Gazarra Company is a very profitable small business. It has not, however, given much consideration to internal

Question:

Gazarra 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, Johnny Stacatto handles all cash receipts, keeps the accounting records, and prepares the monthly bank reconciliations. The balance per the bank statement on October 31, 2010, was $15,453. Outstanding checks were: no. 62 for $107.74, no. 183 for $127.50, no. 284 for $215.26, no. 862 for $162.10, no. 863 for $192.78, and no. 864 for $140.49. Included with the statement was a credit memorandum of $340 indicating the collection of a note receivable for Gazarra Company by the bank on October 25. This memorandum has not been recorded by Gazarra Company. The company?s ledger showed one cash account with a balance of $18,608.81. The balance included undeposited cash on hand. Because of the lack of internal controls, Stacatto took for personal use all of the undeposited receipts in excess of $3,226.18. He then prepared the following bank reconciliation in an effort to conceal his theft of cash.

image

Instructions(a) Prepare a correct bank reconciliation.(b) Indicate the three ways that Stacatto attempted to conceal the theft and the dollar amount pertaining to each method.(c) What principles of internal control were violated in thiscase?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Accounting Principles

ISBN: 978-0470533475

9th Edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

Question Posted: