In the audit of the Regional Transport Company, a large branch that maintains its own bank account, cash is periodically transferred to the central account in Cedar Rapids. On the branch account’s records, bank transfers are recorded as a debit
to the home office clearing account and a credit to the branch bank account. Similarly, the home office account is recorded as a debit to the central bank account and a credit to the branch office clearing account. Gordon Light is the head bookkeeper for both the home office and the branch bank accounts. Because he also reconciles the bank account, the senior auditor, Cindy Marintette, is concerned about the internal control deficiency.
As a part of the year-end audit of bank transfers, Marintette asks you to schedule the transfers for the last few days in 2019 and the first few days of 2020. You prepare the following list:
Amount
of Transfer
Date Recorded in
the Home Office Cash
Receipts Journal
Date Recorded in
the Branch Office
Cash Disburse-
ments Journal
Date Deposited
in the Home
Office Bank Account
Date Cleared
the Branch Bank
Account
$17,000 12-27-19 12-29-19 12-26-19 12-27-19
36,000 01-02-20 12-30-19 12-28-19 12-29-19
10,000 12-26-19 12-26-19 12-28-19 01-03-20
19,000 12-28-19 01-02-20 12-28-19 12-29-19
25,000 01-02-20 01-02-20 12-28-19 12-31-19
18,000 01-07-20 01-05-20 12-28-19 01-03-20
39,000 01-04-20 01-06-20 01-03-20 01-05-20
a. In verifying each bank transfer, state the appropriate audit procedures you should perform.
b. Prepare any adjusting entries required in the home office records.
c. Prepare any adjusting entries required in the branch bank records.
