1. Chapter 7 Internal Control and Cash
Demonstration Problems
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2. Copyright © 2016 Pearson Education, Inc.
Demonstration of E7-16
Wave Dance Studio created a $500 imprest petty cash fund. During the month, the fund custodian authorized and signed petty cash tickets as follows:
Petty Cash
Ticket No.
Item
Account Debited
Amount 1
Delivery of programs to customers
Delivery Expense
$30 2
Mail package
Postage Expense 20 3
Newsletter
Printing Expense 50 4
Key to closet
Miscellaneous Expense 75 5
Copier paper
Office Supplies
100
Requirements 1.
Make the general journal entry to create the petty cash fund. 2.
Make the general journal entry to record the petty cash fund replenishment. Cash in the fund totals $150. 3.
Assume that Wave Dance Studio decides to decrease the petty cash fund to $300. Make the general journal entry to record this decrease.
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3. Demonstration of E7-16-Req. 1 Accounts and Explanation
Make the general journal entry to create the petty cash fund.
Date
Accounts and Explanation
Debit
Credit 1.
Petty Cash
500
Cash
To open the petty cash fund.
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4. Demonstration of E7-16-Req. 2 Accounts and Explanation
Make the general journal entry to record the petty cash fund replenishment. Cash in the fund totals $150.
Date
Accounts and Explanation
Debit
Credit 2.
Delivery Expense 30
Postage Expense 20
Printing Expense 50
Miscellaneous Expense 75
Office Supplies
100
Cash Short & Over
Cash ﴾$500 − $150﴿
350
To replenish the petty cash fund.
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5. Demonstration of E7-16-Req. 3 Accounts and Explanation
Assume that Wave Dance Studio decides to decrease the petty cash fund to $300. Make the general journal entry to record this decrease.
Date
Accounts and Explanation
Debit
Credit 3.
Cash
200
Petty Cash
To decrease the petty cash fund to $300.
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6. Copyright © 2016 Pearson Education, Inc.
Demonstration of E7-19
Peter Publishers' check book lists the following:
Date
Check No.
Item
Check
Deposit
Balance
Aug. 1
$1,000 4
701
Quick Mailing
$500
500 9
Service Revenue
$2,000
2,500 13
702
Salaries Expenses
250
2,250 14
703
Utilities
150
2,100 18
704
Cash 75
2,025 26
705
Office Supplies 85
1,940 28
706
Alpha Printers
300
1,640 30
1,500
3,140
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7. Copyright © 2016 Pearson Education, Inc.
Demonstration of E7-19
Peter’s August bank statement shows the following:
Balance
$1,000
Deposits
2,000
Debit Checks:
No.
Amount
701
$500
702
250
703
175 * 
704 75
(1,000)
Other charges:
Printed checks 50
Service charge 25
(75)
$1,925
*This is the correct amount for check number 703.
Requirements 1.
Prepare Peter Publisher's bank reconciliation at August 31, 2016. 2.
How much cash does Peter actually have on August 31, 2016? 3.
Journalize any transactions required from the bank reconciliation.
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8. Demonstration of E7-19-Req. 1
Calculation of ending book balance:
Aug. 1 Book Balance
$1,000
Add: Deposits ($2,000 + $1,500)
3,500
Less: Checks ($500 + $250 + $150 + $75 + $85 + $300)
1,360
Aug. 31 Book Balance
$3,140
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9. Demonstration of E7-19-Req. 1
PETER PUBLISHERS
Bank Reconciliation
August 31, 2016
BANK
BOOK
Balance, August 31, 2016 [Previous slide]
$3,140
ADD:
3,140 
LESS:
Book error check 703
$25
Printed checks 50
Service charge 25
100
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10. Demonstration of E7-19-Req. 1
PETER PUBLISHERS
Bank Reconciliation
August 31, 2016
BANK
BOOK
Balance, August 31, 2016
$3,140
ADD:
3,140 
LESS:
Book error check 703
$25
Printed checks 50
Service charge 25
100
Adjusted book balance, August 31, 2016
$3,040
Copyright © 2016 Pearson Education, Inc.

11. Demonstration of E7-19-Req. 1
PETER PUBLISHERS
Bank Reconciliation
August 31, 2016
BANK
BOOK
Balance, August 31, 2016
$1,925
$3,140
ADD:
Deposit in transit
1,500
3,425
3,140 
LESS:
Book error check 703
$25
Printed checks 50
Service charge 25
100
Adjusted book balance, August 31, 2016
$3,040
Copyright © 2016 Pearson Education, Inc.

12. Demonstration of E7-19-Req. 1
PETER PUBLISHERS
Bank Reconciliation
August 31, 2016
BANK
BOOK
Balance, August 31, 2016
$1,925
$3,140
ADD:
Deposit in transit
1,500
3,425
3,140 
LESS:
Outstanding checks
Book error check 703
$25
Check 707
$85
Printed checks 50
Check 708
300
385
Service charge 25
100
Adjusted book balance, August 31, 2016
$3,040
Copyright © 2016 Pearson Education, Inc.

13. Demonstration of E7-19-Req. 1
PETER PUBLISHERS
Bank Reconciliation
August 31, 2016
BANK
BOOK
Balance, August 31, 2016
$1,925
$3,140
ADD:
Deposit in transit
1,500
3,425
3,140 
LESS:
Outstanding checks
Book error check 703
$25
Check 707
$85
Printed checks 50
Check 708
300
385
Service charge 25
100
Adjusted bank balance, August 31, 2016
$3,040
Adjusted book balance, August 31, 2016
Copyright © 2016 Pearson Education, Inc.

14. Demonstration of E7-19-Req. 2
PETER PUBLISHERS
Bank Reconciliation
August 31, 2016
BANK
BOOK
Balance, August 31, 2016
$1,925
$3,140
ADD:
Deposit in transit
1,500
3,425
3,140 
LESS:
Outstanding checks
Book error check 703
$25
Check 707
$85
Printed checks 50
Check 708
300
385
Service charge 25
100
Adjusted bank balance, August 31, 2016
$3,040
Adjusted book balance, August 31, 2016
Peter has $3,040 on August 31, 2016.
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15. Demonstration of E7-19-Req. 3
Date
Accounts and Explanation
Debit
Credit
Aug. 31
Utilities Expense 25
Cash
To record check error #703.
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16. Demonstration of E7-19-Req. 3
Date
Accounts and Explanation
Debit
Credit
Aug. 31
Utilities Expense 25
Cash
To record check error #703. 31
Bank Expense 50
To record printed check charge incurred.
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17. Demonstration of E7-19-Req. 3
Date
Accounts and Explanation
Debit
Credit
Aug. 31
Utilities Expense 25
Cash
To record check error #703. 31
Bank Expense 50
To record printed check charge incurred.
To record bank service charges incurred.
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18. Copyright © 2016 Pearson Education, Inc.
Demonstration of E7-20
Robin Knight Company operates four bowling alleys. The owner just received the September 30 bank statement from City National Bank, and the statement shows an ending balance of $1,000. Listed on the statement are an EFT rent collection of $300, a service charge of $15, NSF checks totalling $60, and a $25 charge for printed checks. In reviewing his cash records, Knight identified outstanding checks totalling $500 and a deposit in transit of $1,500. During September, he recorded a $250 check by debiting Salaries Expense and crediting Cash for $50. His Cash account shows a September 30 balance of $2,000.
Requirements 1.
Prepare the bank reconciliation at September 30. 2.
Journalize any transactions required from the bank reconciliation.
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19. Demonstration of E7-20-Req. 1
ROBIN KNIGHT COMPANY
Bank Reconciliation
September 30
BANK
BOOK
Balance, September 30
$2,000
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20. Demonstration of E7-20-Req. 1
ROBIN KNIGHT COMPANY
Bank Reconciliation
September 30
BANK
BOOK
Balance, September 30
$2,000
ADD:
EFT collection on rent
300
2,300
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21. Demonstration of E7-20-Req. 1
ROBIN KNIGHT COMPANY
Bank Reconciliation
September 30
BANK
BOOK
Balance, September 30
$2,000
ADD:
EFT collection on rent
300
2,300
LESS:
Correction of book error
$200
NSF checks 60
Printed checks 25
Service charge 15
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22. Demonstration of E7-20-Req. 1
ROBIN KNIGHT COMPANY
Bank Reconciliation
September 30
BANK
BOOK
Balance, September 30
$2,000
ADD:
EFT collection on rent
300
2,300
LESS:
Correction of book error
$200
NSF checks 60
Printed checks 25
Service charge 15
Adjusted book balance, September 30
Copyright © 2016 Pearson Education, Inc.

23. Demonstration of E7-20-Req. 1
ROBIN KNIGHT COMPANY
Bank Reconciliation
September 30
BANK
BOOK
Balance, September 30
$1,000
$2,000
ADD:
EFT collection on rent
300
2,300
LESS:
Correction of book error
$200
NSF checks 60
Printed checks 25
Service charge 15
Adjusted book balance, September 30
Copyright © 2016 Pearson Education, Inc.

24. Demonstration of E7-20-Req. 1
ROBIN KNIGHT COMPANY
Bank Reconciliation
September 30
BANK
BOOK
Balance, September 30
$1,000
$2,000
ADD:
Deposit in transit
1,500
EFT collection on rent
300
2,500
2,300
LESS:
Correction of book error
$200
NSF checks 60
Printed checks 25
Service charge 15
Adjusted book balance, September 30
Copyright © 2016 Pearson Education, Inc.

25. Demonstration of E7-20-Req. 1
ROBIN KNIGHT COMPANY
Bank Reconciliation
September 30
BANK
BOOK
Balance, September 30
$1,000
$2,000
ADD:
Deposit in transit
1,500
EFT collection on rent
300
2,500
2,300
LESS:
Correction of book error
$200
NSF checks 60
Printed checks 25
Outstanding checks
500
Service charge 15
Adjusted book balance, September 30
Copyright © 2016 Pearson Education, Inc.

26. Demonstration of E7-20-Req. 1
ROBIN KNIGHT COMPANY
Bank Reconciliation
September 30
BANK
BOOK
Balance, September 30
$1,000
$2,000
ADD:
Deposit in transit
1,500
EFT collection on rent
300
2,500
2,300
LESS:
Correction of book error
$200
NSF checks 60
Printed checks 25
Outstanding checks
500
Service charge 15
Adjusted bank balance, September 30
Adjusted book balance, September 30
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27. Demonstration of E7-20-Req. 2
Date
Accounts and Explanation
Debit
Credit
Sept. 30
Cash
300
Rent Revenue
To record EFT rent collection.
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28. Demonstration of E7-20-Req. 2
Date
Accounts and Explanation
Debit
Credit
Sept. 30
Cash
300
Rent Revenue
To record EFT rent collection. 30
Salaries Expense
200
To record error on salary check.
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29. Demonstration of E7-20-Req. 2
Date
Accounts and Explanation
Debit
Credit
Sept. 30
Cash
300
Rent Revenue
To record EFT rent collection. 30
Salaries Expense
200
To record error on salary check.
Accounts Receivable 60
To record NSF checks.
Copyright © 2016 Pearson Education, Inc.

30. Demonstration of E7-20-Req. 2
Date
Accounts and Explanation
Debit
Credit
Sept. 30
Cash
300
Rent Revenue
To record EFT rent collection. 30
Salaries Expense
200
To record error on salary check.
Accounts Receivable 60
To record NSF checks.
Bank Expense 25
To record printed check charge incurred.
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31. Demonstration of E7-20-Req. 2
Date
Accounts and Explanation
Debit
Credit
Sept. 30
Cash
300
Rent Revenue
To record EFT rent collection. 30
Salaries Expense
200
To record error on salary check.
Accounts Receivable 60
To record NSF checks.
Bank Expense 25
To record printed check charge incurred. 15
To record bank service charges incurred.
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32. Copyright © 2016 Pearson Education, Inc.
End of Chapter 7
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