Accounting Problem

Answer problems E7-5; E7-6; & PE-2
E7-5
At Nunez Company checks are not prenumbered because both the purchasing agent and the treasurer are authorized to issue checks. Each signer has access to unissued checks kept in an unlocked file cabinet. The purchasing agent pays all bills pertaining to goods purchased for resale. Prior to payment the purchasing agent determines that the goods have been received and verifies the mathematical accuracy of the vendors invoice. After payment the invoice is filed by vendor name and the purchasing agent records the payment in the cash disbursements journal. The treasurer pays all other bills following approval by authorized employees. After payment the treasurer stamps all bills paid files them by payment date and records the checks in the cash disbursements journal. Nunez Company maintains one checking account that is reconciled by the treasurer.
Identify internal control weaknesses for cash disbursements and suggest improvements.
(LO 2 4)E
Instructions
(a)List the weaknesses in internal control over cash disbursements.
(b)Identify improvements for correcting these weaknesses.
E7-6
Sally Rice is unable to reconcile the bank balance at January 31. Sallys reconciliation is shown here.
Prepare bank reconciliation and adjusting entries.
(LO 5)AP
Cash balance per bank
$3677.20
Add: NSF check
450.00
Less: Bank service charge
28.00
Adjusted balance per bank
$4099.20
Cash balance per books
$3975.20
Less: Deposits in transit
590.00
Add: Outstanding checks
770.00
Adjusted balance per books
$4155.20
Instructions
(a)What is the proper adjusted cash balance per bank?
(b)What is the proper adjusted cash balance per books?
(c)Prepare the adjusting journal entries necessary to determine the adjusted cash balance per books.
PE-2
In January 2014 the management of Weast Company concludes that it has sufficient cash to purchase some short-term investments in debt and stock securities. During the year the following transactions occurred.
Journalize investment transactions prepare adjusting entry and show financial statement presentation.
(LO 2 3 5 6)AN
Feb.
1
Purchased 1200 shares of ALF common stock for $51600.
Mar.
1
Purchased 500 shares of LNC common stock for $18500.
Apr.
1
Purchased 70 $1000 8% CRT bonds for $70000. Interest is payable semiannually on April 1 and October 1.
July
1
Received a cash dividend of $0.80 per share on the ALF common stock.
Aug.
1
Sold 200 shares of ALF common stock at $42 per share.
Sept.
1
Received $2 per share cash dividend on the LNC common stock.
Oct.
1
Received the semiannual interest on the CRT bonds.
Oct.
1
Sold the CRT bonds for $75700.
At December 31 the fair values of the ALF and LNC common stocks were $39 and $30 per share respectively.
Instructions
(a)Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use the T-account form.)
(b)Prepare the adjusting entry at December 31 2014 to report the investments at fair value. All securities are considered to be trading securities.
(c)Show the balance sheet presentation of investment securities at December 31 2014.
(d)Identify the income statement accounts and give the statement classification of each account.