Crane 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 $19,643.00. Outstanding checks were No. 62 for $143.00, No. 183 for $172.00, No. 284 for $255.00, No. 862 for $199.00, No. 863 for $227.00, and No. 864 for $211.00. Included with the statement was a credit memorandum of $250.00 indicating the collection of a note receivable for Crane Company by the bank on October 25. This memorandum has not been recorded by Crane.
The company’s ledger showed one Cash account with a balance of $23,245.00. 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 $3,859.00. He then prepared the following bank reconciliation in an effort to conceal his theft of cash.
Cash balance per books, October 31 $23,245.00
Add: Outstanding checks
No. 862 $199.00
No. 863 227.00
No. 864 211.00 507.00
23,752.00
Less: Undeposited receipts 3,859.00
Unadjusted balance per bank, October 31 19,893.00
Less: Bank credit memorandum 250.00
Cash balance per bank statement, October 31 $19,643.00
(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.)
| Bank Reconciliation | |||||
| Amount | Amount | Amount | |||
| Bank Statement Balance | $19,643.00 | Book Balance | $23,245.00 | ||
| Add: | Add: | ||||
| Deposit in Transit, not recorded by Bank | $3,859.00 | ||||
| Deduct | Deduct | ||||
| Outstanding Check | Amount Stolen | ||||
| Check No: 62 | $143.00 | Omitted Unpresented Check | $570.00 | ||
| Check No:183 | $172.00 | Check No: 62:$143 | |||
| Check No:284 | $255.00 | Check No: 183 :172 | |||
| Check No:862 | $199.00 | Check No: 284:255 | |||
| Check No:863 | $227.00 | Totaling difference of Check No862, 863, 864 (637-507) | $130.00 | ||
| Check No:864 | $211.00 | $1,207.00 | Note Received Collected | $250.00 | $950.00 |
| Adjusted Balance | $22,295.00 | Adjusted Balance | $22,295.00 | ||
Get Answers For Free
Most questions answered within 1 hours.