E7-8 Prepare bank reconciliation and adjusting entries
The following information pertains to Lance Company.
1. Cash balance per bank, July 31, $7,328.
2. July bank service charge not recorded by the depositor $38.
3. Cash balance per books, July 31, $7,364.
4. Deposits in transit, July 31, $2,700.
5. $2,016 collected for Lance Company in July by the bank through electronic funds transfer.
The collection has not been recorded by Lance Company.
6. Outstanding checks, July 31, $686.
Instructions
(a) Prepare a bank reconciliation at July 31, 2017.
(b) Journalize the adjusting entries at July 31 on the books of Lance Company.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
(a)
Cash balance per bank statement Value
Add: Deposits in transit Value
?
Less: Outstanding checks Value
Adjusted cash balance per bank ?
Cash balance per books Value
Add: Collection of note receivable Value
?
Less: Bank service charge Value
Adjusted cash balance per books ?
(b) July 31 Value
Value
Value
Value
July 31 Value
Value
After you have completed E7-8, consider the following additonal question.
1. Assume that deposit in transit, outstanding checks and cash balance per books changed to
$3,600, $886 and $8,064 respectively. Show the impact of these changes on the bank
reconciliation.
Account
Account
Account
LANCE COMPANY
Bank Reconciliation
July 31, 2017
Account
Account
Account
Interest Revenue
Cash
Notes Receivable
E7-8 Solution
(a)
Cash balance per bank statement $7,328
Add: Deposits in transit 2,700
(b) July 31 2,016
20
LANCE COMPANY
Bank Reconciliation
July 31, 2017
Miscellaneous Expense
E7-8 Solution to additional question
1. Assume that deposit in transit, outstanding checks and cash balance per books changed to
$3,600, $886 and $8,064 respectively. Show the impact of these changes on the bank
reconciliation.
(a)
Cash balance per bank statement $7,328
Add: Deposits in transit 3,600
10,928
(b) July 31 2,016
20
2,000
LANCE COMPANY
Bank Reconciliation
July 31, 2017
Cash
Miscellaneous Expense
E7-9 Prepare bank reconciliation and adjusting entries
This information relates to the Cash account in the ledger of Howard Company.
Balance September 1 – $16,400; Cash deposited – $64,000
Balance September 30 – $17,600; Checks written – $62,800
The September bank statement shows a balance of $16,500 at September 30 and the
following memoranda.
Collection of electronic funds transfer $1,830 NSF checks: H. Kane 560$
Interest earned on checking account 45 Safety deposit box rent 60
At September 30, deposits in transit were $4,738 and outstanding checks totaled $2,383.
Instructions
(a) Prepare the bank reconciliation at September 30, 2017.
(b) Prepare the adjusting entries at September 30, assuming (1) the NSF check was from a
customer on account, and (2) no interest had been accrued on the note.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
(a)
Cash balance per bank statement Value
Add: Deposits in transit Value
?
Less: Outstanding checks Value
Adjusted cash balance per bank ?
Cash balance per books
Add: Collection of note receivable Value
Interest earned Value Value
?
Less: NSF check Value
Safety deposit box rent Value ?
Adjusted cash balance per books ?
(b) Sept. 30 Value
Value
Value
30 Value
Value
30 Value
Value
Account
Account
Account
Account
Account
Credits
Account
Debits
HOWARD COMPANY
Bank Reconciliation
September 30, 2017
Account
30 Value
Value
After you have completed E7-9, consider the following additional question
1. Assume that the note, interest on the note and the NSF check changed to $2,000, $50 and
$800 respectively. Outstanding checks also changed to $2,448. Show the impact of these
changes on the bank reconciliation and on the adjusting entries.
Account
Account
Cash
Cash
Interest Revenue
Accounts Receivable – H. Kane
Cash
Miscellaneous Expense
E7-9 Solution
(a)
Cash balance per bank statement $16,500
Add: Deposits in transit 4,738
21,238
(b) Sept. 30 1,830
1,800
30
HOWARD COMPANY
Bank Reconciliation
September 30, 2017
Cash
Notes Receivable
Interest Revenue
1. Assume that the note, interest on the note and the NSF check changed to $2,000, $50 and
$800 respectively. Outstanding checks also changed to $2,448. Show the impact of these
changes on the bank reconciliation and on the adjusting entries.
(a)
Cash balance per bank statement $16,500
Add: Deposits in transit 4,738
21,238
Adjusted cash balance per bank 18,790
Adjusted cash balance per books 18,790
Interest Revenue
Accounts Receivable – H. Kane
Miscellaneous Expense
(b) Sept. 30 2,050
2,000
50
HOWARD COMPANY
Bank Reconciliation
September 30, 2017
Cash
Notes Receivable
Interest Revenue
E7-14 Prepare a cash budget for two months
Rigley Company expects to have a cash balance of $46,000 on January 1, 2017.
These are the relevant monthly budget data for the first two months of 2017.
1. Collection from customers: January $71,000 and February $146,000.
2. Payments to suppliers: January $40,000, February $75,000.
3. Wages: January $30,000 and February $40,000. Wages are paid in the month
they are incurred.
4. Administrative expenses: January $21,000 and February $24,000. These costs
include depreciation of $1,000 per month. All other costs are paid as incurred.
5. Selling expenses: January $15,000 and February $20,000. These costs are exclusive
of depreciation. They are paid as incurred.
6. Sales of short-term investments in January are expected to realize $12,000 in
cash. Rigley has a line of credit at a local bank that enables it to borrow up
to $25,000. The company want to maintain a minimum monthly cash balance
of $20,000.
Instructions
Prepare a cash budget for January and February.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
January February
Beginning cash balance
Value Value
Add: Cash receipts
Collections from customers Value Value
Sale of short-term investments Value Value
Total receipts ? ?
Total available cash ? ?
Less: Cash disbursements
Payments to suppliers Value Value
Wages Value Value
Administrative expenses Value Value
Selling expenses Value Value
Total disbursements ? ?
Excess (deficiency) of available cash over disbursements ? ?
Financing
Add: Borrowings Value Value
Less: Repayments Value Value
Ending cash balance ? ?
After you have completed E7-14, consider the following additional question
1. Assume that collection from customers and payment to suppliers in January changed to $80,000
and $55,000 respectively. Show the impact of these changes on the Cash Budget.
RIGLEY COMPANY
Cash Budget
For the Two Months Ending February 28, 2017
E7-14 Solution
January February
Beginning cash balance $46,000 $24,000
Add: Cash receipts
Less: Cash disbursements
Payments to suppliers 40,000 75,000
Wages 30,000 40,000
Administrative expenses 20,000 23,000
RIGLEY COMPANY
Cash Budget
For the Two Months Ending February 28, 2017
E7-14 Solution to additional question
1. Assume that collection from customers and payment to suppliers in January changed to $$80,000
and $55,000 respectively. Show the impact of these changes on the Cash Budget.
January February
Beginning cash balance $46,000 $20,000
Add: Cash receipts
Less: Cash disbursements
Payments to suppliers 55,000 75,000
Wages 30,000 40,000
RIGLEY COMPANY
Cash Budget
For the Two Months Ending February 28, 2017