Question

TE JUUM ILLU, II put is not prepared. When the Accounting Department receives an invoice billing Paragon Tech for a service call, the accounts payable clerk calls the manager who requested the service in order to verify that it was performed. The fraud scheme involves Mae Jansma, the manager of plant and facilities. Mae arranged for her uncle's company, Radiate Systems, to be placed on Paragon's approved vendor list. Mae did not disclose the family relationship. On several occasions, Mae would submit a requisition for services to be provided by Radiate. However, the service requested was really not needed, and it was never performed. Radiate would bill Paragon for the service and then split the cash payment with Mae. Explain what changes should be made to Paragon Tech Company's procedures for order ing and paying for services in order to prevent such occurrences in the future. EX 7-16 Bank reconciliation Identify each of the following reconciling items as: (a) an addition to the cash balance according Obj. 5 to the bank statement, (b) a deduction from the cash balance according to the bank statement, (©) an addition to the cash balance according to the company's records, or (d) a deduction from the cash balance according to the company's records. (None of the transactions reported by bank debit and credit memos have been recorded by the company.) 1. Bank service charges, $50. 2. Check of a customer returned by bank to company because of insufficient funds, $520. 3. Check for $345 incorrectly recorded by the company as $435. 4. Check for $200 incorrectly charged by bank as $2,000. 5. Deposit in transit. $4,250. 6. Outstanding checks, $5,420. 7. Note collected by bank, $5,300. Obj. 5 EX 7-17 Entries based on bank reconciliation Which of the reconciling items listed in Exercise 7-16 require an entry in the company's accounts? Obj.5 EX 7-18 Bank reconciliation The following data were accumulated for use in reconciling the bank account of Creative Design cn for August 20Y6: 142020

Answer 1

	particulars	EXPLANATION
1	bank service charges,$50	(d) deduction from the cash balance as per company records
		as the bank has charged already it is updated in bank statement
		but not in the company records
2	check of customer returned by bank to company due	(d) deduction from the cash balance as per company records
	to insufficient funds of $520	as there will be no receipt in bank ,the amount which is recorded
		must be reduced from cash balance of company records
3	Check for $345 incorrectly recorded by the company as $435	© addition to the cash balance as per company records
		as the wrong amount is entered this will increases the cash balance
		by the difference
4	Check for $200 incorrectly charged by bank as $2000	(a) addition to the cash balance as per bank statements
		as the wrong amount charged by bank will have to be adjusted for
		the difference
5	deposit in transit ,$4250	(a) addition to the cash balance as per bank statements
		as the deposits are not receorded by bank,it will be added
6	oustanding checks,$5420	(b) deduction from the cash balance as per bank statements
		as more outstanding checks are going to be presented in future ,
		this will reduce the cash balance as per bank statements
7	note collected by bank,$5300	(C)addition to the cash balance as per company records
		AS THE DIRECT COLLECTION BY BANK WILL INCREASE THE CASH BALANCE
		AS PER COMPANIES RECORD