Cory Magnum has been working for Matrix Products Inc

for #975
Cory Magnum has been working for Matrix Products Inc. for five years and has gained the
respect of his peers for his exemplary behaviour and work ethic. His job includes receiving cash
and cheques from customers, depositing the cash receipts in the company’s account at the
local bank, and recording the transactions in the company’s computerized accounting program.
Cory was faced with personal financial problems and decided to make use of $ 2,000 of the
company’s available cash to solve them. He planned to return the money as soon as his
financial situation improved. The $ 2,000 he took was part of the total cash sales to customers
during the previous two business days. At the same time, Cory had received a cheque for $
2,000 from PLC Ltd. as a partial payment on its trade receivables. To hide his theft, Cory
deposited the cheque instead of the cash into the company’s bank account and made the
following journal entry:Cash in bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 2,000Cash on hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000In
addition, he recorded the following journal entry to credit the account of PLC Ltd. to avoid any
questions from that company in the future:Sales returns and allowances . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 2,000Trade receivables— PLC Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 2,000Required:1. Assume that Matrix Products prepares financial statements on a
monthly basis. Would any items on the statement of earnings or the statement of financial
position be incorrect? Explain. 2. Identify the weaknesses that exist in the company’s internal
control system. What changes should be made to strengthen internal control over cash
receipts?View Solution:
Cory Magnum has been working for Matrix Products Inc for

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