ACCT 2000 Chapter : Chapter 7 Class Notes
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Bank Reconciliation The Chicago Scooter Company's bank statement for the month of June indicated a balance of $3,350. The company's cash account in the general ledger showed a balance of $2,464 on June 30. Other relevant information includes the following:
Deposits in transit on June 30 total $2,550.
The bank statement shows a debit memorandum for a $10 check printing charge.
Check No. 160 payable to Simon Company was recorded in the accounting records for $124 and cleared the bank for this same amount. A review of the records indicated that the Simon account now has an $18 credit balance and the check to them should have been $142.
Outstanding checks as of June 30 totaled $3,100.
Check No. 176 was correctly written and paid by the bank for $203. The check was recorded in the accounting records as a debit to accounts payable and a credit to cash for $230.
The bank returned a NSF check in the amount of $311.
The bank included a credit memorandum for $630 representing a collection of a customer's note. The principle portion was $610 and the interest portion was $20. The interest had not been accrued.
Required
a. Prepare the June bank reconciliation for Chicago Scooter Company.
b. Prepare any necessary adjusting entries.
a.
CHICAGO SCOOTER COMPANY Bank Reconciliation June 30 | |||
---|---|---|---|
Cash Balance per Bank | $Answer | ||
Add: | AnswerReconciled Cash Balance per BankReconciled Cash Balance per BooksCollection of NoteDeposit in TransitNSF CheckOutstanding ChecksCheck Printing Charge | Answer | |
Less: | AnswerReconciled Cash Balance per BankReconciled Cash Balance per BooksCollection of NoteDeposit in TransitNSF CheckOutstanding ChecksCheck Printing Charge | Answer | |
AnswerReconciled Cash Balance per BankReconciled Cash Balance per BooksCollection of NoteDeposit in TransitNSF CheckOutstanding ChecksCheck Printing Charge | $Answer | ||
Cash Balance per Books | $Answer | ||
Add: | Accounts Payable Error | $Answer | |
Add: | AnswerReconciled Cash Balance per BankReconciled Cash Balance per BooksCollection of NoteDeposit in TransitNSF CheckOutstanding ChecksCheck Printing Charge | Answer | Answer |
Less: | AnswerReconciled Cash Balance per BankReconciled Cash Balance per BooksCollection of NoteDeposit in TransitNSF CheckOutstanding ChecksCheck Printing Charge | Answer | |
Less: | NSF Check | Answer | Answer |
AnswerReconciled Cash Balance per BankReconciled Cash Balance per BooksCollection of NoteDeposit in TransitNSF CheckOutstanding ChecksCheck Printing Charge | $Answer |
b.
GENERAL JOURNAL | ||||
---|---|---|---|---|
Date | Description | Debit | Credit | |
June | 30 | AnswerAccounts PayableAccounts ReceivableCashInterest EarnedMiscellaneous ExpenseNotes Receivable | $Answer | $Answer |
AnswerAccounts PayableAccounts ReceivableCashInterest EarnedMiscellaneous ExpenseNotes Receivable | Answer | Answer | ||
To correct check error in recording check No. 176. | ||||
30 | AnswerAccounts PayableAccounts ReceivableCashInterest EarnedMiscellaneous ExpenseNotes Receivable | Answer | Answer | |
AnswerAccounts PayableAccounts ReceivableCashInterest EarnedMiscellaneous ExpenseNotes Receivable | Answer | Answer | ||
Interest Earned | Answer | Answer | ||
To record note collection by bank. | ||||
30 | AnswerAccounts PayableAccounts ReceivableCashInterest EarnedMiscellaneous ExpenseNotes Receivable | Answer | Answer | |
AnswerAccounts PayableAccounts ReceivableCashInterest EarnedMiscellaneous ExpenseNotes Receivable | Answer | Answer | ||
To record check printing charge. | ||||
30 | AnswerAccounts PayableAccounts ReceivableCashInterest EarnedMiscellaneous ExpenseNotes Receivable | Answer | Answer | |
AnswerAccounts PayableAccounts ReceivableCashInterest EarnedMiscellaneous ExpenseNotes Receivable | Answer | Answer | ||
To record NSF check. |
Bank Reconciliation The bank reconciliation made by Sandler Company, a sole proprietorship, on March 31 showed:
Deposit in transit of | $1,320 | |
Outstanding checks | no.797 | $540 |
no.804 | $1,068 | |
The reconciled cash balance on March 31 was | $14,064 |
The following bank statement is available for April 2012.
Bank Statement | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
TO | Sandler Company | April 30 | |||||||||||
Fairbanks, AK | FAIRBANKS NATIONAL BANK | ||||||||||||
Date | Deposits | No. | Date | Charges | Date | Balance | |||||||
Apr. | 1 | $1,320 | 804 | Apr. | 2 | $1,068 | Mar. | 31 | $14,352 | ||||
3 | 2,016 | 807 | 3 | 876 | Apr. | 1 | 15,672 | ||||||
7 | 1,500 | 808 | 7 | 1,368 | 2 | 14,604 | |||||||
13 | 1,224 | 809 | 7 | 1,006 | 3 | 15,744 | |||||||
18 | 1,008 | 810 | 16 | 1,248 | 7 | 14,870 | |||||||
23 | 948 | 811 | 13 | 391 | 13 | 15,703 | |||||||
27 | 1,608 | 813 | 27 | 648 | 16 | 14,455 | |||||||
30 | 1,392 | 814 | 23 | 720 | 18 | 14,863 | |||||||
30 IN | 72 | NSF | 18 | 600 | 23 | 15,091 | |||||||
SC | 30 | 48 | 27 | 16,051 | |||||||||
30 | 17,467 | ||||||||||||
Item codes | EC: Error Correction | DM: Debit Memo | CM: Credit Memo | ||||||||||
SC: Service Charge | OD: Overdraft | RT: Returned Item | |||||||||||
IN: Interest Earned | NSF: Non-sufficient Funds |
A list of deposits made and checks written during April is shown below:
Deposits Made | Checks Written | |||||
---|---|---|---|---|---|---|
Apr. | 2 | $2,016 | No. | 807 | $876 | |
6 | 1,500 | 808 | 1,368 | |||
10 | 1,224 | 809 | 1,006 | |||
17 | 1,008 | 810 | 1,248 | |||
22 | 948 | 811 | 326 | |||
24 | 1,608 | 812 | 1,138 | |||
29 | 1,392 | 813 | 648 | |||
30 | 1,710 | 814 | 720 | |||
$11,406 | 815 | 446 | ||||
816 | 1,050 | |||||
$8,826 |
The Cash in Bank account balance on April 30 was $16,644. In reviewing checks returned by the bank, the accountant discovered that check No. 811 written for $391 for delivery expense, was recorded in the cash disbursements journal as $326. The NSF check for $600 was that of customer R. Koppa, deposited in April.
Required
a. Prepare a bank reconciliation for Sandler Company at April 30.
b. Prepare the necessary journal entries to bring the Cash in Bank account into agreement with the reconciled cash balance on the bank reconciliation.
a.
SANDLER COMPANY Bank Reconciliation April 30 | ||||||
---|---|---|---|---|---|---|
AnswerEnding Balance from Bank StatementBalance from General LedgerAdd: Deposits not credited by bankAdd: Interest EarnedService chargeReconciled Cash Balance | $Answer | AnswerEnding Balance from Bank StatementBalance from General LedgerAdd: Deposits not credited by bankAdd: Interest EarnedService chargeReconciled Cash Balance | $Answer | |||
AnswerEnding Balance from Bank StatementBalance from General LedgerAdd: Deposits not credited by bankAdd: Interest EarnedService chargeReconciled Cash Balance | Answer | AnswerEnding Balance from Bank StatementBalance from General LedgerAdd: Deposits not credited by bankAdd: Interest EarnedService chargeReconciled Cash Balance | Answer | |||
Answer | Answer | |||||
Less: Outstanding checks (list in numerical order) | Less: NSF Check R. Koppa | Answer | ||||
Check no. | Amount | |||||
Answer | Answer | AnswerEnding Balance from Bank StatementBalance from General LedgerAdd: Deposits not credited by bankAdd: Interest EarnedService chargeReconciled Cash Balance | Answer | |||
Answer | Answer | Error in recording | ||||
Answer | Answer | Check No. 811 | Answer | |||
Answer | Answer | Answer | Answer | |||
AnswerEnding Balance from Bank StatementBalance from General LedgerAdd: Deposits not credited by bankAdd: Interest EarnedService chargeReconciled Cash Balance | $Answer | AnswerEnding Balance from Bank StatementBalance from General LedgerAdd: Deposits not credited by bankAdd: Interest EarnedService chargeReconciled Cash Balance | $Answer |
b.
General Journal | ||||
---|---|---|---|---|
Date | Description | Debit | Credit | |
April | 30 | AnswerAccounts ReceivableAdvertising ExpenseCash in BankMiscellaneous ExpenseDelivery ExpenseInterest Income | $Answer | $Answer |
AnswerAccounts ReceivableAdvertising ExpenseCash in BankMiscellaneous ExpenseDelivery ExpenseInterest Income | Answer | Answer | ||
To record interest earned on bank account for April. | ||||
30 | AnswerAccounts ReceivableAdvertising ExpenseCash in BankMiscellaneous ExpenseDelivery ExpenseInterest Income | Answer | Answer | |
AnswerAccounts ReceivableAdvertising ExpenseCash in BankMiscellaneous ExpenseDelivery ExpenseInterest Income | Answer | Answer | ||
To reclassify NSF check as an accounts receivable. | ||||
30 | AnswerAccounts ReceivableAdvertising ExpenseCash in BankMiscellaneous ExpenseDelivery ExpenseInterest Income | Answer | Answer | |
AnswerAccounts ReceivableAdvertising ExpenseCash in BankMiscellaneous ExpenseDelivery ExpenseInterest Income | Answer | Answer | ||
To record bank service charge. | ||||
30 | AnswerAccounts ReceivableAdvertising ExpenseCash in BankMiscellaneous ExpenseDelivery ExpenseInterest Income | Answer | Answer | |
AnswerAccounts ReceivableAdvertising ExpenseCash in BankMiscellaneous ExpenseDelivery ExpenseInterest Income | Answer | Answer | ||
To correct error in recording check 811. |
Question 14 pts
The five components to a system of internal controls include all of the following except:
control procedure |
risk assessment |
safeguarding assets |
monitoring controls |
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Question 24 pts
An automobile company testing brakes on new vehicles is part of:
control procedure |
risk assessment |
information systems |
monitoring controls |
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Question 34 pts
Which account would we debit to open a new petty cash fund?
cash |
petty cash |
miscellaneous expense |
petty cash expense |
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Question 44 pts
Our company established a petty cash fund with a balance of $200. We have petty cash receipts for travel expenses that total $125. We have counted petty cash and found that we were $2 short. Which of the following would be included in the entry to replenish the fund?
a credit to petty cash for $127 |
a debit to travel expenses for $125 |
a credit to cash over and short for $2 |
a credit to cash for $125 |
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Question 54 pts
On a bank reconciliation, which of the following will not appear as a deduction on a bank statement?
deposit |
NSF check (non-sufficient funds) |
service charge |
Payments made by EFT (electronic fund transfer) |
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Question 64 pts
Our company received a bank statement with a balance of $10,000. The reconciling items include outstanding checks that totaled $2,000 and a deposit in transit of $1,000. What is the adjusted bank balance after we complete the bank reconciliation?
$7,000 |
$9,000 |
$11,000 |
$13,000 |
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Question 74 pts
Our company has decided to write off an uncollectible account of $3,000. What account would we credit to record bad debt expense if our company uses the direct write-off method for bad debts?
bad debt expense |
accounts receivable |
allowance for doubtful accounts |
cash |
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Question 84 pts
Where does allowance for doubtful accounts appear on our financial statements?
on balance sheet as a current liability |
on income statement as part of cost of goods sold |
on balance sheet as a contra asset related to accounts receivable |
on the statement of retained earnings as a deduction from net income |
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Question 94 pts
At the end of 2018, we have a credit balance of $10,000 in allowance for doubtful accounts before the adjusting entry for bad debts expense. The company uses the percentage of sales method to estimate bad debt expense. The company estimates that 3% of net credit sales will be uncollectible for the year. Net credit sales for the year amounted to $1,000,000. What account and amount would we debit to record the adjusting entry for bad debt expense?
bad debt expense, $30,000 |
allowance for doubtful accounts, $30,000 |
bad debt expense, $20,000 |
accounts receivable, $20,000 |
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Question 104 pts
On July 1, 2017, our company accepts a 9-month 5% note for $12,000. What account and amount would we debit when we record the year-end adjusting entry on December 31, 2017?
interest revenue, $300 |
interest revenue, $350 |
interest receivable, $300 |
interest receivable, $350 |