You are the senior auditor-in-charge of the July 31, 20X0, audit of Reliable Aut

Question

You are the senior auditor-in-charge of the July 31, 20X0, audit of Reliable Auto Parts, Inc. Your newly hired staff assistant reports to you that she is unable to complete the four-column proof of cash for the month of April 20X0, which you instructed her to do as part of the consideration of internal control over cash. Your assistant shows you the working paper that she has prepared. Your review of your assistant’s work reveals that the dollar amounts of all the items in her working paper are correct. You learn that the accountant for Reliable Auto Parts, Inc., makes no journal entries for bank service charges or note collections until the month following the bank’s recording of the item. In addition, Reliable’s accountant makes no journal entries whatsoever for NSF checks that are redeposited and cleared. Your assistant’s working paper appears below.

RELIABLE AUTO PARTS, INC. Proof of Cash for April 20X0 July 31, 20X0 Balance Balance 3/31/X0 Deposits Checks 4/30/X0 Per bank statement $ 72,112.82 $ 61,855.41 $ 68,535.21 $ 65,433.02 Deposits in transit: At 3/31/X0 2,130.89 (2,130.89) At 4/30/X0 4,947.55 4,947.55 Outstanding checks: At 3/31/X0 (14,977.49) 14,977.49 At 4/30/X0 (23,052.21) 23,052.21 Bank service charges: March 20X0 (22.30) 22.30 April 20X0 (19.26) 19.26 Note receivable collected by bank 4/30/X0 18,300.00 18,300.00 NSF check of customer L. G. Waite, charged back by bank 3/31/X0, redeposited and cleared 4/3/X0 (420.47) 420.47 Balances as computed 58,823.45 85,523.43 60,463.53 109,621.15 Balances per book 59,708.99 45,951.60 76,612.97 29,047.62 Unlocated difference $ (885.54) $ 39,571.83 $ (16,149.44) $ 80,573.53 RELIABLE AUTO PARTS, INC Proof of Cash for April 20X0 July 31, 20X0 Balance Balance 3/31/X0 Deposits Checks 4/30/X0 Per bank statement $72,112.82 $61,855.41 $68,535.21 $65,433.02 Deposits in transit: At 3/31/X0 2,130.89 (2,118.18) At 4/30/X0 4,947.55 Outstanding checks: At 3/31/X0 (14,977.49) At 4/30/X0 Bank service charges: March 20X0 22.30 22.30 April 20X0 (19.26) 19.26 Note receivable collected by bank 4/30/X0 NSF check of customer L. G. Waite, charged back by bank 3/31/X0, redeposited and cleared 4/3/X0 420.47 (420.47) Balances per book $59,708.99 $45,951.60 $76,612.97 $29,047.62

Explanation / Answer

Balance Deposits Checks Balance 3/31/9x and Deposits 4/30/9x Per Bank statements 72112.82 61855.41 68535.21 65433.12 Deposits in transit 2130.89 -2130.89 at 3/31/9x at 4/30/9x 4947.55 4947.55 out standing checks at 3/31/9x -14977.5 -14977.49 at 4/30/9x 23052.21 -23052.2 Bank service charges 22.3 22.3 March -19.6 -19.6 April Note receivalbe collected by bank -18300 -18300 NSF Checks of customer L.g 420.47 -420.47 Wait charged back by bank redeposited 59708.99 45951.6 76612.63 29008.86

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