/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q27PSA Preparing a bank reconciliation ... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 7: Q27PSA (page 421)

Preparing a bank reconciliation and journal entries

The December cash records of Davidson Insurance follow:


Davidson鈥檚 Cash account shows a balance of \(17,450 at December 31. On December

31, Davidson Insurance received the following bank statement:

Additional data for the bank reconciliation follow:

a. The EFT credit was a receipt of rent. The EFT debit was an insurance payment.

b. The NSF check was received from a customer.

c. The \)1,400 bank collection was for a note receivable.

d. The correct amount of check no. 1419, for rent expense, is \(1,930. Davidson鈥檚

controller mistakenly recorded the check for \)1,390.

Requirements

1. Prepare the bank reconciliation of Davidson Insurance at December 31, 2018.

2. Journalize any required entries from the bank reconciliation.

Short Answer

Expert verified

The adjusted balance of the bank reconciliation statement is $18,025.

Step by step solution

01

Definition of bank reconciliation statement

The bank reconciliation statement is the statement prepared to remove the errors of bank balance and cash book balance.

02

Bank reconciliation statement

Davidson Insurance
Bank Reconciliation Statement
December 31
Bank Side
Book Side

Particulars

Amount

Particulars

Amount

Balance as per bank

$18,955

Balance as per cash book

$17,450

Add:

Add:

Outstanding Deposits

$1,860

Rent Receipts

$350

Note Collection

$1,400

Deductions:

Deductions:

Outstanding Checks

$2,790

NSF Cheque

$400

Incorrect recording of check

$540

EFT Payment

$225

Service Charge

$10

Adjusted Balance on December 31

$18,025

Adjusted Balance on December 31

$18,025

In the bank reconciliation statement, the opening balance as per bank and cashbook is $18,955 and $17,450. You add the outstanding deposit and deduct the outstanding checks to find the adjusted balance on the bank side. You add rent receipts and note collection to the book balance on the book side. After this, you deduct the NSF check, incorrect recording of the check, EFT payment, and service charge. After making these adjustments on both sides, you got the adjusted balance of $18,025.

03

Journal Entries

Date

Particulars

Debit

Credit

December 31

Cash

$350

Rent Revenue

$350

(To record the rent revenue)

December 31

Cash

$1,400

Notes Receivable

$1,400

(To record the receipt on notes receivable)

December 31

Accounts Receivable

$400

Cash

$400

(To record NSF Check)

December 31

Rent Expense

$540

Cash

$540

(To record the payment of the rent)

December 31

Accounts Payable

$225

Cash

$225

(To record the payment of accounts payable)

December 31

Misc. Expense

$25

Cash

$25

(To record the payment of misc. expense)

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.

Over 30 million students worldwide already upgrade their learning with 91影视!

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

Match the accounting terminology to the definitions.

1. Sarbanes-Oxley Act

2. Internal control

3. Encryption

4. Separation of duties

5. Internal auditors

a. Organizational plan and all the related measures adopted by an entity to safeguard assets,

encourage employees to follow company policies, promote operational efficiency, and ensure

accurate and reliable accounting records.

b. Employees of the business who ensure that the company鈥檚 employees are following company

policies and meeting legal requirements and that operations are running efficiently.

c. Rearranging plain-text messages by a mathematical process鈥攖he primary method of

achieving security in e-commerce.

d. Requires companies to review internal control and take responsibility for the accuracy and

completeness of their financial reports.

e. Dividing responsibilities between two or more people.

What are two common methods used when accepting deposits for credit card and debit card transactions?

Applying internal control over cash payments by check

A purchasing agent for Franklin Office Supplies receives the goods that he purchases

and also approves payment for the goods.

Requirements

1. How could this purchasing agent cheat his company?

2. How could Franklin avoid this internal control weakness?

Identifying internal controls. Consider each situation separately. Identify the missing internal control procedure from these characteristics:

鈥� Assignment of responsibilities

鈥� Separation of duties

鈥� Audits

鈥� Electronic devices

鈥� Other controls (specify)

a. While reviewing the records of Quality Pharmacy, you find that the same Team member orders merchandise and approves invoices for payment.

b. Business is slow at Amazing Amusement Park on Tuesday, Wednesday, and Thursday nights. To reduce expenses, the business decides not to use a ticket taker on those nights. The ticket seller (cashier) is told to keep the tickets as a record of the number sold.

c. The same trusted team member has served as a cashier for 12 years.

d. When business is brisk, Fast Mart deposits cash in the bank several times during the day. The manager at one store wants to reduce the time employees spend delivering cash to the bank, so he starts a new policy. Cash will build up over weekends, and the total will be deposited on Monday.

e. Grocery stores such as Convenience Market and Natural Foods purchase most merchandise from a few suppliers. At another grocery store, the manager decides to reduce paperwork. He eliminates the requirement that the receiving department prepare a receiving report listing the goods actually received from

the supplier.

List internal control procedures related to e-commerce.
See all solutions

Recommended explanations on Business Studies Textbooks

Strategy

Read Explanation

Strategic Analysis

Read Explanation

Influences On Business

Read Explanation

Strategic Direction

Read Explanation

Sales in Business

Read Explanation

Nature of Business

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.