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Chapter 7: Q1Q (page 362)
What may be included under the heading of 鈥渃ash鈥�?
Bank deposits, cash in hand, checks issued, money orders received, etc.
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(Petty Cash, Bank Reconciliation) Bill Jovi is reviewing the cash accounting for Nottleman, Inc., a local mailing service. Jovi鈥檚 review will focus on the petty cash account and the bank reconciliation for the month ended May 31, 2017. He has collected the following information from Nottleman鈥檚 bookkeeper for this task.
Petty Cash
1. The petty cash fund was established on May 10, 2017, in the amount of \(250.
2. Expenditures from the fund by the custodian as of May 31, 2017, were evidenced by approved receipts for the following.
Postage expenses | \)33.00 |
Mailing Labels and Other Supplies | 65.00 |
I.O.U from employees | 30.00 |
Shipping charges | 57.45 |
Newspaper advertising | 22.80 |
Miscellaneous expenses | 15.35 |
On May 31, 2017, the petty cash fund was replenished and increased to \(300; currency and coin in the fund at that time totaled \)26.40.
Bank Reconciliation
THIRD NATIONAL BANK | |||
BANK STATEMENT | |||
Disbursements | Receipts | Balance | |
Balance 1 May, 2017 | \(8,769 | ||
Deposits | \)28,000 | ||
Note payment direct from customer (\(30) | 930 | ||
Check clearing during May | \)31,150 | ||
Bank service charges | 27 | ||
Balance 31 May, 2017 | 6,522 |
Nottleman鈥檚 Cash Account | |
Balance 1 May 2017 | \(8,850 |
Deposit during May 2017 | 31,000 |
Checks written during May 2017 | (31,835) |
Deposits in transit are determined to be \)3,000, and checks outstanding at May 31 total \(850. Cash on hand (besides petty cash) at May 31, 2017, is \)246.
Instructions
(a) Prepare the journal entries to record the transactions related to the petty cash fund for May.
(b) Prepare a bank reconciliation dated May 31, 2017, proceeding to a correct cash balance, and prepare the journal entries necessary to make the books correct and complete.
(c) What amount of cash should be reported in the May 31, 2017, balance sheet?
(Bank Reconciliation and Adjusting Entries) The cash account of Aguilar Co. showed a ledger balance of \(3,969.85 on June 30, 2017. The bank statement as of that date showed a balance of \)4,150. Upon comparing the statement with the cash records, the following facts were determined.
1. There were bank service charges for June of \(25.
2. A bank memo stated that Bao Dai鈥檚 note for \)1,200 and interest of \(36 had been collected on June 29, and the bank had made a charge of \)5.50 on the collection. (No entry had been made on Aguilar鈥檚 books when Bao Dai鈥檚 note was sent to the bank for collection.)
3. Receipts for June 30 for \(3,390 were not deposited until July 2.
4. Checks outstanding on June 30 totaled \)2,136.05.
5. The bank had charged the Aguilar Co.鈥檚 account for a customer鈥檚 uncollectible check amounting to \(253.20 on June 29.
6. A customer鈥檚 check for \)90 (as payment on the customer鈥檚 Accounts Receivable) had been entered as \(60 in the cash receipts journal by Aguilar on June 15.
7. Check no. 742 in the amount of \)491 had been entered in the cash journal as \(419, and check no. 747 in the amount of \)58.20 had been entered as $582. Both checks had been issued to pay for purchases and were payments on Aguilar鈥檚 Accounts Payable.
Instructions
(a) Prepare a bank reconciliation dated June 30, 2017, proceeding to a correct cash balance.
(b) Prepare any entries necessary to make the books correct and complete.
Kraft Enterprises owns the following assets at December 31, 2017.
Cash in bank 鈥� saving account | 68,000 | Checking account balance | 17,000 |
Cash on hand | 9,300 | Post-dated Checks | 750 |
Cash refunded due from IRS | 31,400 | Certificate of deposits (180-days) | 90,000 |
What amount should be reported as cash?
(Assigning Accounts Receivable) On April 1, 2017, Rasheed Company assigns \(400,000 of its accounts receivable to the Third National Bank as collateral for a \)200,000 loan due July 1, 2017. The assignment agreement calls for Rasheed to continue to collect the receivables. Third National Bank assesses a finance charge of 2% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type).
Instructions
(a) Prepare the April 1, 2017, journal entry for Rasheed Company.
(b) Prepare the journal entry for Rasheed鈥檚 collection of $350,000 of the accounts receivable during the period from April 1, 2017, through June 30, 2017.
(c) On July 1, 2017, Rasheed paid Third National all that was due from the loan it secured on April 1, 2017. Prepare the journal entry to record this payment.
Of what merit is the contention that the allowance method lacks the objectivity of the direct write-off method? Discuss in terms of accounting鈥檚 measurement function.
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