At the end of March, Weber Productions' accounting records reveal a balance for cash equal to $21,861. However, the balance of cash in the bank at the end of March is only $4,576. Weber is concerned and asks the company's accountant to reconcile the two balances. Examination of the bank statement and company records at the end of March reveals the following information: NSF checks$6,783 Service fees$195Deposits outstanding7,348 Checks outstanding541In addition, Weber owes one of its suppliers $200. During March, the company's accountant mistakenly wrote the check for $1,200. The check was recorded in the company's records for $200 but processed by the bank for $1,200. Weber has contacted the supplier who has agreed to send a $1,000 refund in April directly to the bank. Finally, a petty
cash fund of $2,500 was established during March. This amount was withdrawn from the checking account but not recorded.Required:1. Calculate the correct ending balance of cash at the end of March.2. Discuss any problems you see with the company's cash procedures.
What will be an ideal response?
Requirement 1
| Weber Productions |
| Bank Reconciliation |
| March 31 |
| Bank's Cash Balance | Company's Cash Balance |
| Per bank statement | $4,576 | Per general ledger | $21,861 |
| Deposits outstanding | +7,348 | NSF checks | ?6,783 |
| Checks outstanding | ?541 | Service fees | ?195 |
| Expected refund | +1,000 | Petty cash fund | ?2,500 |
| Per reconciliation | $12,383 | Per reconciliation | $12,383 |
Requirement 2
The company has a large amount of NSF checks. This indicates that the company's procedures related to acceptance of customers' checks is not reliable. The company should tighten controls over the allowance of payment by check.
Deposits outstanding are relatively high. The company should more frequently deposit cash to avoid theft or loss of cash.
The amount established for the petty cash fund may be too high. Petty cash provides cash on hand for minor purchases. Having too much cash on hand creates the likelihood that a material amount of cash will be mishandled.
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