122.
Chicago Company has hired you to reconcile its bank statement and cash account. At June 30,
2016, the Cash account on the books showed the following:
Cash account
Explanation
Debits
Credits
Balance
Balance
$5,600
Deposits
$32,000
37,600
Checks
$29,700
7,900
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, 2016.
Required:
A. Prepare the bank reconciliation at June 30, 2016.
B. Prepare the adjusting journal entries needed as a result of preparing the bank
reconciliation.
123.
A comparison of the balance in Cottonwood Company’s cash account per its books as of April
30, 2016 and the bank statement dated April 30, 2016 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, 2016)
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
Required:
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, 2016
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: $
Cash: $5,520 A
Balance: $5,170 B
balance: $5,400
balance: $5,400
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
$11,045
Balance,
June 30
$10,800
Other Data:
May
June
Deposit in transit at month end
$600
$400
Outstanding checks at month end
300
525
Required:
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.
A.
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.
Required:
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.
Required:
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).
28.
On July 10, 2016, Rex Company sold merchandise at an invoice price of $5,000 with terms of
2/10, n/30.
Required:
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, 2016
Assumption A: Collection of the account on
August 9, 2016.
Assumption B: Collection of the account on
July 18, 2016.
Sale on July 10, 2016.
Assumption A: Collection of the account on
August 9, 2016.
Assumption B: Collection of the account
on July 18, 2016.
129.
On June 1, 2016, Concorde Company sold merchandise on credit at an invoice price of $1,000;
terms 2/10, n/30.
Required:
Prepare the journal entries to record the following:
A. To record the sale.
B. Assumption A: To record collection on June 28, 2016.
C. Assumption B: To record collection on June 9, 2016.
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 _____