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You are auditing general cash for a company for the fiscal year ended September 30, 2014. The client has not prepared the September 30 bank reconciliation,. After a brief discussion with the owner, you agree to prepare the reconciliation with the assistance from one the company’s clerks. You obtain the following information: (30 points)
You are auditing general cash for a company for the fiscal year ended September 30, 2014. The client has not prepared the September 30 bank reconciliation,. After a brief discussion with the owner, you agree to prepare the reconciliation with the assistance from one the company’s clerks. You obtain the following information: (30 points)
General Ledger Bank Statement Beginning balance 9/1/14 $15,000 $17,800 Deposits $31,051 Cash receipts journal $33,330 Check cleared (30,309) Cash disbursements journal ($27,101) September bank service charge (150) Note paid directly (8,000) NSF check (950) Ending balance 9/30/14 $21,229 $9,442
General Ledger Bank Statement Beginning balance 9/1/14 $15,000 $17,800 Deposits $31,051 Cash receipts journal $33,330 Check cleared (30,309) Cash disbursements journal ($27,101) September bank service charge (150) Note paid directly (8,000) NSF check (950) Ending balance 9/30/14 $21,229 $9,442
General Ledger Bank Statement

General Ledger
General Ledger
Bank Statement
Bank Statement
Beginning balance 9/1/14 $15,000 $17,800
Beginning balance 9/1/14
Beginning balance 9/1/14
$15,000
$15,000
$17,800
$17,800
Deposits $31,051
Deposits
Deposits

$31,051
$31,051
Cash receipts journal $33,330
Cash receipts journal
Cash receipts journal
$33,330
$33,330

Check cleared (30,309)
Check cleared
Check cleared

(30,309)
(30,309)
Cash disbursements journal ($27,101)
Cash disbursements journal
Cash disbursements journal
($27,101)
($27,101)

September bank service charge (150)
September bank service charge
September bank service charge

(150)
(150)
Note paid directly (8,000)
Note paid directly
Note paid directly

(8,000)
(8,000)
NSF check (950)
NSF check
NSF check

(950)
(950)
(950)
Ending balance 9/30/14 $21,229 $9,442
Ending balance 9/30/14
Ending balance 9/30/14
$21,229
$21,229
$9,442
$9,442

August 30 Bank Reconciliation
Information in General ledger and bank statement
Balance per bank $17,800 Deposit in transit 1,200 Outstanding check 4,000 Balance per book $15,000
Balance per bank $17,800 Deposit in transit 1,200 Outstanding check 4,000 Balance per book $15,000
Balance per bank $17,800
Balance per bank
Balance per bank
$17,800
$17,800
Deposit in transit 1,200
Deposit in transit
Deposit in transit
1,200
1,200
Outstanding check 4,000
Outstanding check
Outstanding check
4,000
4,000
Balance per book $15,000
Balance per book
Balance per book
$15,000
$15,000

Additional information obtained is as follows:
Check clearing that were outstanding on August 30 total $3,820 Check clearing that were recorded in the September disbursement journal total $25,239 A check for $500 cleared the bank but had not been recorded in the cash disbursements journal. It was for an acquisition for inventory. The company uses the periodic-inventory method. A check for $750 was charged to the company but had been written on a different company’s bank account. Deposit included $1,200 from August and $29,851 for September. The bank charged the company account for nonsufficient check totaling $950. The credit manager concluded that customer intentionally closed its account and the owner left the city. The check was turned over to collection agency. A note for $7,500, plus interest was paid directly to the bank under an agreement singed five month ago. The note payable was recorded at $ 7,500 on the company’s books.
Check clearing that were outstanding on August 30 total $3,820
Check clearing that were recorded in the September disbursement journal total $25,239
A check for $500 cleared the bank but had not been recorded in the cash disbursements journal. It was for an acquisition for inventory. The company uses the periodic-inventory method.
A check for $750 was charged to the company but had been written on a different company’s bank account.
Deposit included $1,200 from August and $29,851 for September.
The bank charged the company account for nonsufficient check totaling $950. The credit manager concluded that customer intentionally closed its account and the owner left the city. The check was turned over to collection agency.
A note for $7,500, plus interest was paid directly to the bank under an agreement singed five month ago. The note payable was recorded at $ 7,500 on the company’s books.

Required:
Prepared a bank reconciliation that shows both the unadjusted and adjusted balance per books. Prepare all adjusting entries Below are 3 audit procedures commonly performed during an audit: (20 points)
Prepared a bank reconciliation that shows both the unadjusted and adjusted balance per books.
Prepare all adjusting entries
Below are 3 audit procedures commonly performed during an audit: (20 points)

Read the client’s physical inventory instruction and observe whether they are being followed by those responsible for counting the inventory. Compare the client’s count of physical inventory at an interim date with the perpetual inventory master file. Account for a sequence of raw material requisitions and examine each requisition for an authorized approval.
Read the client’s physical inventory instruction and observe whether they are being followed by those responsible for counting the inventory.
Compare the client’s count of physical inventory at an interim date with the perpetual inventory master file.
Account for a sequence of raw material requisitions and examine each requisition for an authorized approval.

Required:
For each procedure, identify which of the following is it: Test of control Substantive test of transactions. For those procedures, identify, what transaction-related audit objective or objectives are being satisfied?
For each procedure, identify which of the following is it:
Test of control
Substantive test of transactions.
For those procedures, identify, what transaction-related audit objective or objectives are being satisfied?
Procedures Type of Test Objective(s) 1. Read the client’s physical inventory instruction and observe whether they are being followed by those responsible for counting the inventory 2. Compare the client’s count of physical inventory at an interim date with the perpetual inventory master file. 3. Account for a sequence of raw material requisitions and examine each requisition for an authorized approval.
Procedures Type of Test Objective(s) 1. Read the client’s physical inventory instruction and observe whether they are being followed by those responsible for counting the inventory 2. Compare the client’s count of physical inventory at an interim date with the perpetual inventory master file. 3. Account for a sequence of raw material requisitions and examine each requisition for an authorized approval.
Procedures Type of Test Objective(s)

Procedures

Procedures
Type of Test

Type of Test
Objective(s)

Objective(s)
1. Read the client’s physical inventory instruction and observe whether they are being followed by those responsible for counting the inventory
1.
1.
Read the client’s physical inventory instruction and observe whether they are being followed by those responsible for counting the inventory
Read the client’s physical inventory instruction and observe whether they are being followed by those responsible for counting the inventory

2. Compare the client’s count of physical inventory at an interim date with the perpetual inventory master file.
2.
2.
Compare the client’s count of physical inventory at an interim date with the perpetual inventory master file.
Compare the client’s count of physical inventory at an interim date with the perpetual inventory master file.

3. Account for a sequence of raw material requisitions and examine each requisition for an authorized approval.
3.
3.
Account for a sequence of raw material requisitions and examine each requisition for an authorized approval.
Account for a sequence of raw material requisitions and examine each requisition for an authorized approval.

3. Distinguish between Prepayments and Accruals (10 points)

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