on the 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.

I have provided a excel spreadsheet that already has the Bank Reconciliation filled out however, I will need the corrected bank reconciliation filled out that is underneath along with the Description of Discrepancy and Value chart filled out as well.

Thank you

**Serial Problem: Kate's Cards**

(Note: This is a continuation of the Serial Problem: Kate's Cards from Chapters 1 through 6.)

**SP7.** On February 15, 2019, Kate Collins, owner of Kate’s Cards, asks you to investigate the cash-handling activities in her business. She believes that a new employee might be stealing funds. “I have no proof,” she says, “but I’m fairly certain that the January 31, 2019, undeposited receipts amounted to 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 checks needn’t appear on the reconciliation because he had notified the bank to stop payment on them and he 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**
**Bank Reconciliation**
**January 31, 2019**

- **Ending balance from bank statement:** $4,843.69
- **Add: Deposits in transit:** $7,238.40

**Total:** $12,082.09

- **Less: Outstanding checks:**
- No. 2351: $1,100.20
- No. 2353: $578.32
- No. 2354: $969.68

**Total Outstanding Checks:** $(2,448.20)

- **Reconciled cash balance:** $9,633.89

- **Balance from general ledger:** $10,893.89

**Less: Bank service charge:** $60.00
**Less: Unrecorded credit:** $(1,200.00)

**Total Adjustments:** $(1,260.00)

- **Reconciled cash balance:** $9,633.89

---

You discover that the $1,200 unrecorded bank credit represents a note collected by the bank on Kate’s behalf; it appears in the deposits column of the January bank statement. Your investigation also reveals that the December

**Bank Reconciliation Overview: 31-Jan**

**Reconciliation Process:**

1. **Balances:**
- **Bank Statement Ending Balance:** $4,943.53
- **General Ledger Balance:** $10,303.38

2. **Adjustments:**
- **Add Deposits Not Credited by Bank:**
- $2,744.60
- $2,026.09
- **Adjusted General Ledger Balance:** $10,303.38

3. **Deductions:**
- **Less Outstanding Checks:**
- Check No. 2350: $1,010.73
- Check No. 2514: $952.85
- Check No. 2534: $1,442.80
- **Less: Bank Service Charges:** $80.00
- **Less: Unrecorded Credit:** $1,200.00

4. **Reconciled Cash Balances:**
- **Reconciled Bank Balance:** $3,623.39
- **Reconciled Ledger Balance:** $3,623.39

**Case Study: Corrected Bank Reconciliation on 31-Jan**

1. **Corrected Balances:**
- **Bank Statement Ending Balance:** Blank
- **General Ledger Balance:** Blank
- **Deducted Amount:** $1,080.00

2. **Reconciled Cash Balance After Correction:**
- **Reconciled Bank Balance:** $0.00
- **Reconciled Ledger Balance:** -$1,080.00

**Note:**
- There is a noted discrepancy amounting to a $1,080.00 fraud, intended to be unveiled by this corrected reconciliation process.

**Graph Explanation:**

- **Discrepancy Table:**
- A simple table is provided to record discrepancies. Currently, no descriptions are filled.

This educational data emphasizes the importance of accurately reconciling bank statements to detect and prevent fraud. Proper reconciliation involves verifying all transactions, adjusting discrepancies, and ensuring both records match once all corrections are made.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.