Disney (Use attached file spreadsheet)

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Resources: Financial Accounting: Tools for Business Decision Making 

Scenario: Daisey 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 book-keeper. As a result, Bret Turrin handles all cash receipts, keeps the accounting records, and prepares the monthly bank reconciliations. 

The balance per the bank statement on October 31, 2017, was $18,380. Outstanding checks were No. 62 for $140.75, No. 183 for $180, No. 284 for $253.25, No. 862 for $190.71, No. 863 for $226.80, and No. 864 for $165.28. Included with the statement was a credit memorandum of $185 indicating the collection of a note receivable for Daisey Company by the bank on October 25. 

This memorandum has not been recorded by Daisey. 

The company’s ledger showed one Cash account with a balance of $21,877.72. The balance included undepositied cash on hand. Because of the lack of internal controls, Bret took for personal use all of the undeposited receipts in excess of $3,795.51. He then prepared the following bank reconciliation in an effort to conceal his theft of cash:

Cash balance per books, October 31                      $21,877.72

Add: Outstanding checks  

No. 862                                      $190.71 

No. 863                                       226.80 

No. 864                                       165.28                  482.79

                                                                                22,360.51

Less: Undeposited receipts                                   3,795.51

Unadjusted balance per bank, October 31            18,565.00

Less: Bank credit memorandum                            185.00

Cash balance per bank statement, October 31      $18,380.00

Prepare a Word document  discussing the following points and the errors in the original bank reconciliation. The written submission must be 1,050-word report (hint: deduct the amount of the theft from the adjusted balance per books) including the following:

  • Indicate the three ways that Bret attempted to conceal the theft and the dollar amount involved in each method.
  • What principles of internal control were violated in this case?

Complete the Excel® spreadsheet for the multi-step income statement and submit with the reconciliation report.

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