Answered: Question 1: Prepare a bank…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question 1:

Prepare a bank reconciliation as of May 31. Be sure to complete the statement heading. Refer to the Labels and Amount Descriptions for the exact wording of text entries. “Deduct:” or “Add:” will automatically appear if it is required. Whenever there is more than one adjusting item in the bank portion of the reconciliation or the general ledger portion of the bank reconciliation, enter in the order presented in the instructions. Enter all amounts as positive numbers.

BRENTWOOD BIKE CO.

Bank Reconciliation

1	Cash balance according to bank statement
2
3
4
5	Adjusted balance
6
7	Cash balance according to company’s records
8
9
10
11
12	Adjusted balance

Question 2:

Journalize the necessary entries. The accounts have not been closed. Refer to the chart of accounts for the exact wording of the account titles. journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. journals will automatically indent a credit entry when a credit amount is entered.

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7

Question 3: If a balance sheet is prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash? $_________________

Info Needed to solve:

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $34,250. During May, the total cash deposited was $140,300, and checks written totaled $138,880. The bank statement indicated a balance of $43,525 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

a.	Checks outstanding totaled $6,440.
b.	A deposit of $1,850 representing receipts of May 31 had been made too late to appear on the bank statement.
c.	The bank had collected for Brentwood Bike Co. $5,250 on a note left for collection. The face of the note was $5,000.
d.	A check for $390 returned with the statement had been incorrectly charged by the bank as $930.
e.	A check for $210 returned with the statement had been recorded by Brentwood Bike Co. as $120. The check was for the payment of an obligation to Adkins Co. on account.
f.	Bank service charges for May amounted to $30.
g.	A check for $1,325 from Jennings Co. was returned by the bank due to insufficient funds.

	Required:
1.	Prepare a bank reconciliation as of May 31. Be sure to complete the statement heading. Refer to the Labels and Amount Descriptions for the exact wording of text entries. “Deduct:” or “Add:” will automatically appear if it is required. Whenever there is more than one adjusting item in the bank portion of the reconciliation or the general ledger portion of the bank reconciliation, enter in the order presented in the instructions. Enter all amounts as positive numbers.
2.	Journalize the necessary entries. The accounts have not been closed. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
3.	If a balance sheet is prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?

CHART OF ACCOUNTS

Brentwood Bike Co.

General Ledger

	ASSETS
110	Cash
111	Petty Cash
112	Accounts Receivable-Jennings Co.
131	Notes Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
181	Land
191	Office Equipment
192	Accumulated Depreciation-Office Equipment
193	Store Equipment
194	Accumulated Depreciation-Store Equipment

	LIABILITIES
211	Accounts Payable-Adkins Co.
221	Notes Payable
222	Interest Payable
231	Salaries Payable
241	Sales Tax Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Merchandise Sold
515	Credit Card Expense
516	Cash Short and Over
520	Salaries Expense
531	Advertising Expense
532	Delivery Expense
533	Insurance Expense
534	Office Supplies Expense
535	Rent Expense
536	Repairs Expense
537	Selling Expenses
538	Store Supplies Expense
561	Depreciation Expense-Office Equipment
562	Depreciation Expense-Store Equipment
590	Miscellaneous Expense
710	Interest Expense

Labels and Amount Descriptions

Labels
For the Month Ended May 31
May 31
Amount Descriptions
Bank error in charging check as $390 instead of $930
Bank error in charging check as $930 instead of $390
Bank service charges
Check returned because of insufficient funds
Company error in recording note collected by bank
Deposit of May 31, not recorded by bank
Error in recording check
Outstanding checks
Note and interest collected by bank

Expert Solution

Step 1

Analysis and adjustment of differences between the cash balance shown on a bank statement, and the amount shown in the account holder's records. This matching process involves making allowances for checks issued but not yet presented and for checks deposited but not yet cleared or credited. And, if discrepancies persist, finding the cause and bringing the records into agreements"

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