Question Toyco, a retail toy chain, honors two bank credit cards and makes daily deposits of credit card sales in two credit card bank accounts (Bank A and Bank B). Each day, Toyco batches its credit card sales slips, bank deposit slips, and authorized sales return documents, and sends them to data processing for data entry. Each week, detailed computer printouts of the general ledger credit card cash accounts are prepared. Credit card banks have been instructed to make an automatic weekly transfer of cash to Toyco’s general bank account. The credit card banks charge back deposits that include sales to holders of stolen or expired cards. The auditor examining the Toyco financial statements has obtained copies of the detailed general ledger cash account printouts, a summary of the bank statements, and the manually prepared bank reconcilia- tions, all for the week ended December 31, as shown here. Review the December 31 bank reconciliation and the related information contained in the following schedules and describe what actions the auditor should take to obtain evidence for each item on the bank reconciliation. Assume that all amounts are material and that all computations are accurate. Organize your answer sheet as follows, using the code contained on the bank reconciliation. Code Number Actions to Be Taken by the Auditor to Obtain Evidence 1. 2. 3. etc. Toyco Bank Reconciliation for December 31, 2013 Bank A Bank B Code No. Add or (Deduct) 1. Balance per bank statement, December 31 $8,600 $-0- 2. Deposits in transit, December 31 2,200 6,000 3. Redeposit of invalid deposits (deposited in wrong account) 1,000 1,400 4. Difference in deposits of December 29 (2,000) (100) 5. Unexplained bank charge 400 6. Bank cash transfer not yet recorded -0- 22,600 7. Bank service charges 8. Chargebacks not recorded—stolen cards -0- 100 500 -0- 9. Sales returns recorded but not reported to the bank (600) (1,200) 10. Balance per general ledger, December 31 $9,700 $29,200 Toyco Detailed General Ledger Credit Card Cash Accounts Printouts for the Week Ended December 31, 2013 Bank A Bank B Dr. or (Cr.) Beginning balance, December 24 $12,100 $4,200 Deposits: December 27 2,500 5,000 December 28 3,000 7,000 December 29 0 5,400 December 30 1,900 4,000 December 31 2,200 6,000 Cash transfer, December 17 (10,700) -0- Chargebacks—expired cards (300) (1,600) Invalid deposits (deposited in wrong account) (1,400) (1,000) Redeposit of invalid deposits 1,000 1,400 Sales returns for week ended December 31 (600) (1,200) Ending balance $9,700 $29,200 Toyco Summary of the Bank Statements for the Week Ended December 31, 2013 Bank A Bank B (Charges) or Credits Beginning balance, December 24 $10,000 $-0- Deposits dated: December 24 2,100 4,200 December 27 2,500 5,000 December 28 3,000 7,000 December 29 2,000 5,500 December 30 1,900 4,000 Cash transfers to general bank account: December 27 (10,700) -0- December 31 -0- (22,600) Chargebacks: Stolen cards (100) -0- Expired cards (300) (1,600) Invalid deposits (1,400) (1,000) Bank service charges -0- (500) Bank charge (unexplained) (400) (-0) Ending balance $8,600 $-0-

XM1ZMM The Asker · Accounting