Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 7: Question E7-24 (page 369)

(Bank Reconciliation and Adjusting Entries) Angela Lansbury Company deposits all receipts and makes all payments by check. The following information is available from the cash records.

June 30 Bank Reconciliation Statement

Balance per bank

\(7,000

Add: Deposit in transit

1,540

Less: Outstanding checks

(2,000)

Balance per books

\)6,540

Month of July Results

Per Bank

Per Books

Balance July 31

\(8,650

\)9,250

July Deposits

5,000

5,810

July Checks

4,000

3,100

July note collected (not included in July deposits)

1,000

-

July bank service charge

15

-

July NSF check from a customer, returned by the bank (recorded by bank as a charge)

335

-

Instructions

(a) Prepare a bank reconciliation going from balance per bank and balance per book to correct cash balance.

(b) Prepare the general journal entry or entries to correct the Cash account.

Answer

Short Answer

Expert verified

The correct balance is$9,900.

Step by step solution

01

Definition of Bank Reconciliation Statement

A bank reconciliation statement can be defined as the statement prepared by the business entity to correct the balance of the cash account of the business entity.

02

Bank Reconciliation Statement

Particular

Amount $

Balance as per bank passbook

$8,650

Add:

Deposit in Transit

2,350

Less:

Outstanding checks

(1,100)

Correct Bank balance

$9,900

Balance as per book

$9,250

Add:

Collection of notes

1,000

Less:

Service charge

(15)

NSF checks

(335)

Correct cash balance

$9,900

Working note:

Calculation of deposit in transit:

Particular

Amount $

Deposit as per book

$5,810

Less: deposit as per bank

(5,000)

810

Add: Deposit in transit as per reconciliation

1,540

Deposit in transit

$2,350

Calculation of outstanding checks:

Particular

Amount $

Checks issued as per book

$3,100

Less: Checks cleared by bank in July

(4,000)

Add: Outstanding checks in BRS

2,000

Outstanding checks

$1,100

03

Journal Entries for Correcting the Cash Account

Date

Accounts and Explanation

Debit $

Credit $

30 June

Cash

$650

Office Expense

$15

Accounts receivables

$335

Note receivable

$1,000

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Of what merit is the contention that the allowance method lacks the objectivity of the direct write-off method? Discuss in terms of accounting’s measurement function.

You are evaluating Woodlawn Racetrack for a potential loan. An examination of the notes to the financial statements indicates restricted cash at year-end amounts to $100,000. Explain how you would use this information in evaluating Woodlawn’s liquidity.

On December 31, 2017, Firth Company borrowed \(62,092 from Paris Bank, signing a 5-year, \)100,000 zero-interest-rate note. The note was issued to yield 10% interest. Unfortunately, during 2019, Firth began to experience financial difficulty. As a result, at December 31, 2019, Paris Bank determined that it was probable that it would collect only $75,000 at maturity. The market rate of interest on loans of this nature is now 11%.

Instructions

(a) Prepare the entry (if any) to record the impairment of the loan on December 31, 2019, by Paris Bank.

(b) Prepare the entry on March 31, 2020, if Paris learns that Firth will be able to repay the loan under the original terms.

(Recording Bad Debts) At the end of 2017, Aramis Company has accounts receivable of \(800,000 and an allowance for doubtful accounts of \)40,000. On January 16, 2018, Aramis Company determined that its receivable from Ramirez Company of $6,000 will not be collected, and management authorized its write-off.

Instructions

(a) Prepare the journal entry for Aramis Company to write off the Ramirez receivable.

(b) What is the net realizable value of Aramis Company’s accounts receivable before the write-off of the Ramirez receivable?

(c) What is the net realizable value of Aramis Company’s accounts receivable after the write-off of the Ramirez receivable?

(Receivables Management) As the manager of the accounts receivable department for Beavis Leather Goods, Ltd., you recently noticed that Kelly Collins, your accounts receivable clerk who is paid \(1,200 per month, has been wearing unusually tasteful and expensive clothing. (This is Beavis’s first year in business.) This morning, Collins drove up to work in a brand new Lexus.

Naturally suspicious by nature, you decide to test the accuracy of the accounts receivable balance of \)192,000 as shown in the ledger. The following information is available for your first year (precisely 9 months ended September 30, 2017) in business.

(1) Collection from Customers

$188,000

(2) Merchandise Purchased

360,000

(3) Ending merchandise inventory

90,000

(4) Goods are marked to sell ay 40% above cost.

Instructions

Assuming all sales were made on account, compute the ending accounts receivable balance that should appear in the ledger, noting any apparent shortage. Then, draft a memo dated October 3, 2017, to Mark Price, the branch manager, explaining the facts in this situation. Remember that this problem is serious, and you do not want to make hasty accusations.
See all solutions

Recommended explanations on Business Studies Textbooks

Organizational Communication

Read Explanation

Introduction to Business

Read Explanation

Intermediate Accounting

Read Explanation

Operational Management

Read Explanation

Business Development

Read Explanation

Financial Performance

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free