Sandhill Company is a very profitable small business. It has
not, however, given much consideration to internal control. For
example, in an attempt to keep clerical and office expenses to a
minimum, the company has combined the jobs of cashier and
bookkeeper. As a result, Bret Turrin handles all cash receipts,
keeps the accounting records, and prepares the monthly bank
reconciliations.
The balance per the bank statement on October 31, 2022, was
$19,052.00. Outstanding checks were No. 62 for $168.00, No. 183 for
$172.00, No. 284 for $283.00, No. 862 for $229.00, No. 863 for
$277.00, and No. 864 for $208.00. Included with the statement was a
credit memorandum of $228.00 indicating the collection of a note
receivable for Sandhill Company by the bank on October 25. This
memorandum has not been recorded by Sandhill.
The company’s ledger showed one Cash account with a balance of
$22,814.00. The balance included undeposited cash on hand. Because
of the lack of internal controls, Bret took for personal use all of
the undeposited receipts in excess of $4,148.00. He then prepared
the following bank reconciliation in an effort to conceal his theft
of cash.
| Cash balance per books, October 31 | $22,814.00 | |||
| Add: Outstanding checks | ||||
| No. 862 | $229.00 | |||
| No. 863 | 277.00 | |||
| No. 864 |
208.00 |
614.00 |
||
| 23,428.00 | ||||
| Less: Undeposited receipts |
4,148.00 |
|||
| Unadjusted balance per bank, October 31 | 19,280.00 | |||
| Less: Bank credit memorandum |
228.00 |
|||
| Cash balance per bank statement, October 31 |
$19,052.00 |
(a) Prepare a correct bank reconciliation.
(Hint: Deduct the amount of the theft from the adjusted
balance per books.) (List items that increase balance
as per bank & books first.)
|
Sandhill Company Bank Reconciliation Statement October 31, 2022 |
||
| Cash Balance as per Bank Statement | $ 19,052 | |
| Add: Undeposited Receipts | $ 4,418 | |
| $ 23,200 | ||
| Less: Outstanding Checks | ||
| No. 62 | ($ 168) | |
| No. 183 | ($ 172) | |
| No. 284 | ($ 283) | |
| No. 862 | ($ 229) | |
| No. 863 | ($ 277) | |
| No. 864 | ($ 208) | ($ 1,337) |
| Adjusted balance as per bank | $ 21,863 | |
| Cash Balance as per books | $ 22,814 | |
| Add: Note collected by bank | $ 228 | |
| Adjusted balance per books | $ 23,042 | |
|
Less: Amount of theft ( $ 21,863 (-) $ 23,042 ) |
($ 1,179) | |
| Correct balance per books | $ 21,863 |
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