The accountant at Terry Farm Stores prepares a monthly bank reconciliation. On 31 August she received a bank statement from QBE Bank, which had a credit balance of $8 950. Terry Farm Stores' cash at bank account per the general ledger showed a debit balance of $15 050. A comparison of the bank statement with the cash payments and cash receipts journals revealed the following information: (1) Outstanding EFTs at 31 August totaled $1 550 (2) QBE bank mistakenly included a cheque payment on Terry Farm Stores' bank statement that related to Tolga Ltd. The cheque amount was for $2 180. The mistake will be corrected in September. (3) The bank statement included bank charges of $20. (4) In reviewing the cheque payments, a mistake was discovered on cheque no. 574 for the payment of rent expense. The amount of the cheque was for $5 510 but was recorded in the cash payments journal as $5 150. (5) Cash receipts recorded in the cash receipts journal on 30 August of $4 300 were not on the bank statement (6) The bank statement showed a reversal entry of $790 that was originally deposited by P. Macca, a customer, to Terry Farm Stores. Required (a) Prepare a bank reconciliation for Terry Farm Stores at 31 August. (b) Prepare the adjusting entries as at 31 August (c) Identify the principle of internal control that is being followed in the case: A prenumbered delivery docket is prepared for each shipment of goods to customers. *Narrations in the general journals are not required.
The accountant at Terry Farm Stores prepares a monthly bank reconciliation. On 31 August she received a bank statement from QBE Bank, which had a credit balance of $8 950. Terry Farm Stores' cash at bank account per the general ledger showed a debit balance of $15 050. A comparison of the bank statement with the cash payments and cash receipts journals revealed the following information: (1) Outstanding EFTs at 31 August totaled $1 550 (2) QBE bank mistakenly included a cheque payment on Terry Farm Stores' bank statement that related to Tolga Ltd. The cheque amount was for $2 180. The mistake will be corrected in September. (3) The bank statement included bank charges of $20. (4) In reviewing the cheque payments, a mistake was discovered on cheque no. 574 for the payment of rent expense. The amount of the cheque was for $5 510 but was recorded in the cash payments journal as $5 150. (5) Cash receipts recorded in the cash receipts journal on 30 August of $4 300 were not on the bank statement (6) The bank statement showed a reversal entry of $790 that was originally deposited by P. Macca, a customer, to Terry Farm Stores. Required (a) Prepare a bank reconciliation for Terry Farm Stores at 31 August. (b) Prepare the adjusting entries as at 31 August (c) Identify the principle of internal control that is being followed in the case: A prenumbered delivery docket is prepared for each shipment of goods to customers. *Narrations in the general journals are not required.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The accountant at Terry Farm Stores prepares a monthly bank reconciliation.
On 31 August she received a bank statement from QBE Bank, which had a
credit balance of $8 950. Terry Farm Stores' cash at bank account per the
general ledger showed a debit balance of $15 050. A comparison of the bank
statement with the cash payments and cash receipts journals revealed the
following information:
(1) Outstanding EFTs at 31 August totaled $1 550
(2) QBE bank mistakenly included a cheque payment on Terry Farm Stores'
bank statement that related to Tolga Ltd. The cheque amount was for $2 180.
The mistake will be corrected in September.
(3) The bank statement included bank charges of $20.
(4) In reviewing the cheque payments, a mistake was discovered on cheque
no. 574 for the payment of rent expense. The amount of the cheque was for
$5 510 but was recorded in the cash payments journal as $5 150.
(5) Cash receipts recorded in the cash receipts journal on 30 August of $4
300 were not on the bank statement
(6) The bank statement showed a reversal entry of $790 that was originally
deposited by P. Macca, a customer, to Terry Farm Stores.
Required
(a) Prepare a bank reconciliation for Terry Farm Stores at 31 August.
(b) Prepare the adjusting entries as at 31 August
(c) Identify the principle of internal control that is being followed in the case:
A prenumbered delivery docket is prepared for each shipment of goods to
customers.
*Narrations in the general journals are not required.
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