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Teaching Since:	May 2017
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Argosy University/ Phoniex University/
Nov-2005 - Oct-2011

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Professor
Phoniex University
Oct-2001 - Nov-2016

Category > Management Posted 21 Jan 2018 My Price 9.00

Osage Farm Supply

Osage Farm Supply had poor internal control over its cash transactions. Facts about the company’s cash position at November 30 are described below.

The accounting records showed a cash balance of $35,400, which included a deposit in transit

of $1,245. The balance indicated in the bank statement was $20,600. Included in the bank state- ment were the following debit and credit memoranda:

Debit Memoranda:

Check from customer G. Davis, deposited by Osage Farm

Supply, but charged back as NSF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$ 130
Bank service charges for November. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Credit Memorandum:
Proceeds from collection of a note receivable from Regal Farms, which Osage Farm Supply had left with the bank’s collection department . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$6,255

Outstanding checks were as follows:

Check No.	Amount
8231 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$ 400
8263 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	524
8288 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	176
8294 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5,000

Bev Escola, the company’s cashier, has been taking portions of the company’s cash receipts for several months. Each month, Escola prepares the company’s bank reconciliation in a manner that conceals her thefts. Her bank reconciliation for November was as follows:

Balance per bank statement, Nov. 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Add: Deposits in transit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$2,145	$20,600
Collection of note from Regal Farms . . . . . . . . . . . . . . . . . . . . . . . . .	6,255	8,400
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Outstanding checks: No. 8231 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$ 400	$30,000
8263 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	524
8288 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	176	1,000
Adjusted cash balance per bank statement . . . . . . . . . . . . . . . . . . . . . . . .		$29,000
Balance per accounting records, Nov. 30. . . . . . . . . . . . . . . . . . . . . . . . . .		$35,400
Add: Credit memorandum from bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		6,255
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Debit memoranda from bank: NSF check of G. Davis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$ 130	$29,145
Bank service charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15	145
Adjusted cash balance per accounting records . . . . . . . . . . . . . . . . . . . . .		$29,000

Instructions

a. Determine the amount of the cash shortage that has been concealed by Escola in her bank rec- onciliation. (As a format, we suggest that you prepare the bank reconciliation correctly. The

amount of the shortage then will be the difference between the adjusted balances per the bank statement and per the accounting records. You can then list this unrecorded cash shortage as the final adjustment necessary to complete your reconciliation.)

b. Carefully review Escola’s bank reconciliation and explain in detail how she concealed the amount of the shortage. Include a listing of the dollar amounts that were concealed in various ways. This listing should total the amount of the shortage determined in part a.

c. Suggest some specific internal control measures that appear to be necessary for Osage Farm Supply.

a. Not yet due. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$500,000
b. 1–30 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	210,000
c. 31–60 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	80,000
d. 61–90 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15,000
e. Over 90 days past due. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	30,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$835,000

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Maurice Tutor

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Status NEW Posted 21 Jan 2018 10:01 PM My Price 9.00

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