ACC107 WEEK 4

Controls and Cash Worksheet
Part 1. Internal Controls
List the 5 most widely accepted components of internal
control. Then, in your own words, write 1-2
paragraphs describing the purpose of internal controls. Provide examples, as appropriate. Use this
week’s content, readings, and your LIRN resources or the Internet, as needed,
to support your answer.

Answer:
The five widely accepted components of internal control are:
1.
Control Environment
2.
Risk Assessment
3.
Control Activities
4.
Information and communication
5.
Monitoring

Internal control are the policies and procedures which helps the
organization to achieve its goals and objectives through reliability of
financial reporting, compliance with the set rules and laws, increasing the
effectiveness and efficiency of the operations.
The management must evaluate the design of the internal control over
the financial reporting as well as the operating effictiveness of these
controls.
For implementing the internal control the organizations implement different
control activities like adequate segregation of duties, proper authorization of
transactions and activities, adequate documents and records, physical control
over assets and records and independent checks on the performance.

Part 2. Dardano
Enterprises Bank Reconciliation
The June 30 bank statement for Dardano Enterprises shows a balance
of $79,310. Dardano Enterprises, however, shows a cash balance of $67,000. In
addition, Dardano’s had the following information:

1.
$4,500 in deposits made, but
not appearing on the June 30 bank statement.
2.
A $15,300 check written but not
appearing on the June bank statement.
3.
One check written for the
purchase of Supplies erroneously recorded for $670 but appears on the bank
statement as $760.
4.
Monthly service charges listed
on the banks statement are $275. Dardano has already recorded the effect of
$175 of those charges.
5.
A customer payment for a $1,700
receivable was collected by the bank but not yet recorded by Hayley.

a.
Prepare the bank reconciliation
for Dardano Enterprises as of June 30. Enter your answers in the shaded areas of
the bank reconciliation below.

Dardano Enterprises
Bank Reconciliation
June 30

Balance per bank statement

79310

Add: Deposits in transit

4500

Deduct: Outstanding checks

15300

Actual cash balance

68510

Balance per company records

67000

Add: Collection of receivable

1700

Deduct:

Error

90

Service charges

100

190

Actual cash balance

68510

b.
Now prepare the necessary
journal entries resulting from the reconciliation. Enter your answers in the
shaded areas of the journal below.

General Journal

Date

Account Names

Debit

Credit

June 30

Cash

1700

Accounts Receivable

1700

To record collection of receivable
by the bank

June 30

Supplies

90

Cash

90

To record correction.

June 30

Service Charge Expense

100

Cash

100

To record bank service charge.

Part 3. Bixler Company’s Petty
Cash
Bixler Company establishes a petty cash fund for $250 on
April 1. On April 30, the fund’s custodian prepares a report showing $165 in
cash remaining and receipts of $17 for miscellaneous items, $35 for postage,
and $32 for supplies. The custodian then gives the report to the accountant,
who replenishes the fund.

Prepare any necessary journal entries for the month of
April. Hint: A journal entry is made
to record the establishment of the fund. No entries are made as payments are
made from the fund, but are made when the fund is replenished. Don’t forget to
check for cash over or cash short before making the entries. Enter your answers
in the shaded areas of the journal below.

General Journal

Date

Account Names

Debit

Credit

April 1

Petty cash

250

Cash

250

To record creation of petty cash
fund.

April 30

Miscellaneous items

17

Postage

35

Supplies

32

Cash short and over

81

Cash

165

To record expenses and replenishment
of petty cash fund.

Part 4. Cash and Cash
Equivalents
Indicate, with a yes or no, whether the item listed would be
reported as cash and cash equivalents. Enter your answer in the shaded box next
to each.

ITEM

YES
or NO?

Commercial paper, maturing in 120 days

No

Certificate of deposit, maturing in 45 days

Yes

Cash on hand

Yes

Undeposited checks from customers

Yes

Common stock

No

Commercial paper, maturing in 60 days

Yes

Part 5. Bedford’s Cash and
Cash Equivalents
On December 31, 2012, Bedford Company has $25,000 of cash in a
checking account. The company invested in the following items during November
and December of 2012:
November:

One-month Treasury bills (T-bills)

$10,000

Certificate of deposit, maturing 1/15/2014

30,000

Common Stock

55,000

Commercial paper, maturing 1/31/2013

60,000

December:

60-day Treasury bills

$15,000

Certificate of deposit, maturing 2/15/2013

20,000

Preferred Stock

40,000

What is the total of cash and cash equivalents that should be
reported on the December 31, 2012 balance sheet? Enter the items that should be
included in the shaded areas below to determine the total. The first one has
been done for you. HINT: Review each item
to determine which ones are readily convertible into cash and have an original
maturity of three months or less.

Checking Account

$25,000

Add:

One-month T-bills

$10,000

Commercial paper

60000

60 day treasury bills

15000

Certificate of deposit

20000

Total cash equivalents

105000`

Total cash and cash equivalents, December 31, 2012

130000