Chapter 7 in-class practice
#1 The following data were accumulated for use in reconciling the bank account of Creative
Design Co. for August 2024:
Cash balance according to the company’s records at August 31, $43,500.
Cash balance according to the bank statement at August 31, $56,300.
Checks outstanding (checks that have not yet cleared the bank), $25,390.
Deposit in transit (deposits that do not yet appear on bank statement), $13,325.
A check for $150 in payment of an account was erroneously recorded in the check
register as $1,500.
6. Bank fees reported in bank statement but not yet recorded, $35.
7. Interest income collected by bank but not yet recorded by Creative Design, $120
8. Check written by Creative Design that cleared the bank, but that Creative Design forgot
to journalize, $700
1.
2.
3.
4.
5.
Requirements:
a) Prepare a bank reconciliation.
b) If the balance sheet were prepared for Creative Design Co. on August 31, what amount
should be reported for cash?
c) Must a bank reconciliation always balance (reconcile)?
1
#2 Sarbanes-Oxley applies to
a. publicly held companies
b. privately held businesses
c. not-for-profit organizations
d. all of these
#3 Which of the following is accurate about the Sarbanes-Oxley Act:
a. It emphasizes the importance of effective internal control.
b. It requires that external auditors must eliminate redundant internal controls.
c. It is only applicable to publicly held companies.
d. It reduces the responsibility of company executives for financial reporting.
#4 Accompanying the bank statement was a debit memo for bank service charges. On the bank
reconciliation, the item is
a. an addition to the balance per company's records
b. an addition to the balance per bank statement
c. a deduction from the balance per company's records
d. a deduction from the balance per bank statement
#5 Which of the following are considered cash equivalents, select all that apply:
o money market accounts
o commercial paper
o U.S. Treasury bills
o long-term investment
o cash
o accounts receivable
2