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Acc557 Week 5 E7-5 E7-7 E7-14 P7-3A

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Acc557 Week 5 E7-5 E7-7 E7-14 P7-3A

E7-5 Listed below are five procedures followed by Parson Company.
1. Several individuals operate the cash register using the same register drawer.
2. A monthly bank reconciliation is prepared by someone who has no other cash
responsibilities.
3. Fran Vorbeck writes checks and also records cash payment journal entries.
4. One individual orders inventory, while a different individual authorizes payments.
5. Unnumbered sales invoices from credit sales are forwarded to the accounting department
every four weeks for recording.

E7-7 LaSalle Company established a petty cash fund on May 1, cashing a check for $100.

The company reimbursed the fund on June 1 and July 1 with the following results.

June 1: Cash in fund $1.75. Receipts: delivery expense $31.25; postage expense $41.00;
and miscellaneous expense $25.00.

July 1: Cash in fund $3.25. Receipts: delivery expense $21.00; entertainment
expense $51.00; and miscellaneous expense $24.75.

On July 10, LaSalle increased the fund from $100 to $150.

Instructions
Prepare journal entries for LaSalle Company for May 1, June 1, July 1, and July 10.

E7-14 Nayak Company has recorded the following items in its financial records.


Cash in bank 41,000
Cash in plant expansion fund 100,000
cash on hand 8,000
Highly liquid investments 34,000
Petty cash 500
Receivables from customers 89,000
Stock investments 61,000

The cash in bank is subject to a compensating balance of $5,000. The highly liquid investments
had maturities of 3 months or less when they were purchased. The stock investments
will be sold in the next 6 to 12 months. The plant expansion project will begin in
3 years.

Instructions
(a) What amount should Nayak report as “Cash and cash equivalents” on its balance
sheet?
(b) Where should the items not included in part (a) be reported on the balance sheet?
(c) What disclosures should Nayak make in its fi nancial statements concerning “cash and
cash equivalents”?

P7-3A On May 31, 2014, Terrell Company had a cash balance per books of $6,781.50.
The bank statement from Home Town State Bank on that date showed a balance of
$6,804.60. A comparison of the statement with the cash account revealed the following
facts.



Instructions
(a) Prepare the bank reconciliation at May 31, 2014.
(b) Prepare the necessary adjusting entries for Terrell Company at May 31, 2014.

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