CHAPTER 7: Fraud, Internal Control, and Cash

LEARNING OBJECTIVE 1 PRACTICE

*BRIEF EXERCISE 7.1
(a) Financial Pressure
(b) Rationalization
(c) Financial Pressure
(d) Opportunity

*BRIEF EXERCISE 7.4

(a) Segregation of duties.
(b) Independent internal verification.
(c) Documentation procedures.

LEARNING OBJECTIVE 2 PRACTICE

*BRIEF EXERCISE 7.5
(a) Physical controls.
(b) Human resource controls.
(c) Independent internal verification.
(d) Segregation of duties.
(e) Establishment of responsibility.

*BRIEF EXERCISE 7.6

(a) Cash................................................................ 6,820.75
Cash Over and Short..................................... 50.75
Sales Revenue......................................... 6,871.50

(b) Cash................................................................ 6,899.82

Cash Over and Short.............................. 28.32
Sales Revenue......................................... 6,871.50

*BRIEF EXERCISE 7.7

Cash (€1,125.74 – €160.00)................................... 965.74
Cash Over and Short............................................. 15.09
Sales Revenue............................................... 980.83

Copyright © 2022 Wiley Weygandt, Financial Accounting, IFRS 5/e, Solutions Manual 7-1
*BRIEF EXERCISE 7.8
(a) Documentation procedures.
(b) Independent internal verification.
(c) Physical controls.
(d) Establishment of responsibility.
(e) Segregation of duties.

*BRIEF EXERCISE 7.9

Mar. 20 Postage Expense........................................................... 52
Freight-Out..................................................................... 26
Travel Expense.............................................................. 10
Cash Over and Short..................................................... 3
Cash (€100 - €9)..................................................... 91

*EXERCISE 7.7

May 1 Petty Cash........................................................ 100.00

Cash............................................................ 100.00

June 1 Delivery Expense............................................. 31.25

Postage Expense............................................. 39.00
Miscellaneous Expense.................................. 25.00
Cash Over and Short....................................... 3.00
Cash ($100.00 - $1.75)............................... 98.25

July 1 Delivery Expense............................................. 21.00

Entertainment Expense.................................. 51.00
Miscellaneous Expense.................................. 24.75
Cash ($100.00 - $3.25)............................... 96.75

July 10 Petty Cash........................................................ 30.00

Cash............................................................ 30.00

Copyright © 2022 Wiley Weygandt, Financial Accounting, IFRS 5/e, Solutions Manual 7-2
*EXERCISE 7.8
Mar. 1 Petty Cash.................................................................. 100
Cash..................................................................... 100

15 Postage Expense....................................................... 39
Freight-Out.................................................................. 21
Miscellaneous Expense............................................. 11
Travel Expense........................................................... 24
Cash Over and Short................................................. 3
Cash (€100 - €2).................................................. 98

20 Petty Cash................................................................... 75
Cash..................................................................... 75

*PROBLEM 7.3
(a) Aug. 1 Petty Cash................................................. 200.00
Cash................................................... 200.00

15 Freight-Out................................................ 74.40
Entertainment Expense............................ 36.00
Postage Expense...................................... 33.70
Miscellaneous Expense........................... 27.50
Cash Over and Short................................ 3.40
Cash................................................... 175.00

16 Petty Cash................................................. 200.00

Cash................................................... 200.00

31 Postage Expense...................................... 145.00

Entertainment Expense............................ 90.60
Freight-Out................................................ 46.40
Cash Over and Short................................ 1.00
Cash................................................... 283.00

Copyright © 2022 Wiley Weygandt, Financial Accounting, IFRS 5/e, Solutions Manual 7-3
LEARNING OBJECTIVE 3 PRACTICE
*BRIEF EXERCISE 7.11
(a) Outstanding checks—deducted from cash balance per bank.
(b) Bank service charge—deducted from cash balance per books.
(c) Collection of note by bank—added to cash balance per books.
(d) Deposits in transit—added to cash balance per bank.

*BRIEF EXERCISE 7.13

Cash balance per bank....................................................................... ¥7,420
Add: Deposits in transit..................................................................... 1,620
9,040
Less: Outstanding checks................................................................. 762
Adjusted cash balance per bank....................................................... ¥8,278

*BRIEF EXERCISE 7.14

Cash balance per books..................................................................... £9,500
Add: Interest earned.......................................................................... 40
9,540
Less: Charge for printing company checks.................................... 35
Adjusted cash balance per books..................................................... £9,505

Copyright © 2022 Wiley Weygandt, Financial Accounting, IFRS 5/e, Solutions Manual 7-4
*EXERCISE 7.9

(a) WYATT LTD.

Bank Reconciliation
January 31

Cash balance per bank statement................... £3,560.20

Add: Deposits in transit.................................. 530.00
4,090.20
Less: Outstanding checks............................... 730.00
Adjusted cash balance per bank...................... £3,360.20

Cash balance per books................................... £3,875.20

Less: NSF check............................................... £490.00
Bank service charge.............................. 25.00 515.00
Adjusted cash balance per books................... £3,360.20
(Cash bal. per books – (NSF ck. + Bank serv. chrg.) = Adj. cash bal. per books)
(₤3,875.20 – (₤490.00 + ₤25.00) = ₤3,360.20)

(b) Accounts Receivable........................................ 490.00

Cash............................................................ 490.00

Bank Charge Expense...................................... 25.00

Cash............................................................ 25.00

Copyright © 2022 Wiley Weygandt, Financial Accounting, IFRS 5/e, Solutions Manual 7-5
*EXERCISE 7.11
(a) CRANE VIDEO
Bank Reconciliation
July 31

Cash balance per bank statement..................................... HK $7,263

Add: Deposits in transit.................................................... 1,300
8,563
Less: Outstanding checks................................................. 591
Adjusted cash balance per bank........................................ HK $7,972

Cash balance per books..................................................... HK $7,284

Add: Collection of note receivable
(HK $700 plus accrued interest HK $36,
less collection fee HK $20)...................................... 716
8,000
Less: Bank service charge................................................ 28
Adjusted cash balance per books...................................... HK $7,972
[(Cash bal. per bank stmt. + Dep. in transit – Outstdg. Cks. = Adj. cash bal. per bank); (Cash bal. per books +
Collection of note rec. – Bank serv. chrg. = Adj. cash bal. per books)]
[(HK$7,263 + HK$1,300  HK$591 = HK$7,972); (HK$7,284 + (HK$700 + HK$36 – HK$20)  HK$28 = HK$7,972)]

(b) July 31 Cash..................................................................... 716

Miscellaneous Expense..................................... 20
Notes Receivable........................................ 700
Interest Revenue......................................... 36

31 Bank Charge Expense....................................... 28

Cash............................................................. 28

Copyright © 2022 Wiley Weygandt, Financial Accounting, IFRS 5/e, Solutions Manual 7-6
*EXERCISE 7.12
(a) WANG ARTWORKS
Bank Reconciliation
September 30

Cash balance per bank statement........................... ¥16,422

Add: Deposits in transit.......................................... 5,450
21,872
Less: Outstanding checks...................................... 2,383
Adjusted cash balance per bank............................. ¥19,489

Cash balance per books........................................... ¥17,404

Add: Collection of note receivable (¥2,500 + ¥30).... ¥ 2,530
Interest earned............................................... 45 2,575
19,979
Less: NSF check...................................................... 425
Safety deposit box rent................................. 65 490
Adjusted cash balance per books........................... ¥19,489
[(Cash bal. per bank stmt. + Dep. in transit – Outstdg. cks. = Adj. cash bal. per bank); (Cash bal. per books +
(Collection of note rec. + Int. earned) + Int. earned of ckg. acct. – (NSF ck. + Safety dep. box rent) = Adj. cash bal.
per books)]
[(¥16,422 + ¥5,450  ¥2,383 = ¥19,489); (¥17,404 + (¥2,530 + ¥30) + ¥45 – (¥425 + ¥65) = ¥19,489)]

(b) Sept. 30 Cash........................................................ 2,530

Notes Receivable............................ 2,500
Interest Revenue............................. 30

30 Cash........................................................ 45
Interest Revenue............................. 45

30 Accounts Receivable—Richard Nance... 425

Cash................................................. 425

30 Bank Charge Expense........................... 65

Cash................................................. 65

Copyright © 2022 Wiley Weygandt, Financial Accounting, IFRS 5/e, Solutions Manual 7-7
*PROBLEM 7.4
(a) KEEDS COMPANY
Bank Reconciliation
July 31, 2025

Cash balance per bank statement..................... $7,690.80

Add: Deposits in transit................................... 1,193.30
8,884.10
Less: Outstanding checks................................ 1,860.10
Adjusted cash balance per bank....................... $7,024.00

Cash balance per books..................................... $6,140.00

Add: Electronic funds
transfer received...................................... 1,520.00
7,660.00
Less: NSF check................................................ $575.00
Error in recording check No. 2480*........ 36.00
Bank service charge................................ 25.00 636.00
Adjusted cash balance per books..................... $7,024.00
* $384 - $348 = $36
(Cash per bank + Dep. in transit – Outstdg. cks. = Adj. cash bal. per bank); [Cash per books + ETF – (NSF ck. + Error in ck.
No. 2480 + Bank svc. Chrg. = Adj. cash bal. per books)]
($7,690.80 + $1,193.30 - $1,860.10 = $7,024.00); [$6,140 + $1,520 – ($575 + $36 + $25) = $7,024.00)]

(b) July 31 Cash.................................................... 1,520

Accounts Receivable................. 1,520

31 Accounts Receivable—W. Krueger. . . 575

Cash............................................ 575

31 Accounts Payable—L. Taylor........... 36

Cash............................................ 36

31 Bank Charge Expense....................... 25

Cash............................................ 25

Copyright © 2022 Wiley Weygandt, Financial Accounting, IFRS 5/e, Solutions Manual 7-8
*PROBLEM 7.6
(a) TIMMINS GROW-FAST
Bank Reconciliation
May 31, 2025

Cash balance per bank statement..................... £6,968.00

Add: Deposits in transit................................... £1,880.15
Bank error—Tomins................................ 360.00 2,240.15
9,208.15
Less: Outstanding checks................................ 276.25
Adjusted cash balance per bank....................... £8,931.90

Cash balance per books..................................... £6,738.90

Add: Electronic funds
transfer received................................. 2,690.00
9,428.90
Less: NSF check................................................ £ 380.00
Error in May 12 deposit*.......................... 50.00
Error in recording check No. 1181**...... 27.00
Check printing charge............................. 40.00 497.00
Adjusted cash balance per books..................... £8,931.90
*₤933.15  ₤883.15
**₤685  ₤658
[(Cash bal. per bank stmt. + (Dep. in transit + Bank error) – Outstdg. cks. = Adj. cash bal. per bank); (Cash bal.
per books + EFT + (NSF ck. + Error in May 12 dep. + Error in recording ck. no. 1181 + Ck. printing chrg.) = Adj.
cash bal. per books)]
[(₤6,968.00 + (₤1,880.15 + ₤360.00)  ₤276.25 = ₤8,931.90); (₤6,738.90 + ₤2,690.00 – (₤380.00 + ₤50.00 +
₤27.00 + ₤40.00) = ₤8,931.90)]

(b) May 31 Cash.................................................... 2,690

Accounts Receivable................. 2,690

31 Accounts Receivable—S. Ballard..... 380

Cash............................................. 380

31 Sales Revenue.................................... 50
Cash............................................. 50

31 Accounts Payable—H. Moses........... 27

Cash............................................. 27

31 Bank Charge Expense....................... 40

Cash............................................. 40

Copyright © 2022 Wiley Weygandt, Financial Accounting, IFRS 5/e, Solutions Manual 7-9
LEARNING OBJECTIVE 4 PRACTICE
*EXERCISE 7.14
(a) Cash and cash equivalents should be reported at ₹88,500.
Cash in bank..................................................... ₹42,000
Cash on hand.................................................... 12,000
Petty cash......................................................... 500
Highly liquid investments................................ 34,000
₹88,500
(b) “Cash in plant expansion fund” should be reported as part of long-term
investments (a noncurrent asset). “Receivables from customers” should be
reported as accounts receivable in the current assets. “Debt investments”
should also be reported in the current assets (because the intent is to
sell them in less than one year).

*EXERCISE 7.15
(a) Cash and Cash Equivalents
1. Currency........................................................................$ 60
2. April checks.................................................................. 260
4. Checking account......................................................... 2,500
5. Savings account........................................................... 4,800
Total cash and cash equivalents.....................................$7,620
(b) 3. Post-dated check—Accounts Receivable; Statement of Financial
Position
6. Prepaid postage in postage meter—Prepaid Postage Statement of
Financial Position or Postage Expense; Income Statement
[Link] from company receptionist—Accounts Receivable; Statement of
Financial Position

Copyright © 2022 Wiley Weygandt, Financial Accounting, IFRS 5/e, Solutions Manual 7-10