Reference no: EM132473940
Bank reconciliation and internal control
The records of Parker Company indicate a July 31 cash balance of $10,400, which includes undeposited receipts for July 30 and 31. The cash balance on the bank statement as of July 31 is $10,575. This balance includes a note of $2,250 plus $150 interest collected by the bank but not recorded in the journal. Checks outstanding on July 31 were as follows: No. 2670, $1,050; No. 3679, $675; No. 3690, $1,650; No. 5148, $225; No. 5149, $750; and No. 5151, $800.
On July 25, the cashier resigned, effective at the end of the month. Before leaving on July 31, the cashier prepared the following bank reconciliation:
- Subsequently, the owner of Parker Company discovered that the cashier had stolen an unknown amount of undeposited receipts, leaving only $1,500 to be deposited on July 31. The owner, a close family friend, has asked for your help in determining the amount that the former cashier stole.
Question 1: Determine the amount the cashier stole from Parker Company. Show your computations in good form.
Question 2: How did the cashier attempt to conceal the theft?
Question 3: Identify two major weaknesses in internal controls that allowed the cashier to steal the undeposited cash receipts.
Question 4: Recommend improvements in internal controls so that similar types of thefts of undeposited cash receipts can be prevented.
Cash to monthly cash expenses ratio
TearLab Corp. is a health care company that specializes in developing diagnostic devices for eye disease. TearLab reported the following data (in thousands) for three recent years:
Cash Equivalents
Year 3 $13,88
Year 2 $16,338
Year1 $37,778
Net cash floes from operations
Year 3 (23,703)
Year 2 (18,172)
Year 1 (13,824)
Question 5: Determine the monthly cash expenses for Year 3, Year 2, and Year 1. Round to one decimal place.
Question 6: Determine the ratio of cash to monthly cash expenses as of December 31 for Year 3, Year 2, and Year Round to one decimal place.
Question 7: Based on (5) and (6), comment on TearLab's ratio of cash to monthly operating expenses for Year 3, Year 2, and Year 1.