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122) Chicago Company has hired you to reconcile its bank statement and cash account. At June
30, 2019, the Cash account on the books showed the following:
Cash account
Date
Explanation
Debits
Credits
Balance
June 1
Balance
$5,600
June 1-30
Deposits
$32,000
37,600
June 1-30
Checks
$29,700
7,900
June 30
Balance
7,900
The June bank statement, just received, showed the following:
June 1, balance
$5,600
Deposits made in June
29,000
Interest paid by the bank in June
120
Checks paid in June
(27,500)
Bank service charge for June
(50)
NSF Charged (Brad Jolie, check returned
for nonsufficient funds)
(150)
June 30, balance
$7,020
There were neither outstanding checks nor deposits in transit at May 31, 2019.
A. Prepare the bank reconciliation at June 30, 2019.
B. Prepare the adjusting journal entries needed as a result of preparing the bank reconciliation.
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123) A comparison of the balance in Cottonwood Company’s cash account per its books as of
April 30, 2019 and the bank statement dated April 30, 2019 revealed the following information:
Code
Item
A.
Ending Cash balance per books (unadjusted)
$5,520
B.
Ending balance per bank statement (as of April 30,
2019)
5,170
C.
Customer’s NSF check returned by bank
Shown on the April bank statement
300
D.
Outstanding checks at the end of April
870
E.
Deposit in transit at the end of April
1,100
F.
Error made by Cottonwood in recording a check
paid to a supplier during April-$550 was credited to
Cash when the proper amount was $500; the bank
properly recorded the check as $500 when it cleared
the bank
50
G.
Bank service charge for April
20
H.
Interest paid by bank
150
Prepare a complete bank reconciliation using the format below. In each section of the bank
reconciliation indicate the proper handling of each of the items shown above by listing the
appropriate item code letter and the respective amount.
Cottonwood Company
Bank Reconciliation
April 30, 2019
Book Balance of Cash: $
Bank Statement Balance:
$
Additions:
Additions:
(Item code)
(Amount)
(Item code)
(Amount)
Deductions:
Deductions:
(Item code)
(Amount)
(Item code)
(Amount)
Correct cash balance: $
Correct cash balance: $
80
124) Burke Company has just received its June 30 bank statement from Urban Bank. The bank
statement and the cash account per the books, summarized below, are to be reconciled for the
month of June.
Bank Statement
Cash Account per
Books
Balance,
June 1
$5,200
Balance,
June 1
$5,500
Deposits
9,200
Cash
receipts
9,000
Interest paid
by bank
240
Checks
written
(7,700)
Checks
cleared
(7,475)
Bank
service
charge
(20)
NSF check
(Jimmy
Dean)
(100)
Balance,
June 30
$7,045
Balance,
June 30
$6,800
Other Data:
May
June
Deposit in transit at month end
$600
$400
Outstanding checks at month end
300
525
A. Prepare the June 30 bank reconciliation.
B. Prepare the journal entries that should be made in the accounts of Burke Company as a result
of the bank reconciliation.
125) A. What are “cash equivalents”?
B. Specifically where would cash equivalents appear on the financial statements?
126) You are the new manager of West Coast Company. The company distributes goods
throughout the Rocky Mountain area. Customers are billed after the shipments are sent. Most
customers pay within two weeks. You notice that one employee is responsible for opening all
incoming payments, recording them in the accounting records, and depositing all receipts in the
bank daily. When asked why this one person performed all of these duties, you were told that it
was more efficient for one person to handle cash and to keep track of things. If any cash was
missing, responsibility could be easily determined.
Do you agree with this arrangement? What changes would you make, and why?
127) Asia Company sold $10,000 of goods to Euro Company on credit on May 1. At the time of
the sale, Asia recorded a debit to Accounts Receivable and a credit to Sales Revenue for
$10,000. Terms were 2/10, n/30.
Prepare the journal entries Asia Company would record for each of the following independent
situations:
A. Euro paid the balance due, less the discount, on May 10.
B. Euro returned half of the goods for credit on May 4. Euro paid the balance due, less the
discount, on May 10.
C. Euro paid its bill on May 30 (there were no sales returns).
128) On July 10, 2019, Rex Company sold merchandise at an invoice price of $5,000 with terms
of 2/10, n/30.
Prepare the journal entries required below by indicating the account code of the appropriate
account for each debit and credit and enter the dollar amounts for each item.
Account Code
A
Cash
B
Accounts receivable
C
Sales revenue
D
Sales discounts
Transaction
Debits
Credits
Code
Amount
Code
Amount
Sale on July 10, 2019
Assumption A: Collection of the account on
August 9, 2019.
Assumption B: Collection of the account on July
18, 2019.
Transaction
Sale on July 10, 2019.
Assumption A: Collection of the account on
August 9, 2019.
Assumption B: Collection of the account
on July 18, 2019.
129) On June 1, 2019, Concorde Company sold merchandise on credit at an invoice price of
$1,000; terms 2/10, n/30.
Prepare the journal entries to record the following:
A. To record the sale.
B. Assumption A: To record collection on June 28, 2019.
C. Assumption B: To record collection on June 9, 2019.
130) Determine the effect of the following transactions on the financial statement components
identified. Code your answers as follows:
A: If the transaction results in an increase in the financial statement component.
B: If the transaction results in a decrease in the financial statement component.
C. If the transaction does not affect the financial statement component.
Transaction 1: The adjusting entry to record bad debt expense was made.
Gross profit _____
Current assets _____
Stockholders’ equity _____
Transaction 2: An account receivable was collected for which the customer took advantage of a
2% discount and remitted the payment less the discount.
Net sales _____
Gross Profit _____
Current assets _____
131) On January 2, 2019, Boulder Pointe Air Conditioning and Heating sold and installed an
HVAC system to DeMille Co. for $2,750. The selling price is allocated as follows: (1) 90% for
the HVAC unit and (2) 10% for an ongoing 4-year service contract for the HVAC unit.
A. Determine each of the following related to this sale:
1. Identify the contract between the company and the customer.
2. Identify the performance obligations of Boulder Pointe.
3. Determine the transaction price.
4. Allocate the transaction price to the performance obligations.
B. What amount of revenue should Boulder Pointe recognize for the year ended December 31,
2019?
132) Lumberjack, Inc. manufactures and sells skis and snowboards and uses the allowance
method to account for its receivables. Lumberjack sold $16,000 of skis to North Slope Co. in
January. In March, North Slope encountered financial difficulties due to a much lower than
average snowfall and decreased tourism at its ski resort. North Slope declared bankruptcy in June
at which time Lumberjack, Inc. wrote off the $16,000 account receivable. November and
December brought record snowfall and North Slope was able to pay the $16,000 owed to
Lumberjack on December 15. Prepare the entries on Lumberjacks’ books to account for the sale,
write-off, and recovery of North Slope’s account receivable.
133) Josephine sells organic, GMO-free pecans in the United States, Canada, and Europe.
Recently Josephine made the following two sales. Prepare the entries required on Josephine’s
books to record these sales.
February
Sold 3,500 pounds of pecans on account to Tinder, a German company. Tinder agreed to pay
€14,000. On the sale date, each Euro was worth US$1.35.
March
Sold 4,000 pounds of pecans on account to Charlie Co., an English company. Charlie agreed to
pay £24,800. On the sale date, each British pound was worth US$.98.