Chapter Seven

Challenge Exercise 1 Expands on: E7-1 LO: 2 Stefan Pagnucci is the owner of Pagnuccis Pizza. Pagnuccis is operated strict ! on a carr!-out "asis. #usto$ers pic% up their orders at a counter where a c er% exchanges the pizza for cash. &hi e at the counter' the custo$er can see other e$p o!ees $a%ing the pizzas and the arge o(ens in which the pizzas are "a%ed. )nstructions: *a+ )dentif! the six princip es of interna contro and gi(e an exa$p e of each princip e that !ou $ight o"ser(e when pic%ing up !our pizza. *,ote: )t $a! not "e possi" e to o"ser(e a the princip es.+ *"+ &hat other interna contro s wou d !ou reco$$end for Pagnuccis Pizza-

Challenge Exercise 2 Expands on: E7-7 LO: .

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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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/ris 0 en #o$pan! esta" ished a pett! cash fund on 1a! 1' cashing a chec% for 21.3. 4he co$pan! rei$"ursed the fund on 5une 1 and 5u ! 1 with the fo owing resu ts. 5une 1: #ash in fund 26.7.. 7eceipts: de i(er! expense 281.2.9 postage expense 28:.339 and $isce aneous expense 2;2.33. 5u ! 1: #ash in fund 28.2.. 7eceipts: de i(er! expense 281.339 entertain$ent expense 271.339 and $isce aneous expense 266.7.. On 5u ! 13' /ris 0 en increased the fund fro$ 21.3 to 2233. )nstructions: *a+ Prepare <ourna entries for /ris 0 en #o$pan! for 1a! 1' 5une 1' 5u ! 1' and 5u ! 13. *"+ &hat interna contro features are present in a pett! cash fund-

Challenge Exercise 3 Expands on: E7-11 LO: 7

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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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4he fo owing infor$ation pertains to 4wo =u!s >ideo #o$pan!. 1. #ash "a ance per "an%' 5u ! 81' 27'8;8. 2. 5u ! "an% ser(ice charge not recorded "! the depositor 222. 8. 4he "an% erroneous ! charged another co$pan!s 2733 chec% against 4wo =u!s account. 6. #ash "a ance per "oo%s' 5u ! 81' 2?'7?6. .. 4he "an% charged 4wo =u!s account 28.3 for a custo$ers ,S@ chec%. ;. Aeposits in transit' 5u ! 81' 22'233. 7. 4wo =u!s recorded a cash receipt fro$ a custo$er as 282. 4he "an% correct ! recorded it at 228. ?. Ban% co ected a 21'2.3 note for 4wo =u!s in 5u !' p us interest 28;' ess fee 223. 4he co ection has not "een recorded "! 4wo =u!s and no interest has "een accrued. :. Outstanding chec%s' 5u ! 81' 2.:6. )nstructions: *a+ Prepare a "an% reconci iation for 5u ! 81. *"+ 5ourna ize the ad<usting entries for 5u ! 81 on the "oo%s of 4wo =u!s >ideo #o$pan!.

Challenge Exercise 4 Expands on: E7-16 LO: ? Por%#hop #o$pan! has recorded the fo owing ite$s in its financia records.
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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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#ash in "an%: #hec%ing account 227'333 1one! $ar%et fund 18'333 Pa!ro account 8'333 #ertificate of deposit *$atures in 2 $onths+ .'333 #ertificate of deposit *$atures in 12 $onths+ 13'333 #ash in p ant expansion fund 123'333 #ash on hand 11'333 Cigh ! iDuid in(est$ents 83'333 Pett! cash 833 7ecei(a" es fro$ custo$ers ::'333 Stoc% in(est$ents ;1'333 E.S 4reasur! "i s 23'333

2 .?'333

4he chec%ing account is su"<ect to a co$pensating "a ance of 2.'333. 4he high ! iDuid in(est$ents had $aturities of 8 $onths or ess when the! were purchased .4he stoc% in(est$ents wi "e so d in the next ; to 12 $onths. 4he p ant expansion pro<ect wi "egin in 8 !ears. )nstructions: *a+ &hat a$ount shou d Por%#hop report as F#ash and cash eDui(a entsG on its "a ance sheet*"+ &here shou d the ite$s not inc uded in part *a+ "e reported on the "a ance sheet*c+ &hat disc osures shou d Por%#hop $a%e in its financia state$ents concerning Fcash and cash eDui(a entsG-

Copyright 2012 John Wiley & Sons, Inc. #For Instr ctor $se %nly&

Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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