The problem below with Corrected Bank reconciliation 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.**Required**a. Calculate the amount of funds stolen by the employee.b. Describe how the employee concealed the theft.c. What suggestions would you make to Kate about cash control procedures? ### 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 $7,238.40. Also, the January bank reconciliation doesn’t show several checks that have been outstanding for a long time. The cashier told me that these checks needn’t appear on the reconciliation because he had notified the bank to stop payment on them and he had made the necessary adjustment on the books. Does that sound reasonable to you?”At your request, Kate shows you the following (unaudited) January 31, 2019, bank reconciliation prepared by the cashier:#### KATE'S CARDSBank Reconciliation January 31, 2019| **Ending balance from bank statement** | **$ 4,843.69** | **Balance from general ledger** | **$10,893.89** ||----------------------------------------|----------------|-------------------------------|----------------|| **Add: Deposits in transit** | **7,238.40** | | || | **$12,082.09** | || **Less:** | | || Outstanding checks: | | || No. 2351 | $1,100.20 | || No. 2353 | 578.32 | || No. 2354 | 969.68 | || | (2,448.20) | || **Reconciled cash balance** | **$9,633.89** | | **$10,893.89** || | | **Less:** | **1,260.00** || | | Bank service charge | **$60.00** || | | Unrecorded credit

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. Required Calculate the amount of funds stolen by the employee. Describe how the employee concealed the theft. What suggestions would you make to Kate about cash control procedures? а. b. с.

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. Required Calculate the amount of funds stolen by the employee. Describe how the employee concealed the theft. What suggestions would you make to Kate about cash control procedures? а. b. с.

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter6: Cash And Internal Control

Section: Chapter Questions

Problem 6.4DC

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Concept explainers

Bank Reconciliation Statement

As a commerce student, we all know that every business has to maintain a cash book to maintain all his cash and bank transactions. A cash book is a book which has two columns, one cash column and one bank column.

Question

The problem below with Corrected Bank reconciliation

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.

**Required**
a. Calculate the amount of funds stolen by the employee.
b. Describe how the employee concealed the theft.
c. What suggestions would you make to Kate about cash control procedures?

### 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** | **Balance from general ledger** | **$10,893.89** |
|----------------------------------------|----------------|-------------------------------|----------------|
| **Add: Deposits in transit** | **7,238.40** | | |
| | **$12,082.09** | |
| **Less:** | | |
| Outstanding checks: | | |
| No. 2351 | $1,100.20 | |
| No. 2353 | 578.32 | |
| No. 2354 | 969.68 | |
| | (2,448.20) | |
| **Reconciled cash balance** | **$9,633.89** | | **$10,893.89** |
| | | **Less:** | **1,260.00** |
| | | Bank service charge | **$60.00** |
| | | Unrecorded credit

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