ACC M115 Lecture Notes - Lecture 17: Bank Reconciliation, Bank Statement, Petty Cash
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The bookkeeperat Hopkins Company has not reconciled the bank statement with the cash account, saying instead, "I don't have time." You have been asked to prepare a reconciliation and review procedures with the bookkeeper.
The April 30, 2018, bank statement and the April ledger accounts for cash showed the following (Summarized):
Bank Statement
| Cheques | Deposits | Balance | |
|---|---|---|---|
| Balance, April 1,2018 | $31,000 | ||
| Deposits during April | $36,100 | 67,100 | |
| Notes Collected for company (including $70 interest) | 1,180 | 68,280 | |
| Cheques cleared during April | $44,500 | 23,780 | |
| NSF cheque-A. B. Wright | 160 | 23,620 | |
| Bank service charges | 70 | 23,550 | |
| Balance, April 30, 2018 | 23,550 |
Cash in Bank
| Apr. 1 Balance 23,500 | Apr. Cheques written 41,000 |
| Apr. Deposits 41,500 |
Cash on Hand
| Apr. 30 Balance 100 |
A company of cheques written before and during April whththe cheques cleared through the bank showed that cheques of $4,100 are still outstanding at April 30. No seposits in transit were carried over from March, but a deposit was in transit at April 30.
Required:
1. Prepare a detailed bank reconciliation at April30, 2018.
2. Prepare any required journal entries as a result of the reconciliation. Why are they necessary?
3. What were the balances in the cash accounts in the ledger on May 1, 2018?
4. What total amount of cash should be reported on the statement of financial position at April 30. 2018.
Please answer all the questions, espicially, question 3 and 4 because I put this question before but the professor who answered it did not answer all of them.
1. Prepare all journal entries thatwould be required by the bank reconciliation. Prepare a generaljournal.
Excel communications had a computer failure on Febuary 1, 2014,which resulted in the loss of data, including the balance of itsCash account and its bank reconciliation from January 31, 2014. Theaccountant, Brad Eyers, has been able to obtain the followinginformation from the records of the company and its bank:
A. Anexamination showed that two cheques (#461 for $645 and #492 for$225) had not been cashed as of February, 1. Eyers recalled thatthere was only one deposit in transit on the January 31 bankreconciliation, but was unable to recall the amount.
B. Thecash receipts and cash payments journal contained the followingentries for February 2014:
Cash ReceiptsAmounts Cheque# Amount
$876 499 $678
$1230 500 $651
$1545 501 $2578.50
$612 502 $846
$2460 503 $327
504 $820
505 void
506 $314
507 $543
---------------------------------------------------------------------------------------------------------------
6723 $6757.50
C.
Date | Cheques and Other Debits | Deposits and Other Credits | Deposits and Other Credits | Balance |
Feb. 1 | #500 | 660 | 3579 | |
3 | #492 | 3354 | ||
5 | #501 | 775.50 | ||
8 | 876 | 1651.50 | ||
16 | #499 | 585 | 1558.50 | |
17 | EFT | 1116 | ||
19 | EFT | 720 | 1836 | |
21 | #503 | 1230 | 2739 | |
22 | #504 | EFT | 336.50 | 2215.50 |
24 | EFT | 471 | 2686.50 | |
26 | NSF | 1545 | 2439 | |
27 | SC | 2401.50 | ||
27 | #507 | 612 | 2470.50 |
D. Thedeposit made on February 16 was for the collection of a notereceivable ($540) plus interest
E. The EFTs had not yet been recorded by Excel Communications sincethe bank statement was the first notification of them.
· The February 17EFT was for the monthly payment on an insurance policy for ExcelCommunications.
· The February 19and 24 EFTs were collections on accounts receivable
· The February 22EFT was in error â the transfer should have been to AccelCommunications
F. The NSF cheque on February 26 was received from a customer aspayment of $1792.50 for installation of a satellite purchased fromExcel.
G. Cheque #504 was correctly written for $860 for the purchase ofinventory (assume perpetual), but incorrectly recorded by the cashpayments clerk.
General Journal | |||||
| DATE 2014 | ACCOUNT TITLES AND EXPLANATIONS | POST. REF. | DEBIT | CREDIT | |
Periodic inventory system. Each of the following four horizontal lines represents data taken from a separate multiple-step income statement. Insert the missing amounts in the space (empty box) provided. Indicate any net loss by placing brackets around the amount.
Hint: Not all parts of the income statement are shown, so be careful with your arithmetic.
| Beginning Inventory | Purchases | Cost of Goods Available for Sale | Ending Inventory | Cost of Goods Sold | |
| a. | $180,000 | $325,000 | $80,000 |
| Sales (Revenue) | Cost of Goods Sold | Gross Profit | Operating Expenses | Net Income | |
| b. | $240,000 | $145,000 | $32,000 |
| Revenue (Sales) | Cost of Goods Available for Sale | Ending Inventory | Cost of Goods Sold | Gross Profit | Operating Expenses | Net Income | |
| c. | $515,000 | $240,000 | $145,000 | $225,000 | $145,000 |
. For each question below, circle the best answer from the choices given. (
1 : Under the periodic inventory system the purchases of merchandise are recorded at their selling prices.
a. True b. False
2 : Inventory shrinkage does not include the loss of merchandise through shoplifting.
a. True b. False
3 : Only under the periodic inventory system is a physical count of the inventory necessary.
a. True b. False
4 : It is not possible to have more inventory at the end of a period then at the beginning of a period.
a. True b. False
5) True and false. Indicate whether each of the following is True (T) or False (F). (5 POINTS)
T F 1. US Treasury bills that mature within 120 days are cash equivalents.
T F 2. Financial assets describe not just cash, but all assets that are easily and directly convertible into known amounts of cash.
T F 3. Good cash mgmt. dictates that any cash and checks received each day should be deposited the same day.
T F 4. The income statement approach to estimating Bad debts Expense emphasizes the aging of accounts receivable and the adjustment of the Allowance for Doubtful Accounts account to the level of the estimated uncollectible amount.
T F 5. When I use the allowance method for accounts receivable, I will recognize a Bad Debt Expense at the same time the account is taken off the Accounts Receivable Subsidiary Ledger.
. For each question below, circle the best answer from the choices given.
1. Which of the following items would cause the ending balance on the bank statement to be larger than the ending balance of cash shown in the accounting records (checkbook)?
A) Bank service charges.
B) Deposits in transit.
C) Outstanding checks.
D) NSF check from one of the depositor's customers.
2. When a bank reconciliation has been satisfactorily completed, the only related entries to be made in the companyâs records are:
A) To correct errors made by the bank in recording the dollar amounts of cash transactions during the period.
B) To reconcile items explaining the difference between the balance per books and the balance per bank stmt.
C) To record outstanding checks and bank service charges.
D) To record items explaining the difference between the balance per accounting records and the adj. cash bal.
3. The Allowance for Doubtful Accounts represents:
A) Cash set aside to make up for bad debt losses.
B) The amount of uncollectible accounts written off to date.
C) The difference between total credit sales and collections on credit sales.
D) The difference between the face value of A/R and the net realizable value of A/R.
4. In preparing a bank reconciliation, a service charge shown on the bank statement should be:
A) Added to the balance per the bank statement.
B) Deducted from the balance per the bank statement.
C) Added to the balance per the depositor's records.
D) Deducted from the balance per the depositor's records.
5. During preparation of a bank reconciliation, outstanding checks should be:
A) Added to the balance per the bank statement.
B) Deducted from the balance per the bank statement.
C) Added to the balance per the depositor's records.
D) Deducted from the balance per the depositor's records.
Bank reconciliation. Indicate what effect each situation will have on the bank reconciliation process (Match the situation with the bank reconciliation process below by placing the number of the process next to the situation). Note that there are more situations than processes, so some processes may be used more than once, but not all processes have to be used. Only one process is required for each situation. Hint: Determine if Cash is increasing or decreasing
Process
Deduct from bank balance 2. Add to bank balance
3. Deduct from checkbook balance 4. Add to checkbook balance
Situation
_______ Bank received $2,750 from one of your customers (Terms: Cash in advance)
_______ Bank collection (wire) fee was $15
_______ Check number 111 was outstanding for $55
_______ A $400 check was written, but recorded on the books as $40
_______ Interest received from your bank for the month was $16.55
