The document provides information about cash balances and bank reconciliations for multiple companies. It includes details such as demand deposits, outstanding checks, deposits in transit, bank charges, and reconciled balances. For each problem, key details are given about cash accounts, reconciling items, and adjustments needed to determine the correct cash balance.
The document provides information about cash balances and bank reconciliations for multiple companies. It includes details such as demand deposits, outstanding checks, deposits in transit, bank charges, and reconciled balances. For each problem, key details are given about cash accounts, reconciling items, and adjustments needed to determine the correct cash balance.
The document provides information about cash balances and bank reconciliations for multiple companies. It includes details such as demand deposits, outstanding checks, deposits in transit, bank charges, and reconciled balances. For each problem, key details are given about cash accounts, reconciling items, and adjustments needed to determine the correct cash balance.
The document provides information about cash balances and bank reconciliations for multiple companies. It includes details such as demand deposits, outstanding checks, deposits in transit, bank charges, and reconciled balances. For each problem, key details are given about cash accounts, reconciling items, and adjustments needed to determine the correct cash balance.
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PROBLEM 1:
The following items were included as cash on the statement of financial position Lawton Company.
How should each of the items have been reported? Write your answer on the space after each item.
The lists of possible answers are as follows: Cash, Notes Receivable, Accounts Receivable, Advances to Employees, Office Supplies, and Other Noncurrent Asset
Demand deposits with bank
CASH
Bank account used for payment of salaries and wages
CASH
Cash in special cash account to be used currently for the construction of a new building
OTHER NONCURRENT ASSET
Customers’ checks returned by the bank marked “No Sufficient Fund”
ACCOUNTS RECEIVABLE
Customers’ post-dated checks
ACCOUNTS RECEIVABLE
IOUs from employees
ADVANCES TO EMPLOYEES
Postage stamps received in the mail for merchandise
OFFICE SUPPLIES
Postal money orders received from customers and not yet deposited
CASH
Notes receivable in the hands of the bank for collection
NOTES RECEIVABLE
Customer’s checks not yet deposited
CASH
PROBLEM 2: Indicate how each separate question will affect the reconciliation of December 31, 2020. (Assume you are reconciling the balance per books and the balance per bank to the correct or adjusted balance). Write your answers on the space provided before each item.
A. Add to bank balance
B. Deduct from the bank balance
C. Add to book balance
D. Deduct from book balance
E. No effect
Bank service charge for December, P 300, not recorded on books.
DEDUCT FROM BOOK BALANCE
Checks totaling P 41,500 were outstanding at December 31, 2020.
DEDUCT FROM THE BANK BALANCE
Deposits totaling P 26,500 were in transit at December 31, 2020
ADD TO BANK BALANCE
Check No. 601 dated November 30, 2020 was paid by the bank in December
NO EFFECT
Check No. 607 for P 2,050 were recorded on the books as P 2,500
ADD TO BOOK BALANCE
A check from a customer was paid by the bank in December. It had been returned earlier in December for proper endorsement and was redeposited. No entry for the return or re-deposit had been made
NO EFFECT
An interest charge was made to the account by the bank in error
ADD TO BANK BALANCE
The December bank statement included the proceeds of a customer’s draft collected by the bank on December 30, 2020, but not recorded on the books
ADD TO BOOK BALANCE
Credit memorandum from the bank for December was not recorded in December. It was, however, recorded in January 2021
ADD TO BANK BALANCE
A debit memo issued by the bank for P 450 recorded as a credit to cash
NO EFFECT
PROBLEM 3:
Garfield Company had the following cash balances at December 31, 2020: Undeposited coin and currency P35,000
Unrestricted demand deposit 1,450,000
Company checks written (and deducted from the demand deposits amount) but not scheduled to be mailed until January 2 180,000
Time deposits restricted for use (expected use in 2021) 3,000,000
In exchange for a guaranteed line of credit, Garfield has agreed to maintain balance of P 150,000 in its unrestricted demand deposit account.
How much should Garfield report “Cash” in its December 31, 2020, statement of financial position?
1 665 000
35 000 + 1 450 000 + 180 000 = 1 665 000
PROBLEM 4:
Corona Company’s bank statement for the month of March 2020, included the following information:
Ending balance, March 31 P280,460
Bank service charge for March 1,300
Interest paid by bank to Corona for March 1,070
In comparing the bank statement to its own cash records, Corona found the following:
Deposits made but not yet recorded by the bank P36,890
Checks written and mailed but not yet recorded by the bank 47,860
In addition. Corona discovered that it had erroneously recorded a check for P460 that should have been recorded for P640.
What is Corona’s correct cash balance at March 31, 2020?
269 490
BANK BOOK 280 460 (1 300) 1 070 36 890 (47 860) 269 490
PROBLEM 5:
Alpha Corporation’s bank statement for the month of April included the following information:
Bank service charge for April P1,300
Check deposited by Alpha during April was not collectible and has been marked “NSF” by the bank and returned 4,000
In comparing the bank statement to its own cash account, Alpha found the following:
Deposits made but not yet recorded by the bank P13,240
Checks written and mailed but not yet recorded by the bank 9,870
All the deposits in transit and outstanding checks have been properly recorded in Alpha’s books. Alpha also found a check for P 3,500, payable to Alpha Corporation, that had not yet been deposited and had not been recorded in Alpha’s books. Alpha’s books show a bank account balance of P 41,120 (before any adjustments or corrections).
What is Alpha Corporation’s correct cash balance at April 30?
39 320
BANK BOOK 41 120 (1 300) (4 000) 13 240 (9 870) 3 500 39 320
PROBLEM 6:
The accounting department supplied the following data in reconciling the September 30 bank statements for Auto Guapito:
Ending cash balance per bank 154,969.10
Ending cash balance per book 146,927.10
Deposit in transit 26,152.30
Bank service charge 250.00
Outstanding checks 30,795.10
Notes collected by bank including P 450 interest (Auto Guapito not yet notified) 10,450.00
Error by bank – check drawn by Auto Guapangit was charged to Auto Guapito’s account 6,170.80
Sale and deposit of P 17,290 was entered in the sales journal and cash receipts journal as P 17,920.
What is the reconciled bank and book balances at September 30?
156 497.10
BANK BOOK 154 969.10 146 927.10 26 152.30 (250) (30 795.10) 10 450 6 170.80 (630) 156 497.10 156 497.10
PROBLEM 7:
Animalistic Corporation provided the following information:
Balance per bank statement – May 31 2,600,000
Deposits outstanding 300,000
Checks outstanding (100,000)
Correct bank balance – May 31 2,800,000
Balance per book – May 31 2,810,000
Bank service charge (10,000)
Correct book balance – May 31 2,800,000
June data are as follows:
Bank Book
Check recorded 2,200,000 2,500,000
Deposits recorded 1,600,000 1,800,000
Service charges recorded 50,000
Notes collected by bank, P 500,000 plus interest 550,000
NSF check returned with June 30 statement 100,000
Balances 2,400,000 2,100,000
What is the amount of outstanding checks on June 30?
