/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q15E Evaluating internal control over... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 7: Q15E (page 415)

Evaluating internal control over cash payments Gary鈥檚 Great Cars purchases high-performance auto parts from a Nebraska vendor. Dave Simon, the accountant for Gary鈥檚, verifies receipt of merchandise and then prepares, signs, and mails the check to the vendor.

Requirements

1. Identify the internal control weakness over cash payments.

2. What could the business do to correct the weakness?

Short Answer

Expert verified

There is a weakness in the assignment of responsibilities.

Step by step solution

01

Step-by-Step Solution Step 1: Definition of internal control over cash payments

Internal control over cash payments means controlling the activities of cash payments.

02

Internal control weakness

The weakness of internal control is that one person is performing all responsibilities. Hence, the main weakness is the assignment of responsibilities.

03

Way to correct the weakness

This weakness is correct by assigning different responsibilities to different persons.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

The Scott Sun & Shade Company had the following financial data at December 31, 2018:

Cash and cash equivalents $ 60,000

Total current liabilities 75,000

What is the cash ratio as of December 31, 2018, for Scott Sun & Shade?

Accounting for petty cash transactions

On September 1, Party Salad Dressings creates a little cash fund with an imprest

balance of \(600. During September, Michael Martell, the fund custodian, signs the

following petty cash tickets:

Petty Cash

Ticket Number Item Amount

101 Office supplies \) 60

102 Cab fare for executive 25

103 Delivery of package across town 45

104 Business dinner 55

105 Merchandise inventory 75

On September 30, prior to replenishment, the fund contains these tickets plus cash

of \(355. The accounts affected by petty cash payments are Office Supplies, Travel

Expense, Delivery Expense, Entertainment Expense, and Merchandise Inventory.

Requirements

1. Explain the characteristics and the internal control features of an imprest fund.

2. On September 30, how much cash should the petty cash fund hold before it isreplenished?

3. Journalize all required entries to create the fund and replenish it. Include explanations.

4. Make the October 1 entry to increase the fund balance to \)800. Include an explanationand briefly describe what the custodian does.

This case is based on an actual situation. Centennial Construction Company, headquartered in Dallas, Texas, built a Rodeway Motel 35 miles north of Dallas. The construction foreman, whose name was Slim Chance, hired the 40 workers needed to complete the project. Slim had the construction workers fill out the necessary tax forms, and he sent their documents to the home office. Work on the motel began on April 1 and ended September 1. Each week,Slim filled out a time card of hours worked by each employee during the week. Slim faxed the time cards to the home office, which prepared the payroll checks on Friday morning. Slim drove to the home office on Friday, picked up the payroll checks, and returned to the construction site. At 5 p.m. on Friday, Slim distributed payroll checks to the workers.

Requirements

1. Describe in detail the main internal control weakness in this situation. Specify what negative result(s) could occur because of the internal control weakness.

2. Describe what you would do to correct the internal control weakness.

Preparing a bank reconciliation and journal entries

The October 31 bank statement of Wyndham鈥檚 Healthcare has just arrived from State

Bank. To prepare the bank reconciliation, you gather the following data:

a. The October 31 bank balance is \(6,290.

b. The bank statement includes two charges for NSF checks from customers. One is

for \)370 (#1), and the other is for \(180 (#2).

c. The following Wyndham鈥檚 checks are outstanding at October 31:

Check No. Amount

237 \) 120

288 140

291 570

294 570

295 30

296 110

d. Wyndham鈥檚 collects from a few customers by EFT. The October bank statement

lists a \(2,200 EFT deposit for a collection on account.

e. The bank statement includes two special deposits that Wyndham鈥檚 hasn鈥檛 recorded

yet: \)900 for dividend revenue and \(100 for the interest revenue Wyndham鈥檚

earned on its bank balance during October.

f. The bank statement lists a \)80 subtraction for the bank service charge.

g. On October 31, the Wyndham鈥檚 treasurer deposited \(270, but this deposit does

does not appear on the bank statement.

h. The bank statement includes a \)750 deduction for a check drawn by Multi-State

Freight Company. Wyndham鈥檚 notified the bank of this bank error.

i. Wyndham鈥檚 Cash account shows a balance of $3,200 on October 31.

Requirements

1. Prepare the bank reconciliation for Wyndham鈥檚 Healthcare at October 31, 2018.

2. Journalize any required entries from the bank reconciliation. Include an explanation for each entry.

Defining internal control

Internal controls are designed to safeguard assets, encourage employees to follow company policies, promote operational efficiency, and ensure accurate accounting records.

Requirements

1. Which objective do you think is most important?

2. Which objective do you think the internal controls must accomplish for the business to survive? Give your reason.
See all solutions

Recommended explanations on Business Studies Textbooks

Actuarial Science in Business

Read Explanation

Finance Literacy (Business Studies)

Read Explanation

Introduction to Business

Read Explanation

Strategy

Read Explanation

Human 91影视

Read Explanation

Operational Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.